Know the Controlling Feature of a Self-Directed Individual Retirement Account

Are you among those who like to take control of things in their own hands? If you want to exercise your control over most of the things in life, then a Self-Directed Individual Retirement Account (SDIRA) is one of the best things for you.


What is an SDIRA?

It certainly makes sense to understand what an SDIRA is before we proceed to know how you can exercise your control over it. 

An SDIRA is a retirement savings account that can either be a traditional or Roth IRA with the same contribution limits. The term ‘self-directed’ comes into play as it allows to self-manage the account. Besides, an SDIRA has many tax advantages over a regular IRA.


The Controlling Feature

When you open an SDIRA, you need to hire an IRA custodian. It will, however, play a passive role. Meaning, it will not give you any advice, but on the contrary, will act upon your instructions.

You will have to instruct your custodian what assets to invest upon. And the custodian will carry out your instructions.

Since you will instruct your custodian, you should keep yourself informed of the latest market trends so that you can choose and invest in alternative assets like stocks, real estate, precious metals etc. 

Role of the Custodian

Apart from playing a passive role by acting upon your instructions, the custodian executes many essential functions that go a long way in properly maintaining your SDIRA. It performs roles, such as:

  • Maintaining IRA agreements and forms in compliance with the regulations of the IRS and the U.S. Department of Labor 
  • Documenting and recording contributions, transfers and rollovers from other IRAs or retirement plans 
  • Holding documents, such as subscription agreements, operating agreements, offering documents, promissory notes, certificates, and other evidence of ownership
  • Receiving and recording income from assets held in the account
  • Providing IRA statements to the account holder

You have come to know how you can control your SDIRA. And also the roles of the custodian in addition to acting upon your instructions. It will certainly make sense for you to explore all the reasons for which you should open an SDIRA. And for that you need not do many efforts, referring to the infographic in this post will suffice.

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