Saving for retirement is a big deal and a huge investment; as a result, we hear about things like 401ks all the time. However, a somewhat less-known and understood retirement plan is the IRA. IRAs are similar to 401ks in that they are retirement savings programs. IRA specifically stands for “Individual Retirement Account.” Unlike 401ks, however, IRAs have an annual contribution limit of $5000 (although this contribution limit is exceeded to $6000 if the individual is over the age of 50), and individuals who withdraw funds before they reach the age of 59 ½ are penalized 10%. There are several kinds of IRA plans such as the traditional IRA and the education IRA. However, one of the most commonly used is the self directed IRA.

A self run IRA requires the individual, or account owner, to make contribution decisions on behalf of the retirement plan. The IRS also requires that a qualified trustee hold the IRA assets for the IRA owner. In other words, this means that the IRA trustee is responsible for maintaining assets and for keeping track of all transactions and records pertaining to the IRA account. This trustee also takes care of duties such as filling out IRS reports, issuing statements for their clients, and helping their clients in any way they need to, which includes helping them to understand IRA regulations and procedures.

Self directed IRA accounts are not usually limited to certain types of assets and investments, such as stocks, bonds, and/or mutual funds. In fact, most IRA trustees allow their clients to make whatever types of investments they choose, as long as those investment decisions are permitted by the IRS. Individuals have used all sorts of investments for their self directed IRA accounts, including mortgages, real estate, private equity, franchises and partnerships, and tax liens. Saving for retirement can involve more than simply reducing your salary by 10%—with an IRA, several options are available for individuals who wish to save for retirement.

In short, individuals who chose to use a self directed IRA account are given a specific IRA trustee to handle the account for them, to do the secretarial work so to speak. The account holder is left with the responsibility of deciding how to fund or invest their retirement savings. A self run IRA is a simple and relatively stress-free way to save for retirement because it allows the individuals to make their own decisions, but it doesn’t require that they execute them on their own—that is what the IRA trustee is for. For those individuals who feel like they have too much on their plate to handle already generally respond favorably to the self run IRA plans because it takes the headache out of saving for retirement. However, IRA trustees are not necessarily tax advisors. Because of this, individuals who chose to have an IRA trustee are encouraged to seek advice and counsel from an unbiased source. However, a self directed IRA plan is one of the most excellent ways to save for retirement.