Self- Directed IRAs
Self- Directed IRAs
What is a Self-Directed IRA?
Technically, a self-directed IRA (SDIRA) is the same as a traditional individual retirement account because it offers the same tax savings that any other IRA offers.
Most IRA companies limit their IRA account holders to a few assets that benefit the IRA company or financial advisor, such as stocks, bonds, or mutual funds. However, with the self-directed version, the account holder may invest in a wide variety of assets, often referred to as “alternative” or even “exotic” investments, instead of the usual, run-of-the-mill assets like stocks, bonds, and mutual funds.
Self-directed IRA holders, often called self-directed investors, can invest in promissory notes, cryptocurrencies, private equity, and – you guessed it – real estate, in addition to almost anything else, with a very few exceptions.
What You Can Invest In
- Real Estate
- Tax Liens
- Trust Deeds
- Oil & Gas
- Curise Lines
- Stocks & Bonds
- Cyrptocurrency
- Precious Metals
- Vacation Rentals
- Farmland
And so much more!
What You Can NOT Invest In
IRS rules prevent using SDIRA funds to invest in many types of collectibles, life insurance, S-corporation stock and certain other transactions.
How to Set Up a Self-Directed IRA
Are you ready to take control of your retirement capital and stop letting other “financial professionals” tell you how to invest your hard-earned retirement savings? If so, then you are ready to set up a self-directed individual retirement account (SDIRA). In the best-case scenario, it’s as easy as calling up your IRA custodian and discovering that you already have an SDIRA because your account is with a self-directed IRA company, but the odds of that are very slim. You will probably have to do a little work to get to your goal of a truly self-directed IRA.
Here are the steps you will need to take:
1. Figure out what self-directed IRA company is right for you.
Although there are a lot of SDIRA companies out there, not all are right for real estate investors. For example, the ones that take 90 or even 180 days to respond to direction will probably not fit your needs. Also, some SDIRA companies allow their clients to invest in alternative assets but not in real estate. If you get a “gold IRA,” for example, you still could be blocked by your SDIRA company from investing in rental properties or property tax liens. So talk to a few SDIRA companies and make sure you select one that will fit your needs.
2. Contact an SDIRA attorney.
You need good professional advice at this point. You will need to decide whether you want to go with a traditional SDIRA or a Roth SDIRA, just for starters. You may also need help getting your current IRA custodian to work with your future SDIRA custodian. This can be time-consuming, but do not give up! It will pay off in the short- and long-term.
3. Make the move.
Tell your current IRA custodian that you will be moving your account to your new SDIRA custodian. Your new custodian should be able to handle most, if not all, of the work from there. They will tell your old custodian what they need and how to handle the move. Then, you are ready to start self-directing your retirement!
There are a lot of investment firms that leave out that second step, and that is okay. If you are familiar with this space or if you already know the custodian that you like for holding your self-directed retirement account, you might not feel as if you need to consult an attorney. At Strategic Passive Investments, however, we like to leave it in there because there are a lot of times that just 10 minutes with a knowledgeable expert could save you lots and lots of tax dollars down the road. We would never want you to miss that chance! After all, the more tax benefits you gain, the better positioned you are to keep right on investing with us.
Recommended SDIRA Custodians
- 3 Reasons
- Setting up
- Fee Schedule