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How to plan your self-directed IRA strategically

April 18, 2022 • 2 min read
How to plan your self-directed IRA strategically
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Key takeaways:

  • Project retirement expenses and income needs to set Self-Directed Individual Retirement Accounts (SDIRAs) and overall retirement savings targets. Financial advisors recommend having at least 12x annual pre-retirement income.
  • Assess SDIRA time horizon; invest more aggressively early for higher returns, then shift to fixed income to preserve capital closer to retirement.
  • Develop an SDIRA estate plan to enable continued tax-advantaged growth for beneficiaries. Name heirs, select payout timelines aligned to goals.

Using your self-directed individual retirement account (SDIRA) wisely is critical to building retirement readiness. Whether starting your first SDIRA or optimizing an existing one, strategic planning is key. 

Apply these best practices to maximize the value of your self-directed account:

Project your retirement expenses

Estimate your income needs in retirement based on desired lifestyle activities and expenses. Financial advisors often suggest having at least 12x your pre-retirement annual income saved up. SDIRA balances factor in, along with Social Security, taxable accounts and more. Yieldstreet’s retirement calculator can help you determine your target figure.

Assess your SDIRA time horizon

Ideally begin contributing to your SDIRA in your 20s to benefit from decades of tax-advantaged compound growth. But any age works – just tailor your SDIRA investments accordingly. More aggressive investments early on can yield higher returns, while fixed income and other conservative options help preserve capital as you near retirement.

Consider SDIRA withdrawal strategy

Being strategic with how you take SDIRA required minimum distributions (RMDs) and optional withdrawals can significantly impact your annual tax burden in retirement. Generally, withdraw first from taxable investment accounts before touching pre-tax IRAs to benefit from continued tax deferred growth as long as possible within the SDIRA(s).

Develop an SDIRA estate plan

A well-structured SDIRA allows continued tax-advantaged growth to pass on to your chosen beneficiaries. Name heirs properly and select payout timelines that align to your vision. Draft supporting legal documents to ease executor burdens later on.

The key is an integrated retirement strategy, with your SDIRA(s) as a cornerstone. Yieldstreet can help advise on self-directed account planning tailored to your retirement goals.

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