How to Choose a Self-Directed IRA Custodian
Alternative Investments in IRAs
To invest in alternative assets such as real estate or private equity with your retirement savings, you need a self-directed IRA. The IRS states that this must be through a passive 3rd party. Many investors choose an custodian for the added protections this oversight brings.
However, there are many companies out there that hold assets in an individual retirement account not all of which are IRA custodians. It's important to differentiate between these types of companies since they're not all regulated the same (if at all). Choose the right company- one that will help you meet your retirement goals.
There are many companies that hold alternative assets in individual retirement accounts, not all of which are custodians. It's important to differentiate between these types of companies, since they're not all regulated the same (if at all).
However, there are a few commonalities between companies investors should be aware of. Here’s a list of what to keep in mind regardless of the type of company you choose:
Self-directed IRA administrators do not meet the IRS requirements to be a custodian or trust. As such, they cannot hold title to assets. Usually, their role involves marketing and selling, data entry, producing statements, and basic reporting. However, they can serve as a link to a reputable IRA custodian.
Alternatively, a lack of oversight means passing funds through an administrator to a self-directed IRA custodian can create more risk for investors.
It is a financial institution that holds your retirement account's alternative assets for safekeeping and IRS reporting. It is regulated, audited, and adheres to IRS rules and guidelines.
To become a self-directed IRA custodian, a company must undergo a rigorous application process. This involves meeting specific legal and IRS regulations, along with demonstrating certain requirements. The process is complex and requires the company to meet strict standards. They must also provide a capital pledge, liability insurance, and a fidelity bond, among other qualifications. The company and its leaders must prove their ability to perform custodian duties as required by the law. Once approved, the company receives a Charter and Certificate of Authority from the state in which it applied, signifying their readiness to serve as a self-directed IRA custodian.
Trust companies undergo regular audits and are expected to adhere to strict guidelines outlined in their written policies and procedures. During these audits, auditors conduct a comprehensive review of the trust company's books, records, funds, and IRA investments to ensure that all operations are being carried out correctly. The auditors pay particular attention to any transactions that involve disqualified persons or asset types, as these are prohibited by IRS regulations. The goal of the audit is to ensure that the trust company is operating in compliance with all applicable laws and regulations. Our charter (and all self-directed IRA custodian charters) specifically forbids these types of investments. For example, a self-directed IRA custodian cannot legally offer one of their clients any investment advice or investment opportunities. The investment option is yours as is conducting due diligence on the asset.
Not all custodians are the same or provide the same services, but they all are regulated similarly by federal and state law.
It is important to determine the type of company you want to work with, based on your investment choice. Are you looking for a one-stop shop? If so, perhaps a large trust company with many types of services would be ideal. But beware, don't get stuck with a company that is a jack of all trades, master of none. Here's what to look for when choosing a self-directed IRA custodian for your investment options:
Fees that are often ignored can significantly affect IRA accounts. Retirement plan fees are the primary cause of retirement fund depletion, hindering the growth of your hard-earned money. To comprehend fee structures, it is essential to understand how custodians charge and compare. As your investments increase, you should not be required to pay more.
Keep in mind that investments made through self-directed IRAs can require additional paperwork and documentation, resulting in higher fees. When comparing self-directed IRA custodians, be sure to cross-examine setup fees, opening account fee, and transaction fees. Also make sure to check for either a flat quarterly fee or an asset-based fee.
Self-directed IRA custodians must be knowledgeable to provide the customer service investors need. Experience and expertise in managing these account types go beyond IRS authorization. Responding to inquiries, executing transactions, and providing account statements are just a few ways to measure adequate customer support.
Your self-directed IRA custodian will monitor and record keep transactions that occur within the account to make sure it remains tax-compliant. They should be proficient in regulations governing your self-directed IRA and steer you away from engaging in prohibited transactions.
Lastly, you want a custodian with the wherewithal to help you jump fast on investment opportunities that are time-sensitive.
Clear communication is very important, especially when it comes to your retirement. If you have a time-sensitive question, you want to make sure you can get a hold of the staff— and when you do, they know what they're talking about.
Servicing times are very important for any investor. The success of an investment deal can depend on timing. Failure to pay IRA bills on time can result in additional fees. It is important to select a custodian who will simplify the process, rather than complicate it.
To learn about a trust company's customer service, servicing times, or communication style, pay attention to the signs. Did someone call you back in a timely manner? Did you get tossed around from one person to the next? Do they have expertise in your asset of choice? Inquire about the processing time for your transaction to avoid complications. Asking such questions can prevent significant problems in the future.
IRAR Trust Company is a custodian regulated directly by the South Dakota Division of Banking- the state with the most knowledge and experience in working with self-directed IRA custodians.
Our annual account reviews include but are not limited to audits of recordkeeping, safekeeping of assets, compliance with federal and state laws, IRS reporting, trust accounting, account correspondence, distributing account statements.
Lowered, competitive fees, unrivaled client support, secure investing, and a streamlined investment process— these are all of the qualifications to look for when choosing a self-directed IRA custodian like IRAR.
If you are an investor looking for specialized services and personalized service, IRAR Trust Company is the ideal custodian. We specialize in real estate and private equity transactions in self-directed IRAs. We bring years of knowledge, experience, and hands-on assistance as needed. We do not offer, endorse, or promote products or investment options, nor do we provide investment advice. Your IRA, your choice. Our team holds the Certified IRA Services Professional (CISP) designation. Our average employee has 10 years of experience in self-directed IRAs, uncommon in our niche industry. We're a seasoned and dedicated group. We have a passion for education. No matter the question, you know you're getting up-to-date information every time you call.
When you self-direct your retirement funds you are in charge of every investment decision. This is why it's so important for any investor to choose a custodian that is responsive.
IRAR's committed to answering the phone because we know it's essential to have a team you can trust behind you. Give us a call- you'll be glad you did. 888-322-6534.
A self-directed IRA custodian is a financial institution that holds your IRA's alternative investments for safekeeping. It is regulated, audited, and adheres to IRS rules and guidelines.
Not all self-directed IRA companies are the same. There are many companies that "hold" alternative investments in IRAs that are not regulated like custodians. It's important to know the difference between custodians, administrators, and promoters."
To find the best IRA custodian for your strategy, you must do a comparison in fees and services. Use this template to help you make an informed decision.
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