In the wake of the financial crisis, which left many Americans with a devastated nest egg, investors are looking for new and innovative ways to save for retirement. Self-directed IRAs are becoming more popular because they offer a new solution to retirement savers; the freedom and flexibility to explore alternative investments, such as private equity and real estate.
In order to benefit from a self-directed IRA, it is important that investors understand the rules that regulate these retirement savings vehicles. Similarly, it is important that financial professionals understand these rules so they can more effectively guide clients in a direction that will best meet their savings goals. If an investor asked you to help them navigate the world of self-directed IRAs, would you know where to start?
Take note of the following three self-directed IRA rules, and share them with your clients to ensure the most potential for successful investing:
1) Self-Dealing Rule
Retirement accounts in the US are structured in such a way as to not bring any immediate gain to the account owner. If a self-directed IRA owner is acting in a way that will bring him personal gain in the present, rather than upon retirement in the future, then this is called “self-dealing.” Self-dealing is not allowed within an IRA, and can lead to significant monetary penalties.