Staying Safe with Your Self-Directed IRA

Self Directed IRA // Silverstone // March 14, 2013 //

Your self-directed IRA funds are pretty sacred and any investor should consider them so. Not only does the account have more upfront costs to get it properly structured, but it also has tax advantages that make the funds within very powerful when invested wisely and judiciously. Most self-directed investors would be devastated if they were burned in some type of fraud or taken in an IRA scam, which many in the past have. It?s another reason we always advise against tapping retirement funds to pay bills as the very last resort. Here are a few of my own personal pointers for staying safe when investing with your self-directed IRA or solo 401(k).

1. Avoid Unknown Investments. The R&B group TLC had a hit song in the 90?s that went like this, ?don?t go chasing waterfalls, just stick to the rivers and the lakes that you?re used to.? The same goes for retirement account investing.?
2. Avoid Unknown Investors. If you can?t substantiate the investor, financial planner, his/her products and the returns they are promising, steer clear. I personally like to even take it one step further. I?ll let my CFP work on other investments. The money in my self-directed account is strictly keep to my own creativity and personal genius.
3. Don?t Put More than 25% at Risk. Like a good gambler, I don?t put more than 25% of my entire account at risk in a single venture. That?s actually not as conservative as other clients, but it at least helps force discipline for ?all or nothing? bets when such can jeopardize years of work to acquire your assets.
4. Keep Your Checks In a Safe Place. Unlike money market accounts at a custodian like Fidelity, the self-directed account provides checkbook control over IRA funds. The checks should be kept safe. It?s much more difficult to get a ?refund? if someone falsifies records in your name.
5. Keep 25% in more safe-haven investments. Even if you do rollover your funds with the intention of investing in things not related to mutual funds, it is still wise not to give them up completely. They?re part of a healthy and complete diversification strategy.
6. Keep the Rules. Nothing will burn or obliterate your account more than engaging in prohibited transactions that break the self-directed IRA rules. Steer clear of rule-breaking investments and persons.

Clients whose retirement nest-eggs have been obliterated by the recent recession are really just seeking returns right now. This is one of the reasons bonds have been bubbling over and general retirement account investors are looking for ways to invest in the real estate?the ?come-back-kid.? However, caution is always in order when it comes to 1. setting up the account, 2. managing the account 3. investing the account and 4. making account distributions.

Fight hard, fight clean and perhaps you can work to explode your retirement returns like so many have before you.

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Source: http://www.silverstone.net/staying-safe-with-your-self-directed-ira/

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