A self-directed IRA custodian is an individual who manages investments and holds assets for an investor. The custodian makes sure all self-directed IRA IRS guidelines are observed at all times. Violating such IRA rules can incur severe penalties. So, it is important to carefully choose your custodian who will help you manage your retirement funds. Aside from dodging potential penalties, you’ll also have to consider other factors, like hiring a disqualified person or entity. We’ve listed six tips that can help your selection process.
7 Tips for Choosing the Right Self-Directed IRA Custodian
1. Account Setup and Website Experience
Setting up a self-directed IRA should be easy. Look for a custodian that has an “application-friendly” website offered for people with a self-directed account. New account forms and information should be easy to download from the website.
You should also consider a custodian’s website interface. Make sure monitoring of your self-directed IRA investment/s and making transactions are easy and uncomplicated.
2. Custodianship Experience and Concentration
It’s ideal to look for a custodian who specializes in self-directed IRA custodial services and has commendable experiences. They will attend to your needs better than a generalist financial firm. They will help you protect your IRA funds.
This is one of the most important considerations. Fees and rates differ depending on the custodian’s fee structure and the size of an account. Some follow quarterly or annual payments for account maintenance fees. On top of that, you should also be very particular about additional fees like loads for mutual fund investments and commissions they may charge when making trades.
4. Account Options
Depending on your plans and goals, it may help to look for a custodian who offers account flexibility. There are custodians who provide services for Roth IRAs, Saving Incentives Match Plan for Employees (SIMPLE) IRAs, Simplified Employee Pension (SEP) IRAs and even other types of retirement accounts like a 401(k) or 403(b).
5. Investment Options
The difference of self-directed IRAs in comparison to a traditional IRA or Roth IRAs is investment flexibility. If you want to increase your investment possibilities, you may want to look for a custodian with a wider selection of investment options.
6. Customer Service
If your retirement savings are at stake, having competent customer service is of utmost importance. It really helps if your custodian has adept specialists that can answer your inquiries whether it be over the telephone or via their website. You cannot afford to have mediocre, confusing or incomplete answers for questions concerning your savings and traditional or non-traditional investments.
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7. Average Account Size
It’s a common observation that custodians with the largest average account sizes tend to have the least amount of customer complaints. If you prefer bigger custodians to handle your self-directed IRA, you can ask them about the number of total assets under their custody and the number of their client accounts.
Your investment experience will be largely affected by the self-directed custodian you select. It is important you identify your specific needs before embarking on your search. With the growing number of reported self-directed IRA fraud cases, we urge you to be vigilant and scrutinizing when looking for IRA custodians.
Important Note: While a custodian will help you manage your assets, most custodial contracts between an investor and a self-directed IRA custodian specifically state that it has no responsibility for the performance of the investments, which may include and not limited to precious metals, mutual funds, and real estate. Thus it is always important that you take care of your individual retirement account.
Do you have other self-directed IRA custodian tips of your own? Share it with us in the comments section below!