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First things first. What is a self-directed IRA?
A self-directed IRA is a retirement account that empowers investors to take control of their financial future. Just like a conventional IRA (or 401(k)), a self-directed IRA gives you the opportunity to take advantage of tax benefits and watch your money grow with compound interest. It has all the benefits you’ve come to expect from a retirement account with two important differences — more investment options and greater control of your retirement portfolio.
You direct it. You reap the benefits.
Self-directed IRAs give modern investors an opportunity to complete their portfolios with investments they truly believe in.
See how a self-directed IRA can empower your investing potential:
Leverage a wider range of investments that you know and understand
Greater control and flexibility over your investments
The power to invest in companies with ideas you truly believe in
Tax-deferred or tax-free growth, tax deductions, asset protection and estate planning benefits
Protection against market volatility and inflation rates
Asset protection under federal bankruptcy laws
Administrators, custodians and self-directed IRAs
One of the most confusing aspects of a self-directed IRA is the difference between an IRA administrator and an IRA custodian. Both have the ability to help you invest in self-directed IRAs, but there are a few key differences that you should be aware of before selecting an IRA provider.
Administrators are not directly regulated by state or federal banking authorities for safety and soundness, which can put uninvested cash and assets at risk. Even though administrators must contract with a custodian, sometimes the custodian has contracted its powers away which enables the administrator to maintain control of a customer’s uninvested cash and assets for the administrator. After a well-publicized failure of an IRA administrator based in Utah in 2014, some states are beginning to tighten state laws to prevent the inherent risks with the administrator business model.
Custodians, like STRATA, are directly regulated by state or federal banking authorities for safety and soundness in the same way that banks are. By law, a custodian must be a bank, trust company or apply with the IRS to become an approved IRA custodian. A custodian must maintain control of its customer’s uninvested cash and hold title to customer assets.
Learn more about the differences between administrators and custodians:
STRATA Trust Company (“STRATA”) performs the duties of a directed (passive) custodian, and as such does not provide due diligence to third parties regarding prospective investments, platforms, sponsors, dealers or service providers. As a custodian, STRATA does not sponsor, endorse or sell any investment and is not affiliated with any investment sponsor, issuer or dealer. STRATA does not provide investment, legal or tax advice. Individuals should consult with their investment, legal or tax professionals for such services.
Investment Products: Not FDIC-Insured | No Bank Guarantee | May Lose Value