What You Need To Know Before Investing In A Self-Directed IRA Account
Published Wednesday, March 1, 2023 at: 7:55 PM EST
Self-directed Individual Retirement Accounts (IRAs) are at greater risk of fraud than other types of other retirement accounts. Here’s what you need to know before investing in a self-directed IRA account.
With more than $30 trillion currently held in company-sponsored retirement plans, self-directed IRAs are a way for peddlers of high-risk, high expense investments and outright frauds to lure investors.
A self-directed IRA is an account that taps assets in a company-sponsored 401(K), 403(b) or other federally qualified retirement plan (QRP) to enable an investment not provided by a company retirement plan.
QRPs often do not allow employees to make investments in alternative assets, such as investments in real estate, gold bullion, private investments, and cryptocurrency because these investments are less liquid than publicly traded stocks and bonds. However, most company retirement plans will allow an employee to create a self-directed account to hold these assets.
A confluence of events makes Americans more susceptible to falling for a self-directed IRA account scheme:
- Forty percent of Americans aged 60 to 64 are at risk of experiencing a retirement shortfall, according to the Employee Benefit Research Institute, and less than one-third of American workers feel very confident about their ability to afford a comfortable retirement.
- Social media allows social influencers to conspire to pump up prices on investments and conspire to sell their holdings to their social network followers.
- Celebrities, Hollywood stars, and professional athletes, including social influencer Kim Kardashian, retired quarterback Tom Brady, and actor Matt Damon, endorsed cryptocurrencies and helped create a speculative bubble by giving these ill-fated investments legitimacy.
Before opening a self-directed IRA to invest in an investment that’s off the grid provided by your company sponsored plan, it’s wise to consult a real financial professional.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.
©2023 Advisor Products Inc. All Rights Reserved.
- Financial Consumer Alert: Long-Term Care Insurance Policies
- An Impressive Performance By The Federal Reserve
- After 20 Years, America Is Rethinking Social Media
- At A Unique Moment In Financial History, Five Takeaways From Fed Chair's Press Conference
- Developing Portfolio Return Expectations
- Why Investors Like Our Financial Commentary
- What To Do Now To Build Wealth
- The New Rules On Retirement Affect Americans Of Any Age And Income
- Sweeping New Law Changes Retirement Planning In 2023
- You Can’t Trust The Phone Number On The Back Of Your Credit Card Anymore
- American Exceptionalism Is A Legitimate Financial Philosophy
- Investor Note: Post Pandemic Inflation Crisis Highlights U.S. Exceptionalism
- Federal Reserve Likely To Dial Back Rate Hikes But They’re Far From Over
- Test Your Personal Financial Knowledge In 30 Seconds
- The Inspirational Story Of Hetty Green, The Warren Buffett Of The Early 1900s