Why Have a Self-Directed Roth IRA?

Sat, 20 Sep 2008 17:54:44 EST

In 1974, Congress developed the concept of an Individual Retirement Account, basically a trust account designed to let people save up money for their retirement without having taxes chipping away at their accounts before the money is taken out.

A few years later, the setup was modified, allowing account owners to deduct their contributions to the IRA from their income, meaning that no taxes would be paid on IRA funds at all until the owner withdraws that money during retirement, at which point it is taxed similarly to any other form of income.

Several decades later, in 1998, the Roth IRA was created. Named after its main legislative sponsor, Senator William Roth, a Roth IRA has several differences from a regular IRA. The biggest one is that money taken out of the account during retirement isn't taxed, while money contributed into it is not tax-deductible. Its value lies in the fact that once the account owner puts money into the account, it never gets taxed again.

An IRA can also be "self-directed." This is when the account owner, using a trustee or counselor for guidance, directs what happens within the account. In traditional IRA's, the trustees or counselors, who are required by law, are often financial institutions with their own interests and goals.

Thus they can easily charge exorbitant fees for their "advice" and lock the account owners into their own investing programs. The money is left in the account, and the owner often has little or no idea what is going on until the quarterly reports come in. These problems can be greatly alleviated by converting an IRA into a self-directed IRA.

Although there are countless benefits of holding a self-directed IRA, an extremely small percentage of people with those accounts choose to do so. One reason is that people just don't desire to put forth the extra effort. They consider the annual return of 8% or so they get from the bank to be adequate, and have no desire to begin investing in real estate for fear of all the time it would require. Banks also discourage customers from self-directing their IRA's, and it is rather easy to understand why. A bank would rather pick its own investment venues and give account owners a portion, keeping the rest for itself.

However, many of these "reasons" are resolved with City Capital Corporation, leaving little reason not to have a self-directed IRA. Since the company does virtually everything on its own, the investor has no real extra work he or she needs to do in order to receive greater returns. There are companies out there which are set up to help those who choose to self-direct their IRA's. In short, by taking this route, an investor gets all the benefits without doing any of the work. While this might sound too good to be true, it really isn't, and is backed by a guarantee: City Capital will pay the difference if an investor's returns don't double after joining their program!

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Why Have a Self-Directed Roth IRA?