Boy, did I learn a valuable lesson. I used to rely on an investment adviser provided by my bank to manage my retirement investment account. I thought the low returns I was getting were reasonable until I realized it was possible to earn over double the amount. My colleague suggested that I rollover to a self directed IRA. Prior to that, I never considered it because the self directed IRA rules my bank told me about seemed so convoluted.
It didn’t take me long to realize that my bank just didn’t want me to make the conversion because they would lose profits that way. They tried to make it sound like it would be very hard for me to self-direct my account. They also said it would be expensive to rollover and risky to invest in the venues available in self directed IRAs.
Self directed IRA rules are actually a lot simpler than you think. First of all, before rolling over to a self directed IRA, you need to find a company that is set up to help people self direct their accounts. You are legally required to have a custodian or trustee help you manage your account. Obviously you are going to want to find a company that has the knowledge and experience necessary to help you maximize your returns.
An important point to remember is that when investors roll over to self directed IRAs they must make sure the check is made out from one trustee to another trustee. By failing to do so, you can be penalized and end up having to pay 20% in taxes.
Other self directed IRA rules that you may not be aware of include the fact that there are no conversion fees if you find the right company to roll over to. Your bank will try to discourage you from doing it and tell that there are hefty fees to pay in order to roll over to a self directed IRA but that is false. In fact, the banks are the ones that charge exorbitant fees in order to manage your investments. For that reason you get such low returns from traditional investment accounts.
The biggest perk of self directed IRAs and the main reason why investors make the conversion is because of the flexibility they offer. You have a much wider range of investment options with self-directed accounts thus many more opportunities to increase your returns.
Self directed IRA rules allow you to invest in as many venues as you’d like but the most lucrative venue is real estate. Real estate is a stable investment that tends to increase in value over time and unlike other venues it is insured against common forms of loss such as natural disaster so it is low in risk.
What’s stopping you from getting out there and rolling over to a self-directed IRA? Self-directed IRAs offer far more flexibility and opportunities to increase your returns than traditional IRAs. In spite of what your bank may try to tell you self directed IRA rules are quite simple and straightforward. If you want to maximize your returns, ignore the naysayers and roll over to a self directed IRA and invest in real estate.