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IRA Financial Group Blog

AdBits Episode 28 – Protect Your Self-Directed IRA from Fraud

AdBits Podcast
3 Minute Read

IRA Financial’s Adam Bergman Esq. explains how to protect your Self-Directed IRA from fraud and keep your investments safe and secure.




Self-Directed IRAs can be quite complicated, especially for beginners. Mistakes can happen. Prohibited transactions are a big one that many new investors stumble on. However, mistakes are understandable and can generally be fixed. What is unacceptable is fraud. Purposely trying to skirt the laws is not only illegal, but downright wrong. Thankfully, fraud in Self-Directed IRA plans make up a very small percentage of all transactions. Here’s Adam Bergman’s take on where he sees fraud and how you can protect yourself.

The majority of fraudulent transactions comes from a couple types of transactions or investments. The first is hard money loans. An advisor might approach you saying something along the lines of “loan X amount of money with us and we guarantee you a specified rate of return.” So, you send the money, and start receiving payments. Great for passive IRA income. However at some point, the checks stop coming. You contact them and they are full of excuses. You realize you just invested in a Ponzi scheme.

You can protect yourself from falling for this. First off, do your due diligence. Find out everything you can before you give anyone your money. If it seems too good to be true, it probably is! When you are in control of your investments, you do the legwork. You know exactly what you are getting into. Don’t trust anyone with your retirement funds, until you know everything about him or her. Watch out for promoters soliciting you for money!

Second, watch out for real estate promoters. They will look to sell you a property. They say they’ll handle the entire process. And, it seems like everything’s going great. You give them the money, the property is bought, you start receiving income. But do you have proof of ownership? Do you have the deed to that house? Sneaky promoters will do this to dozens of investors. They all think everything is great, but not one of them actually owns the deed to the house. You are a victim of fraud.

Again, you need to know who you are getting involved with. How long has the promoter, or his or her company been around? Is there a track record? If you want to invest in real estate, do it yourself. Find the property you want to invest in, work with trusted experts, and do everything yourself. There is no shortcut, but there is no fraud when you are doing things yourself.

One last thing to bear in mind is foreign investments. Many Americans travel abroad and see opportunities to invest outside of the country. Be especially careful when invest in foreign assets. The court systems in other countries may not help you out, especially if you are not a citizen. In sum, be smart!

Don’t Be Scared of the Self-Directed IRA

With all that said, we don’t want to scare you off from alternative investments. After all, that’s our business. we believe in diversifying your retirement investments. You can only do that when you self-direct. As Adam mentions, it’s a very small minority that is affected by fraud. You don’t want to be a part of that statistic. Just do your homework and control as much of the investment as you can.

Further, seek professional help before make a large commitment. Have a lawyer, accounted or trusted advisor review the investment first. Don’t sign anything before you get a chance to really look into the investment and the person offering it. If it sounds fishy in any way, just walk away. You worked hard to accumulate your savings. Of course, you want the best investments you can make, but not at the risk of giving your money to a fast talker. Your IRA custodian can help navigate the IRS rules, however, they are not there to help you make your investments. In the end, that’s up to you!

Stay In Touch

We always appreciate our listeners and we hope you will continue to listen and spread the word. You can find AdBits on SoundCloud, YouTube or your favorite streaming platform. Thanks for listening and if you have any topics you want to see covered, give us a call @ 800.472.0646 today!

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