Unlike a traditional IRA account, a self-directed IRA, or SDIRA, allows the owner of the account to have some input or complete control over the way the funds are invested. Since the investment strategies are non-trivial, a qualified custodian or trustee must maintain the IRA assets, records and transactions, according to the current IRS regulations. Even though you might be comfortable distributing your savings among stocks, bonds, mutual funds, and annuities, it is important to have a professional who can file the necessary tax reports and oversee the legal transactions. If you would like to have a bit more control over your retirement fund growth, follow these steps to set up your own self-directed IRA.

1. Identify an account custodian.

You should find someone you enjoy working with one-on-one, who you fee listens to your input and follows through with the plans you develop. This individual may be an officer at your bank or a local financial institution, or just someone with a degree in finance and experience with SDIRAs.

2. Transfer funds into a new SDIRA account.

You will need to redirect some or all of your assets into the SDIRA that you set up. This may require liquidating some holdings because you need capital in the form of cash. As with any large balance transfer, you can expect this process to take up to 2 weeks. Be sure to leave yourself enough cash in a simple savings account that you will have access to in case of an emergency. The penalties attached to early withdrawals from any IRA are roughly 10%, so you don’t want to drawing on your IRA or SDIRA before retirement.

3. Explore investment options.

The beauty of an SDIRA is that your investment options are not limited to stocks, bonds, and mutual funds. You have the ability to invest in real estate, stocks, mortgages, corporations, equity, and public tax liens. The more you know about some of these less traditional investment avenues, the better you and your custodian will be able to make important decisions and protect your retirement fund. When in doubt, talk to an expert before branching out into that field.

4. Break your way into the real estate market.

Real estate offers great potential for high profit earnings, but requires a considerable amount of startup or buy-in capital. If you have the funds available, real estate investing is probably the best way to see your SDIRA balance grow rapidly.

5. Diversify and prepare for retirement.

As you get closer and closer to your retirement age, you will want to modify your investments to reflect a more conservative rather than an aggressive portfolio. At this age, you will not longer need high risk investments, because you will have built up the necessary savings over the last 30+ years. Now is the time to settle your finances into secure, guaranteed-return investments that will allow you to live off of the earnings as you would a fixed-income. The SDIRA gives you the flexibility to move your money into whichever stocks and bonds you feel are safe.

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