In a recent educational video from New Century Planning, Bob Ryerson sat down with Alan Johnson, a leading authority on self-directed Individual Retirement Accounts (IRAs), to demystify the concept and benefits of these investment vehicles. Their discussion shed light on the opportunities self-directed IRAs offer for investors seeking to broaden their retirement portfolios beyond traditional paper assets.

Understanding Self-Directed IRAs

Contrary to common misconceptions, a self-directed IRA is not limited to traditional stock market investments. Alan Johnson clarifies that, although the term ‘self-directed’ might be misleading, it essentially refers to IRAs that can invest in private offerings. This flexibility allows investors to venture into areas like real estate, precious metals, cryptocurrencies, and more, subject to IRS regulations.

The Wide Range of Investment Opportunities

Self-directed IRAs enable investments in a diverse array of assets, including franchises, private equity, real estate, and even racehorses. However, there are certain restrictions; investments cannot be made in S corporations, life insurance on oneself, or in art and collectibles directly. Despite these limitations, investors can still explore avenues like art galleries or classic car dealerships as business investments.

Choosing the Right Custodian

With around 40 IRS-approved custodians available, selecting the right one is crucial. These custodians are regulated by state banking organizations and have varying levels of expertise and willingness to handle different types of investments. Johnson emphasizes the importance of finding a custodian that not only allows the investment but is also proficient in managing it, especially for assets like international real estate or private lending opportunities.

Navigating Fees and Regulations

The fees for self-directed IRAs can vary significantly, with some custodians charging up to ten times more than others for comparable services. Johnson is developing an app to help investors compare these fees and choose the most cost-effective custodian. This tool will also assist in ensuring that investments comply with IRS rules and avoid prohibited transactions, which can be a complex landscape to navigate.

The Future of Self-Directed IRAs

As investors become more aware of the benefits and possibilities of self-directed IRAs, the demand for specialized knowledge and tools to navigate this space is increasing. Johnson’s upcoming app and his advocacy work are timely resources for those looking to diversify their retirement savings into non-traditional investments.

Conclusion

The conversation between Bob Ryerson and Alan Johnson highlights the growing interest in self-directed IRAs as a means to diversify retirement portfolios and potentially hedge against the volatility of traditional paper assets. By understanding the rules, choosing the right custodian, and being aware of the fees, investors can unlock a world of investment opportunities previously thought to be out of reach for retirement accounts.