You have lots of options for an easy setup self directed IRA, thanks to the internet. A variety of companies and groups of trustees offer you the opportunity to sign up and set up the account online. What could be simpler?
There are several things that you should consider when choosing a trustee or company to manage the account. Even though you are responsible for investment decisions in an easy setup self directed IRA, the trustee has certain responsibilities, as well, such as filing relevant tax documents and preparing statements. And, if they handle something incorrectly, it could cost you.
So, you want to use an experienced company. You may want to consider asking for referrals or references. This is an important decision and you are in effect “hiring” an employee, when you choose an easy setup self directed IRA custodian.
Then, you must consider the fees involved. While custodians are prohibited from “receiving unreasonable compensation” for managing the account, under the provisions of the ERISA, what is considered reasonable and customary varies. As you would shop for anything else, you should do some comparisons before you sign up for an easy setup self directed IRA.
Charges may include set up, maintenance, and per transaction fees, along with other sometimes hidden charges, such as consultation and filing fees. An easy setup self directed IRA is far from free, but if you are careful, you can find custodians that include practically everything in a single annual fee.
The most reasonable price that I have found for an easy setup self directed IRA is $50 for the initial set up and $300 annually for maintenance, with no transaction fees. Other companies may charge less for set up and maintenance, but each transaction can cost anywhere from $25 to $175.
Particularly high prices are charged for real estate transactions at most companies. And, real estate investing has become a really popular choice for easy setup self directed IRA account owners.
Experienced investors have learned that they can increase the amount of money that they keep, by conducting real estate deals within the account, rather than with private funds. It’s all because of the tax status of qualified retirement accounts.
Typically, an investor who buys and sells houses for a profit, pays capital gains and unrelated business income tax of UBIT, but within the qualified IRA, there are no such taxes. All holdings within the account are either tax-deferred or tax-free, depending on the type of account. That’s the big advantage to using an easy setup self directed IRA for real estate investments.
Another advantage of opening an easy setup self directed IRA, rather than a managed account at T. Rowe Price or Schwabb, is that you have more investment choices, so your ability to diversify is greater. Stocks, bonds and mutual funds are great, but some are low yield and others are risky right now.
Certificates of deposit or CDs have long been the standard for retirement account holding, but the returns are not even keeping up with inflation. With an easy setup self directed IRA, you may be able to grow your retirement wealth faster, as long as you choose the right company and of course, make the right investment choices.