Self-directed IRAs are exploding in popularity as savvy investors are becoming increasingly aware of the financial benefits they bring. 18% of Americans now use a self-directed individual retirement account (IRA) to supplement their retirement savings, and among those that don’t use one, 56% revealed that they would consider using one.
Here are 7 facts about self-directed IRAs, like the one available at The Entrust Group, that will help you increase your retirement savings by making smart decisions when it comes to investing.
You Can Choose Your Own Investments
Self-directed retirement accounts give you total control over your own investments. Unlike other retirement saving options, self-directed IRAs allow you to invest your finances in stocks and bonds, as well as real estate, precious metals, commodities, digital currencies, businesses and many other investment options.
You Can Even Buy Debt
You can legally purchase debt instruments with a self-directed IRA, including tax liens, loans, and real estate debt.
There Are Seven Different Types of Self-Directed Savings Accounts
It isn’t just Roth IRAs that can be self-directed, traditional IRAs, SEP IRAs, simple IRAs, individual 401Ks, Roth 401Ks and ESAs (Education Savings Accounts) and HSAs (Health Savings Accounts) can all be used for non-traditional investments under the banner of a self-directed account.
Self-Directed IRAs Offer Tax Benefits
Self-directed IRAs offer deferred taxation on growth. Contributions are tax deductible, meaning the money held in the IRA is only taxable on withdrawal. This means, if you are in a lower tax bracket when you retire, you will make considerable tax savings.
Also, the investments are held as IRA investments, not assets. They are therefore taxed at a more favourable rate than assets. Many investors choose to reinvest the tax they would have paid to earn growth on the tax savings.
Almost Everyone is Eligible for a Self-Directed IRA
Having a 401K through your employer does not disqualify you from qualifying for a self-directed IRA. In fact, many investors use a self-directed IRA to complement their savings through a traditional IRA.
Anybody with an income who is under the age of 70.5 can make contributions to a self-directed IRA.
IRAs Can Be Pooled with Other Investors to Accrue Revenue
If you want to invest in a condo to rent out to a tenant, but are a little short, you can pool your savings in your self-directed IRA with another personal investor. You may, for example, put up 60% of the initial cost, your IRA will receive 60% of the rent income as tax-sheltered income.
Self-Directed IRAs Can Borrow Money
Self-directed IRAs can borrow money under the umbrella of a non-recourse loan. Providing the loan is for a figure of more than $100,000 and you have the funds to put down 35% of the loan, many banks will lend to your self-directed IRA.
Self-directed IRAs offer an unmatched level of control and freedom over your retirement savings. They allow investors to pursue investment options most other savings plans do no, giving them the ability to invest their retirement funds in assets and commodities that best align with their investment knowledge and expertise.