Everyone needs to save for retirement. Social Security, if it still exists in its current form when a person retires, is only designed to supplement a person’s income. The monthly payment a retiree receives from the government every month may not be enough to provide for all of their basic needs and certainly isn’t enough to allow them to enjoy their retirement. The solution is investing in an individual retirement account, or IRA.
This kind of account allows people who are serious about funding their own retirement to invest with tax advantages. Depending on the type of IRA they choose, they could defer taxes or invest with after-tax money and take the distributions tax-free. There are advantages and disadvantages to both options and anyone who is thinking about opening a free ira account should consider all of them before they get started.
There is another option many people don’t know about. While the vast majority of IRAs today are opened through large banks or investment firms, some savvy investors open self-directed IRAs. The former only allows a person to invest in exchange traded assets like stocks, bonds, mutual funds and exchange traded funds. However, the latter has few restrictions on the type of investment a person can hold in their IRA. This means people can have precious metals, real estate and even promissory notes inside their IRA, with the same tax advantages.
Before opening a self-directed IRA, it’s important to do some research to find an experienced custodian to handle the account. Like all IRAs, the IRS has rules that direct the way the account can be used. An investor should be sure their custodian is an expert in the subject of the IRS regulations. They should also look for a company that charges reasonable fees. After all, there’s no value in saving money if all of the earnings are spent in fees.
Self-directed IRAs are becoming more popular so it’s possible an investor will hear someone in their circle talking about them. Researching to find the right custodian and then filling the account with the most profitable investments could help a person have a happy retirement.