Most people don’t realize that they can decide how the funds in their IRAs are invested. In today’s economy, many people are finding that they would have been better off investing the money in their IRAs themselves rather than relying on someone else.
IRAs were originally designed for people who did not have a pension plan where they worked. In 1982, the law was changed to make them accessible to anyone under the age of 70½ who has earned an income.
Traditionally, a person establishes an IRA account with an investment firm, such as a bank or brokerage firm. You are then provided with a short list of investments to choose from.
Because the investor “stitches” their investment, they sometimes think they have a self-directed IRA. That is not true. He has been limited to the investment products offered by the company where his IRA is held.
A truly self-directed IRA allows the owner to choose from a wide variety of investments. You are no longer limited to choosing from a few products offered by the investment company. Here is a partial list of investments available:
• Discounted notes
• Foreclosures
• Foreign currency
• Futures
• Land trusts
• Limited Liability Companies
• Limited Companies
• Mortgages and Deeds of Trust
• Oil and gas
• Options
• Associations
• Precious metals (certain types of gold, silver and others)
• Private Developments
• Private placements
• Public and Private Companies
• REITs
• Secured and unsecured loans
• Stocks, Bonds, Mutual Funds
• Tax Liens and Deeds
• Real estate: including domestic, foreign, investment, commercial real estate, and untreated land
• Much more
With a few exceptions specifically prohibited by the IRS, the owner can invest in almost any type of investment available. Examples of prohibited transactions are:
• Lend money to yourself
• Selling personal property to your IRA
• Pay yourself unreasonable amounts to manage your IRA.
• Using it as collateral for a loan
• Buy property for personal use (your house)
Self-directed IRAs are not for everyone. Some people don’t want the responsibility of choosing and managing their investments. For those who do, there are many advantages, especially with an LLC IRA:
• More control over your IRA investments
• Minimum custody fees
• Better asset protection
• Tax deferral
• Ability to partner with an IRA LLC or a self-directed IRA
• Less administrative bureaucracy
• No transaction fees or retention fees
• Less paperwork
If you already have a traditional IRA, it’s not too late to convert it to a self-directed IRA. While all IRAs are required to have a custodian, a self-directed IRA can give you checkbook control over your retirement funds and let you decide how they’re invested. In no time, your IRA can be rolled over to a self-directed IRA, and you can take control of your retirement and your future.