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Can I Administer My Own IRA?

Friday, February 23rd 2024

An Individual Retirement Account (IRA) is a financial tool designed to enable individuals to save for retirement tax-free with growth or withdrawals tax-free depending on which type of IRA is selected. Individual Retirement Accounts have become popular as they allow self-directed individuals a means to build up retirement nest eggs more quickly than with traditional savings vehicles like bank savings accounts or CDs.

Self-Administration Considerations

“Can I administer my own IRA?” may appear straightforward, yet its answer can be complex. While self-administration provides more autonomy for account owners than ever before, the Internal Revenue Service (IRS) sets rules as to what can and cannot be done with your account.

How an IRA Custodian Operates

Custodians typically serve an important function for individual retirement accounts (IRAs). Custodians include banks, credit unions, brokerage companies or any other approved by the IRS to manage an IRA in accordance with IRS guidelines – handling paperwork distribution funds reporting directly to IRS completing administrative duties on your behalf while you make your choices of investments – you just let the custodian do their work!

Self-Directed IRAs Provide the Pathway to Auto-Administration

Self-directed IRAs (SDIRAs, 1) allow more control of your retirement savings account. You have access to more investment choices with these accounts than before – including stocks and bonds as well as real estate, private placements, precious metals and more! But SDIRAs require strict adherence to regulations; you still require a custodian, though often no advice or assistance with investments is offered from them.

Restrictions and Responsibilities

Though you have plenty of investment choices with an SDIRA, certain transactions are considered illegal by the IRS and must not take place. Examples include but are not limited to:

Engaging in any prohibited transaction could void its tax-advantaged status and compromise your IRA funds; so be wary when making transactions within it.

Risks and Challenges

While self-administering an IRA provides more control, it also poses certain challenges. Here are a few to keep an eye out for:

Evaluate Your Decision

Deciding to self-administer an IRA can be an enormously important decision, so before embarking on this path it is wise to give careful thought. Here are few things to bear in mind before embarking upon it:

Conclusion

While establishing your own IRA may seem feasible, doing it requires significant knowledge, time commitment and the capacity for risk tolerance. Carefully consider both your capabilities and your circumstances before committing to this endeavor.

Are you ready to take control?

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2 Comments

  • Shawn says:

    It sounds like a job on top of another job, no thanks!

    • Hi Shawn,

      It sounds like it and it is indeed! Being a custodian is no easy task and requires knowledge, experience and time. I can’t stress enough how important the choice of a custodian is for your IRA to do well. Please refer to our guide on custodians and their role for further information.

      Happy investing!