Is Your Stock Broker or Banker Lying to You? Or Are They Just Telling You Half of the Story?

Did your broker sell you on the idea of using your IRA to purchase stocks for which HE earned a commission?

If youre one of those millions of Americans who has been told that you have to invest your hard-earned IRA dollars in stocks, then quite frankly, the commissions your broker has earned from selling you may very well buy him a new Mercedes while your IRA dollars barely grow.

But dont get mad get educated. Welcome to Self Directed Retirement Plans let us teach you about The The TRUE IRA!

What is a Self Directed IRA

An IRA is an Individual Retirement Account which most financial institutions and investment firms offer.  With a self directed IRA, you may choose from a variety of investment products BUT you are generally limited to the choices provided by the particular custodian.  Although these IRA’s are self-directed, the situation is similar to going to a Ford dealership and making a decision from the choices available.  At the end of the day though, you still are forced to buy a Ford.

A true self directed IRA allows the client to “step outside the box” and invest in all the asset classes that are legally available.  Now you can look at commercial and residential real estate, tax liens, loans – both hard money and regular, private placements, Trust Deeds, and precious metals just to name a few.  At Self Directed Retirement Plans LLC, we specialize in these types of self directed IRA’s.  Every IRA has to have a custodian. so the choice of custodians is very important.  We use a “passive” custodian, they don’t have products to sell and realize their clients wish to be in the “alternative investment world.”

How does a Self Directed IRA work?

There are two main ways to employ a self directed IRA.

The first is to send instructions to the custodian to send a check or wire and purchase the investments in the name of the IRA.  This is how most custodians prefer because it allows them to continuously charge for activity fees etc.

The second and preferred way is to use an underlying LLC.  At Self Directed Retirement Plans LLC, we establish state approved LLC’s for each client.  The LLC’s are “owned” by the self directed IRA and become the investment arm for the IRA.  Our clients open a checking account for the LLC at a bank of their choice.  We assist them to transfer the funds from the IRA (at the custodian) to the new self directed IRA LLC checking account.

Now they have a truly self directed IRA with checkbook control.  When an investment opportunity arises, they simply write a check and immediately take advantage.  There isn’t any waiting for permission etc.

What Rules affect a Self Directed IRA?

For a technical answer, you can refer to the Internal Revenue Website at www.IRS.gov and request Publication 590 – specifically pages 40-41.

Generally, as long as you don’t violate the prohibited transaction rules and the disqualified person rules, you should be on the safe side of the IRS.  We ask our clients to always call or email if they have any questions about these rules.

Prohibited Transactions – a self directed IRA cannot invest in collectibles such as works of art, rare automobiles etc.  Also prohibited are life insurance contracts and shares of S corporations.

Disqualified Persons – these are persons the plan is forbidden to “do business with”.  A more detailed list can be found on our site.

Funding of Self Directed IRA’s

Transfers and new contributions are the main funding vehicles for self directed IRA’s .

Transfers can come from the following: