Ask the Self-Directed IRA and Solo 401k Experts

If I make a real estate or other investment with my self-directed IRA LLC, are they protected against fraud?

Ted J., CA

Hi Ted,

In general, ones retirement funds are only protected against fraud or theft if they are deposited in an FDIC insured account. FDIC insurance covers all deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. Hence, if one makes a real estate investment or make a loan to a third-party and those funds are taken out of the FDIC insured account and invested, those funds are no longer granted FDIC insured protection and would not be protected against fraud.

IRA Financial Group is committed to helping our clients make safe and financial rewarding investments with their self-directed IRA accounts. While self-directed IRAs can be a safe way to invest retirement funds, investors should be mindful of potential fraudulent schemes when using a self-directed IRA.

Recently the Securities and Exchange Commission (“SEC”) issued an Investor Alert to warn investors of the potential risks of fraud associated with investing through self-directed Individual Retirement Accounts (self-directed IRAs). The SEC notes that there has been a recent increase in reports or complaints of fraudulent investment schemes that utilized a self-directed IRA as a key feature.

The IRA Financial Group encourage each investor to click on the link below and review the following questions when considering an investment. Because it is not the responsibility of IRA Financial Group to provide investment analysis or recommendations or to perform due diligence concerning your investment decisions, the questions have been designed to help you in your efforts to evaluate the soundness, prudence and merit of your investments.

Please note that this is not a comprehensive list of questions but simply a starting point. The answers to these questions are not a substitute for your own due diligence. We also strongly encourage investors to make use of legal, tax and financial advisors to support these efforts.

Always take the time you need to understand and evaluate a potential investment. Make sure you understand the investment you will be making and thoroughly understand how the promoter will be able to generate the returns being promised. Also, make sure the promoter of the investment has the necessary qualifications or licenses, if applicable, to offer the investment. Be cautious if a sponsor or advisor uses the affiliation as the reason to make the investment, rather than relying on the underlying merits of the investment or trust in the sales person.

For more information on potential fraud risks, please click here to view our Fraud Alert Detector.

The Self-Directed IRA Experts

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