Self Directed Plan Responsibilities — Video

What this episode covers

Though investors wanting expanded choice and more control of their future love self directed retirement plans, they sometime don’t understand self directed plan responsibilities. Download Audio Transcript: Self-directed plans are great plans. You have that freedom, you have the ability to invest in things outside of the traditional world, outside of stocks, bonds, and mutual funds. You have that control. You have that benefit of being able to invest in what’s called nontraditional assets, whether it be real estate, whether it be precious metals, whether it be discounted notes, whether it be hard money loans. These are all great things that are afforded to you, but now comes the responsibility. This is not a candy store. There are rules that have to be followed. When you have your self-directed IRA or your self-directed 401K keep in mind a few things that you really want to give serious thought to. One, is it a proper investment, not only is it complying with the IRS code on investments, but is it a proper investment that you fully have researched and done your due diligence on? Number two, are you even the person who should be directing your investments? Everybody is enamored, loves the concept, and is romanced by the concept of controlling their own retirement account, to do what they want to do. Sometimes we have to do some soul searching and look at ourselves as, are we the best person to do that? Not saying that it doesn’t necessarily mean that you shouldn’t self-direct, but maybe you should also be working with professionals, in various fields, to get guidance, get good due diligence on whether or not you should invest in certain things. The next one is very, very critical, and quite honestly it’s one that people unintentionally make mistakes with all the time. These are very specific plans that have to meet certain requirements established by either the IRS and/or Department of Labor. Are you the person who’s best suited to keep proper plan accounting, plan reporting, making sure that you dot I’s and cross T’s? Some people are very organized, some people are not. For those of you who aren’t it doesn’t mean that you can’t self-direct, but you should always make sure that you’re doing the adequate steps to make sure that you have good plan accounting and reporting features. Does that mean hiring a CPA to assist you? Possibly. I would even say probably. With all cases, when you’re dealing with retirement plans, you do probably want to have a tax professional assist you from start to finish with that. It’s just a good thing to do. Again, with this concept it doesn’t mean that self-direction is bad. I’m not trying to scare people. It is a wonderful tool, but again, remember, are you the right person, is it the right investment, are you doing the proper reporting and accounting for the plan? Those are all critical things that you need to determine when deciding whether or not to establish a self-directed IRA or 401K plan.

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