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Should You Self-Direct Your Retirement Account?

Self-directed retirement accounts are increasing in popularity as savvy investors look to investment opportunities beyond stocks, bonds, and mutual funds. With a self-directed retirement account, investors can diversify their financial portfolio in a way that can provide less volatility, less risk, and higher gains. But there are serious considerations to make before jumping into a self-directing a retirement account. It’s essential to be fully aware of the responsibilities, risks and potential gains of this exciting proposition.

Benefits of a Self-Directed Retirement Account

The list of benefits of a self-directed retirement account outnumbers the risks involved. The first benefit is freedom and control. With a self-directed retirement account, the investor is in complete control of the investments including, which investments to make, when to get in and when to exit. This gives the investor tremendous freedom of choice. The only limits would be ones that the government lays out regarding allowable investments and investment behavior around self-directed retirement accounts.

A second large benefit of a self-directed retirement account is the additional investments that are allowed. With a self-directed retirement account, you can invest in things like:

  • private money lending
  • single-family rental homes
  • apartment buildings
  • commercial lease buildings
  • gold, silver and other precious metals
  • and more…

If you’re interested in diversifying your portfolio and taking more control of your investments, self-directed retirement accounts can offer you both of those benefits and then some. But should you self-direct your retirement account? Following are some of the responsibilities and risks involved.

Risks of Self-Directing Your Retirement Account

As with all investments, there are some risks involved in self-directing your own retirement account. Risks include:

  • inadvertently falling out of compliance with IRS regulations – this can be avoided with the assistance of a qualified self-directed retirement account sponsor.
  • making unwise investment decisions – this is why you should always conduct extensive due diligence with every investment.
  • making uneducated investment choices – self-education is key to success with all investments.

Should You Self-Direct Your Retirement Account?

Self-directing a retirement account makes sense for many – but not all – investors. You should consider changing your account to be self-directed if:

  • You’re excited about real estate and the different ways to invest in it.
  • You enjoy spending time perusing investment options.
  • You often feel you know more about the market than your financial planner.
  • You prefer being in control of your own money.
  • You’re dissatisfied with the low returns you’re seeing in your portfolio.
  • You feel confident in your abilities to understand investment documents.
  • You have sufficient free time to review investment options.

In short, self-directing your retirement account offers you the freedom to determine your own financial investments. It’s not ideal for everyone, but for those who feel they have the resources needed to meet the responsibilities involved, a self-directed retirement account is an obviously smart choice.

If you’d like to have your questions answered about self-directing your retirement account, or you’re already self-directing and are interested in available investments right now, please contact American Real Estate Investments today. We’re happy to help in any way we can.