Missing Out? How Not Using Self-Directed IRAs Could be Costing You

4 minute read

Let’s talk money.

How much of yours is sleeping while you are wide awake worrying about your future? Are you losing out on opportunities to maximize your financial growth? Maybe you’ve heard of Self-Directed IRAs (SDIRAs) or perhaps not. Either way, understanding this investment avenue could be the key to unlocking the financial independence you seek. Your hard-earned money deserves to work just as hard as you do, and a SDIRA might be one way to achieving that.

Unsung Hero: The IRA and its Evolution

Once upon a time, back in 1974, the U.S. government came up with the Individual Retirement Account (IRA). This was their attempt to encourage people to save for their golden years. Fast forward to today, we have different types of IRAs, such as the Traditional IRA and Roth IRA. But let’s not get lost in the weeds with the details.

What you really need to know about is the unsung hero: the Self-Directed IRA. This financial instrument offers the possibility of outsmarting the average retirement account, giving you the power to choose your investments and potentially reap greater returns.

Hijacking of the IRA: Are You Really in Control?

Here’s a bitter pill to swallow: nearly 97% of Americans have their IRAs managed by financial institutions like Vanguard, Fidelity, Charles Schwab, and Ameritrade.

Why is this a problem? Simply because these investments are often locked into traditional investments like stocks, bonds, and high-fee mutual funds. This illusion of control is exactly that — an illusion. By settling for traditional investments, you’re stuck with their limitations, losing out on potential profits.

Risk Taker: It’s All on You

You know it, I know it, but let’s repeat it: all investments come with risks.

But with traditional IRAs, the deck is often stacked against you. Your money is tied up in a system designed to line the pockets of big institutions, not yours. This hostage situation could cost you precious time and money. Your future financial independence is too important to leave in the hands of someone else who does not have your best interested in mind.

Your Money, Your Choice: with Self-Directed IRA

The Self-Directed IRA gives you the flexibility to invest in more opportunities. For me, this is commercial real estate, for others, maybe a startup or precious metals. Whatever it is, a SDIRA gives you the power to choose.

Before you jump in, there are a few things you need to know. First, you’ll need a trusted IRA custodian. Think of them as your co-pilot. They’ll ensure your SDIRA follows the rules, while also offering a layer of protection against fraud. But remember, they won’t tell you where to put your money as they cannot give investment advice. That’s up to you. So, you need to do your homework and understand the risks before you invest.

An option I chose to invest our SDIRA in is a real estate syndication. This is when you join other investors to buy commercial real estate like an apartment, retail outlet or self-storage. If you are interested in learning more about this type of alternative investment in a hard asset, then check out my other article here: Guide to the Real Estate Syndication Universe.

The takeaways: do your due diligence, watch out for excessive fees and always be aware of the risks involved in any investment.

Conclusion: Take Action

From the introduction of the IRA to today’s versatile Self-Directed IRAs, the journey has been long and shrouded in mystery. But by embracing the power of SDIRAs, you’re not just choosing to invest differently than the masses. You’re choosing to take control of your financial independence, to understand where your money is going, and to potentially achieve the growth and freedom you deserve. The power to shape your future is in your hands.