How often do you think about your retirement? If it’s never, then you need to get involved as soon as possible! There’s nothing worse than imagining yourself old and debilitated with absolutely no money to live off. It’s a sad thought and you’ll have to rely on charity from others or loving family members to take care of you, but you’ll be stripped of your independence and, in some cases, feel depressed as a result. No one wants to be a burden at any stage of their life, which is why it’s important to think and plan your retirement during the early stages of your life.

Successful people know this all too well. They understand that money is fleeting and, in the world of investments and banking, it can disappear in just a matter of seconds—you won’t get rich quick, but you can certainly become poor quickly. This is why many people have turned from traditional retirement funds to a self-directed IRA. Compared to a regular IRA, there aren’t that many differences. However, the things that are different can completely change how you view your retirement account. In this brief article, we’ll be going over what a self-directed IRA is and how it can affect your future.

How does a self-directed IRA work?

In most cases, a self-directed IRA works similarly to a regular IRA. However, instead of the funds being put into things that the custodian chooses, you have a say in where the money goes. Most IRA custodians will invest your money in stocks and mutual funds, but these can be volatile and unpredictable. If you’re unlucky, then you won’t actually make much money by the time you need to make use of your retirement fund and, in some cases, you may even lose money. This is a horrible situation to be in, which is why many people have switched to a self-directed IRA so they can maintain some level of control over their money.

What are the advantages of a self-directed IRA?

The most obvious advantage and the main reason you would want to switch is to have more control over your business. For instance, you’ll have access to a wider range of alternative investments, such as the ability to use your IRA to buy a house for the sake of investing. This means you can invest in things that you personally understand and are familiar with instead of being dazzled with technical jargon that you don’t understand. This also means you can diversify your investment portfolio, meaning you’re less susceptible to unpredictable markets. Let’s say you invest all of your funds into a single industry. If that industry suddenly drops and dies as a trend, then all of your money is going to be wasted and those stocks will be worth less. However, if you invest in multiple different things, then your money is more likely to grow over many decades.

A self-directed IRA requires work

Although this sounds promising, keep in mind that you’ll need to constantly put in work to make the most of a self-directed IRA. You’ll have more control over your money, meaning that you will ultimately make the final decision on what to invest in. You’ll need to educate yourself how the industries you invest in, and while custodians will be available to give you advice and help you, you want to have a good understanding of how it works in order to gain the most benefit.