A self directed IRA is similar to a traditional IRA (Individual Retirement Account) in its tax-deferral status. Financial contributions to a gold IRA grow tax free and are taxed either at the time of contribution (Roth) or withdrawal (traditional). It’s a huge advantage.
The difference between the self-directed IRA and a traditional IRA is that traditional IRA investment options are limited to actual stock market securities: stocks, bonds, mutual funds, ETFs, money markets, etc. You get all these options, with a self directed IRA in addition with the ability to invest in commercial property, residential property, small businesses that aren’t publicly traded, unregistered securities, and approved physical precious metal such as gold or silver bullion.
A self directed IRA can offer you hedges that traditional IRAs just cannot, by placing a portion of your portfolio into assets that are not directly tied to stock market performance. This leads more people to either rollover traditional IRAs, or to open up an additional self directed IRA.
A self directed IRA normally has the ability to provide you a tax-advantaged way to hold assets that are not denominated in government fiat currency. When you invest in physical assets, for instance, jewelries or landed properties, the wealth is stored somewhere central banks cannot inflate to worthlessness.
Are there any drawbacks to having a self-directed IRA? Of course, the most common is that losses cannot be deducted from your taxes like with a traditional IRA. This feature, nevertheless, was only a small consolation to the average IRA investor who lost more than 25% of their portfolio value in the stock market crash during the Great Recession of 2007-09.
Managing Risk with Your Self Directed IRA
Recall that a self directed IRA is supposed to be an investment portfolio, and there are risks, of course, involved with any investment strategy. Precious metals have seen unthinkable appreciation over the past half-decade, which has played a major role in the rise of a self-directed IRA, but it has also attracted a lot of investment frauds and scammers. What this simply means is that you need to find a trusted resource for your precious metals investment information.