Sunday, October 26, 2008

What is a Self-Directed IRA?

A self-directed IRA is legally no different from any other IRA. The term “self-directed” simply indicates that you, the client, choose your IRA’s investments. Most brokerage houses and banks that offer “self-directed” IRAs limit clients to the scope of their own investment products. Non-Traditional Custodians do not need to impose the same restrictions. What this means for you is MORE CHOICES & MORE FLEXIBILITY for your retirement savings plan.

What can a Self-Directed IRA invest in?
The rules governing what an IRA CAN invest in are exclusive - not inclusive. That is, the rules only specify where you CANNOT invest. Therefore, there is a virtually unlimited array of possible investments that fall well within the permissible boundaries.

The IRS only defines the following assets as excluded (prohibited):
- Life insurance contracts (e.g., a life insurance policy on the life of the IRA owner);
- Collectibles (e.g., antique rugs, cars, stamps, furniture, etc.);
- Capital stock in an "S" corporation.

Examples of investments allowed (specialized assets) within self-directed IRAs
Self-directed IRAs offer you, the investor, tremendous flexibility in choosing investments for your retirement savings.


Investing in real estate through your self-directed IRA may be the key to turning those dreams into reality. While most self-directed custodians accommodate traditional investments such as mutual funds and stocks, specialized companies also allow clients to invest in all forms of real estate (e.g., raw land; rental properties; commercial properties; even real estate-related private entities, such as limited liability companies, that invest in real estate).
Additionally, investments called private placements, such as those associated with funding a startup company. Many people are shocked to learn that they can use the 401-k from a former employer to help start a new business.

Why hasn't the self-directed IRA business been publicized?
Because of their efficiency and profitability, traditional IRA providers control about 97% of the IRA industry. Their huge marketing budgets allow them to maintain a strong public presence, although recent guerilla marketing techniques through the national media are now giving much-needed exposure to the valuable self-directed service industry. The true self-directed industry has the remaining 3% - but rapidly growing - share of the IRA market.

Many feel that the cat has been let out of the bag for the IRA marketplace. The recent publicity surrounding possibilities within the self-directed industry has started a brush fire that will rapidly sweep across the U.S. A recent national publication suggested that all Americans should have 25% of their retirement savings in real estate. That would represent a growth of 1,150% over the current level of 2% of the $3.7 trillion in retirement savings that is currently in IRA assets. It is also estimated that overall, IRA assets will grow by as much as $2 trillion between 2004 and 2006 due to the retirement of the baby boomers. Clearly, the self-directed industry is on the rise. The time to join this growing movement is now.

For more information, please contact

Your Mortgage Planner - William Doom, CMPS.
www.MyEquityPro.com

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