By J.P. Dahdah, Founder & CEO of Vantage
‘With freedom comes responsibility’ and Self-Directed IRA (SDIRA) account holders are not immune to this reality. I regularly share my insights about the long list of powerful benefits SDIRAs offer investors, but as with most things in life, there are downsides to these accounts which I feel obliged to also share.
In the world of SDIRAs, the burdens exist within the realm of personal accountability. Building wealth is very hard to do, but when you are a SDIRA investor, you must never overlook the work associated with the words “self-directed.” The brokerage company IRA industry is built on an electronic based platform focused on automating everything. Buy and sell transactions are done online and can be completed with a few mouse clicks, monthly retirement savings are sold through the concept of “dollar cost averaging” via ACH debits from your bank account, and all holdings are valued daily and delivered to mobile devices so you are never more than a blink away from your portfolio snapshot.
In the alternative investment world of SDIRAs, the opposite is true. SDIRA Custodians and Administrators help facilitate transactions and provide the services the IRS requires, but the individual account holder bears on their shoulders the majority of the workload. The process is not automated. There is a lot of paperwork, signatures, investment research, and learning that are the individual investor’s responsibility. That’s why anyone who has heard me speak knows that I emphasize the fact that SDIRAs are NOT for everyone.
To fully understand the value of SDIRAs, you must embrace both the benefits and the burdens. We have to take the little amount of “bad” stuff with the long list of “great” things SDIRAs offer. Do I like filling out my Fair Market Value (FMV) form every year on all my IRA alternative assets? Heck no! Am I thrilled about completing the stack of documents required to buy and sell my retirement holdings? Nope. I do it because that’s what I have to do to reap the immense benefits of the investment returns I expect my IRA to receive in the long term. In my case, the benefits of SDIRAs largely outweigh the burdens. You must decide if you feel the same way I do. Happy Investing!!