Published Wednesday, March 1, 2023 at: 7:55 PM EST
Self-directed Individual Retirement Accounts (IRAs) are at greater risk of fraud than other types of other retirement accounts. Here’s what you need to know before investing in a self-directed IRA account.
With more than $30 trillion currently held in company-sponsored retirement plans, self-directed IRAs are a way for peddlers of high-risk, high expense investments and outright frauds to lure investors.
A self-directed IRA is an account that taps assets in a company-sponsored 401(K), 403(b) or other federally qualified retirement plan (QRP) to enable an investment not provided by a company retirement plan.
QRPs often do not allow employees to make investments in alternative assets, such as investments in real estate, gold bullion, private investments, and cryptocurrency because these investments are less liquid than publicly traded stocks and bonds. However, most company retirement plans will allow an employee to create a self-directed account to hold these assets.
A confluence of events makes Americans more susceptible to falling for a self-directed IRA account scheme:
Before opening a self-directed IRA to invest in an investment that’s off the grid provided by your company sponsored plan, it’s wise to consult a real financial professional.
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