3 Common Misconceptions About Self-Directed IRAs

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As a self-directed IRA custodian, New Direction Trust Company has frequent run-ins with popular misconceptions about retirement accounts. Let's address three such misconceptions about self-directed IRA investing.

IRAs have an annual earnings limit

Regardless of asset type or account structure, self-directed IRA earnings have no annual limit. This means your IRA can grow to any size in a given year without tax liabilities or penalties. IRA investors needn’t fear a lucrative year in real estate or a particularly wise investment in a booming local business. These investment successes can be celebrated without consequence!

IRA earnings are different from annual contribution limits. Each IRA account type has different annual contribution limits which are designated by the IRS.

The government oversees IRA investments

Some investors may believe that the SEC or IRS oversees their self-directed IRA investments. This idea is more than likely rooted in the history of retirement accounts. Since most IRAs were invested solely in the stock market since their inception in the ‘70s, many investors associate the SEC with IRA asset oversight. Although the IRS defines the rules and regulations regarding retirement accounts, it is the self-directed IRA custodian who oversees the documentation and execution of investments.

In terms of understanding prohibited transactions, it is the account holder’s responsibility to stay within legal boundaries with their investments. New Direction Trust Company employs an education-based business model to help our clients navigate the IRS rules and regulations regarding their accounts.

Disqualified persons can't be your account beneficiaries

IRA owners should be are aware of disqualified person rules that prohibit certain people from deriving direct or indirect benefit from their IRA accounts. Although there are some hard-and-fast rules in this regard, a disqualified person is 100% allowed to be designated as a beneficiary to your account. An IRA holder can name his or her spouse, child, grandchild, or any other individual as a beneficiary. They may also designate a trust, charity, or a combination of the aforementioned individuals or entities.

You may designate or update your account beneficiaries online or by submitting our Beneficiary Designation Form.

Self-directed IRA custodians have no legal responsibility to educate clients about the ins-and-outs of retirement investing. However, New Direction Trust Company prioritizes an education-based business model because we believe in empowering our clients to help them make the decisions that suit their needs. Give us a call at 877-742-1270 or send us an e-mail at info@ndtco.com for more information about self-directed retirement.