Self-Directed IRAs

Do more than check a box. Directly find, pick, buy, and sell alternative assets with your retirement savings.

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Self-Directed IRA (SDIRA) vs  Managed IRA

With the self-managed IRA or regular IRA you find at most financial institutions, you simply check a box to indicate the mix of stocks and mutual funds you want. You are limited to traditional investments. With self-directed IRAs, you get to find, buy, and sell the alternative investments in your individual retirement account- this is true self-directed investing.

You can also invest in alternative assets that you can't invest in with a regular IRA or managed IRA. This is especially beneficial if you already have expertise in a certain types of investments or market, such as real estate.

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Reach Your Retirement Goals with a Self-Directed IRA

SDIRAs have the same tax benefits as IRAs offered by IRA companies, banks or brokerage firms with the added benefits of being able to invest in more asset types and directly pick, buy, and sell the assets held in your retirement account.

Self-directed IRAs offer investors three key benefits: diversification, investment control, and the same tax benefits as IRAs managed by a broker-dealer. Beyond stocks, bonds, and mutual funds, you can invest in non-traditional assets like real estate and private equity that give you added protection from a turbulent stock market- the investment decision is yours.

You also decide whether you want IRAR to do the recordkeeping of your IRA assets or if you want full bookkeeping control of your account via an LLC. Often referred to as checkbook control, establishing a self directed IRA LLC with IRA funds allows your LLC to make asset purchases. SDIRAs also allow you to employ other strategies , like taking out a non-recourse loan with your IRA or partnering with others to purchase real estate.

How Self-Directed IRAs Work

With any truly self-directed retirement plan, the IRS requires you to have a custodian for protection and oversight. Custodians like IRAR are regulated by state and federal law and are regularly audited. Make sure you know the difference between an IRA custodian and an IRA administrator.

After you choose a self directed IRA custodian, you'll want to determine which IRA account is best for your goals and open an account . You can choose from a self-directed Roth IRA, Traditional IRA, or if you have a small business, a SEP IRA or SIMPLE IRA might be best.

You can fund your SDIRA with an existing retirement account. This can be an IRA or old 401(k), or by making scheduled contributions.

If you're funding it with an existing retirement account, there are two ways to do this: a rollover or a transfer . Be sure to check IRA compatibility. Given the different tax benefits of different types of IRAs, you want to know the type of account you can move funds to.

Once your account is funded, simply tell your SDIRA custodian what alternative asset you want to purchase. When it's time to take distributions (age 59 1/2) or required minimum distributions (age 72), you can liquidate the assets or you can take in-kind distributions.

How Do I Set up a Self-Directed IRA?

First, conduct a comparison on Custodians or trust companies for self directed IRA services. Third-party providers, like administrators and promoters, are generally not custodians. Instead, they work with a trust company to conduct business. It's important to know the difference.

More thank likely, your standard IRA provider or custodian, will not allow you to make investments in tangible alternative assets such as real estate— that's not their expertise.

Once you choose a custodian, opening a self-directed IRA is simple and you can do it yourself online. You can complete a new account application and fund your account with an existing IRA or old 401(k), or you can make regularly scheduled contributions, not to exceed the contribution limits for the year.

There are different types of accounts to choose from. If you are an individual investor, explore the Roth IRA and Traditional IRA. For small business owners, you can look into the SEP IRA or SIMPLE IRA.

Transferring funds from an existing IRA to your self-directed IRA is an easy process and it is not a taxable event. You can start an IRA transfer by completing a Transfer Form and submitting it with your new account application. You can also open an account with an IRA contribution . But not to worry, IRAR guides you through this process and rule.

Once your account is funded, you can tell your IRA custodian what to invest in and your custodian will make the purchase. The investment options are yours to make. The investments are titled in the name of the self-directed IRA (not the account holder.) All the expenses for the investment are paid from the self-directed IRA and all of the income is put back in the self-directed IRA. The same is true if you sell the investment- the profits are put back into the self-directed IRA.

Unlock the Potential for Higher ROI— Alternative Investments

Why leave your money at the mercy of the market? With a self-directed IRA, you can invest in specific assets such as a private company or tax liens. But you can also invest in other non-traditional assets , like real estate or an LLC, that have the potential for a higher rate of return. And, you don't have to transfer all your account, you can leave your mutual fund or other retirement assets with the existing IRA providers.

Alternative investments are the major benefit of opening a self-directed IRA. By investing in these assets, you can further diversify your portfolio, capitalize on any industry knowledge, and protect your savings from a volatile stock market or unpredictable changes in the economy.  In fact, one of the best investments in a self-directed IRA is real estate.

A real estate professional or real estate investor, for example, can use their expertise to invest in residential, commercial real estate, and other types of rental properties . With their knowledge of the industry, they can invest in properties that stand to grow faster than the market. They can also help their clients invest in real estate with self directed IRAs.

Self-Directed IRA Investment Strategies

Your retirement goals and financial situation will influence your SDIRA strategy. Different account types offer different tax benefits. For example, a Roth IRA (tax free) may fit into your retirement strategy if you believe you'll be in a higher tax bracket when you're retired, whereas a Traditional IRA (tax deferred) may make more sense if you believe you'll be in a lower tax bracket.

You have many investment options as well strategies for your retirement savings. While IRAR can do your recordkeeping, you can gain full bookkeeping control of your account by establishing a Limited Liability Company (LLC) or checkbook IRA with IRA funds or with your self retirement account. Often called checkbook control, this type of SDIRA allows your LLC to make asset purchases.

Other strategies include taking out a non-recourse loan with your IRA to make real estate investments via a direct purchase of a property, or partnering with others or their retirement fund(s) to make a bigger real estate investment.

These strategies can be mixed and matched in many ways. The IRA holder is not limited to just one of them. You can combine these to maximize your investment potential.

Self-Directed IRA Rules 

Keep your self-directed retirement account on the right side of IRS regulations. With this tax-enhanced environment comes added responsibility. There are three key rules to keep in mind:

  1. You cannot engage in a transaction with a disqualified person
  2. You cannot use the IRA to take personal benefit
  3. You cannot invest in disallowed investments (life insurance and collectibles)

As the account owner, you are responsible for making all the investment choices and finding the investment opportunity for your self directed IRA account. This means that you are also responsible for making sure you do not break the rules or engage in a prohibited transaction.

You are responsible for conducting due diligence on the investment; finding, vetting, and keeping track of investment performance- and for updating the fair market value ( FMV ) of your investments or assets annually. Your are also responsible for getting investment advice from a qualified financial or tax professional.

With self-directed IRAs you get a lot of investment freedom, but you do have some responsibility. You should always discuss your strategy with a financial advisor or professional that handles your retirement portfolio.

Your Search for the Best Self-Directed IRA Custodian Ends Here!

Specializing in real estate and private equity transactions in self-directed IRAs, our employees each have nearly a decade of industry experience and a passion for educating clients. That means we share what we know with you as soon as we know it, so you can always make the best investment decisions possible.

We also keep our transaction fees low so you can save more and build equity— trust that we have your best interest first.

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Self-Directed IRA FAQs

What is a self-directed IRA? 

A Self-directed IRA is a retirement account that you, the IRA owner, control. With a self-directed IRA, you do more than check a box. These types of retirement accounts are usually used to invest in alternative assets like real estate. Self directed IRA investors directly find, pick, buy, and sell the assets held in the IRA. You need a self-directed IRA custodian or trust company to establish an account. 

How do I set up a self-directed IRA? 

You can open a self-directed IRA yourself. Open a new account online, move savings from another IRA to the account, or make a contribution to the new account. 

Can a self-directed IRA invest in a business? 

Yes. A self-directed IRA can invest in business where you or a disqualified person do not own 50% or more of the business. A business is considered an alternative investment in private stock.

What are the fees for a self-directed IRA? 

The fees for self-directed IRAs vary depending on the custodian. Usually there is a fee to set up the IRA and a fee to maintain the IRA. You should compare custodians fees before opening an account.

Self-Directed IRAs: What You Need To Know To Get Started

Understand the basics before getting started with a Self-Directed IRA.