There are many advantages to a Self-Directed IRA LLC, which may be why it’s growing in popularity. Foremost, it gives your portfolio more diversity and enables you to have full control over your finances. Additionally, you can invest in what you know and understand, which can decrease the risk of losing your funds.
When you use a Self-Directed IRA LLC, one of our IRA Services, you have the ability to make traditional investments such as stocks and mutual funds. But you can also make non-traditional investments, like real-estate, tax liens and precious metals. All these investments are tax-free, which is highly advantageous to your future wealth.
With your Self-Directed IRA LLC, you have a world of investment opportunities, including:
Domestic or foreign real estate (rentals, foreclosures, raw land, tax liens etc.)
- Private businesses
- Precious metals (gold or silver)
- Hard money
- Peer to peer lending
Moreover, you no longer need custodian consent, which gives you the opportunity to make investments as they present themselves. Let’s not forget that you no longer pay high custodian fees.
Self-Directed IRA LLC vs Custodian Controlled IRA
Again, a self-directed IRA LLC is a retirement account that you manage. Of course, you still have a custodian (approved financial institution) to secure your assets. However, your custodian makes investments at your sole direction. The custodian provides no guidance or support, so more responsibility converts to you.
With a self-directed IRA LLC, you can control your IRA assets and make investments from your LLC bank account. Investments are easier to make. A self-directed IRA LLC is popular for investments that involve a high degree of activity, such as real estate rentals and flips.
Whereas, a custodian-controlled IRA requires custodian consent to make transactions. This will incur custodian fees and time delays as the custodian reviews your desired investment. A custodian controlled self-directed IRA is more popular with one-off investments, such as investment funds, private business and land purchases.
Furthermore, with a custodian controlled-IRA, you must consider the fact that your investment may not be approved.
A Roth IRA works similarly and is subject to the same rules as a Traditional IRA. The only difference is, a Roth IRA generates tax-free income, whereas on a Traditional IRA, tax is deferred to a later date during tax-time. Therefore, in the case of a Roth IRA, earnings and gains aren’t subject to income tax ever. So long as the Roth distribution satisfies a few simple conditions.
- The distribution must be qualified
- The Roth IRA must be established more than five years
- You (the Roth IRA owner) must be over 59 ½
You can make contributions to a Roth IRA, but there are contribution limits. Between the years 2015-2018, the annual contribution limit for an individual under age 50 is $5,500-$6,500. However, not all taxpayers can make Roth IRA contributions. That’s where the Backdoor Roth IRA comes in.
Backdoor Roth IRA
If you’re an individual who exceeds the annual contribution limits above, you can still make Roth IRA contributions. Because there is no limit for conversions, if you’re above AGI limits, you can now make contributions. This is known as “Backdoor” Roth IRA.
It’s important to note, any contributions you make go into a tax-deductible traditional IRA. This is perfectly legal and allows you to make large investments tax-free.
Now that you know the benefits, learn the workings of a self-directed IRA LLC.
When you’re ready to set up a self-directed IRA LLC, contact us today and we’ll assign you to an IRA specialist to assist you.
Did you know?
The “Checkbook Control” Self-Directed IRA LLC can save you a lot of money on custodian fees.