A self-directed IRA is not a legal term that you will find in the Internal Revenue Code.  A self-directed IRA is essentially an IRA that allows for alternative asset investments, such as real estate or even cryptocurrency.  Traditional financial institutions do not allow IRAs to invest in IRS approved alternative assets, such as real estate, because their focus is on earning fees through traditional investments. Hence, the birth of the self-directed IRA industry.  Today, the Retirement Industry Trust Association (RITA) estimates anywhere between 4-7% of all IRAs are invested in alternative assets.  Accordingly, the self-directed IRA is the only way one can purchase alternative assets in an IRA.

With a self-directed IRA, a special IRA custodian, IRA Financial, will serve as the custodian of the IRA. All types of iRAs can be used in a self-directed IRA structure, such as a Traditional IRA, roth IRA, SEP IRA, SIMPLE IRA, 401(k) rollover, and even a Coverdell and HSA.

Unlike a typical financial institution which generates fees by selling products and providing investment services, a self-directed IRA custodian earns fees by simply opening and maintaining IRA accounts and do not offer any financial investment products or platforms. With a self-directed IRA, the IRA funds are generally held with the IRA custodian. The IRA owner will then direct the IRA custodian to invest the IRA funds in IRS approved alternative asset investments, such as real estate. Title to the self-directed IRA asset will be in the name of the self-directed IRA custodian care of the IRA owner.

A self-directed IRA is popular with retirement investors looking to invest in alternative assets which do not involve a high frequency of transactions, such as the purchase of raw land or private fund investments.

When it comes to making investments with a self-directed IRA, the IRS generally does not tell you what you can invest in, only what you cannot invest in.  The types of investments that are not permitted to be made using retirement funds is outlined in Internal Revenue Code Section 408 and 4975.  These rules are generally known as the “Prohibited Transaction” rules.  Other than life insurance, collectibles, and transactions that involve or directly or indirectly benefit the IRA holder or a “disqualified person,” one can use their IRA to make the investments.  A “disqualified person” is generally defined as the IRA holder and any of his r her lineal descendants and/or any entities controlled by such persons.  Note – siblings are not considered “disqualified persons.” Some of the most popular self-directed IRA investments are, but are not limited to, real estate, stocks, loans, notes, tax liens/deeds, investment funds, and even cryptocurrency.

If you are looking to invest your IRA into an alternative asset investment that is not expected to involve a high number of transactions, a self-directed IRA LLC is typically not employed, such as:

1. Private placement
2. Investment fund
3. Real estate fund
4. Private business investments
5. Debt fund
6. Raw land
7. Cryptocurrency

The concept of tax-deferral stems from the notion that all income and gains the pretax retirement account generates will flow back into the account tax-free. Instead of paying tax on the returns of a Self-Directed IRA investment, such as real estate, you pay tax at a later date so your investments grow unhindered.

Below are several examples that illustrate the power of tax deferral or tax-free growth for a Roth IRA:

Example 1: Jen is 22 years old.  Assuming Jen makes an annual self-directed IRA contribution of just $365 a year from age 22 through age 70.  Assuming Jen gets an annual rate of return of 8% on her IRA investments. Also assume Jen would have a 25% income tax rate.  Based on these numbers, Jen would have $ 193,210 in her self-directed IRA at age 70, but only $99,265 if she invested using a taxable account.

Example 2:  Jen is 22 years old.  Assuming Jen makes an annual self-directed IRA contribution of just $1825 a year from age 22 through age 70.  Assuming Jen gets an annual rate of return of 8% on her IRA investments. Also assume Jen would have a 25% income tax rate.  Based on these numbers, Jen would have $ 966,050 in her self-directed IRA at age 70, but only $496,324 if she invested using a taxable account.

The primary difference between a self-directed IRA and a self-directed IRA LLC, also known as a “checkbook control” IRA, is that with a self-directed IRA LLC a special purpose limited liability company is established that is owned by the IRA and managed by the IRA owner.  Whereas, in the case of a self-directed IRA, the IRA would invest directly into the underlying investment and title to the investment would be in the name of the IRA and not the LLC.

With a self-directed IRA LLC with checkbook control, an IRA is set-up with a self-directed IRA custodian, such as IRA Financial. The IRA is then invested into a special purpose LLC, which IRA Financial can help you establish. The self-directed IRA LLC is then managed by the IRA owner providing the IRA owner with “checkbook control” over the IRA funds. With a “checkbook control” self-directed IRA LLC, the manager of the self-directed IRA LLC, will have the authority to make the investment decisions without the involvement of the custodian.  Plus, a self-directed IRA LLC will offer the IRA owner with limited liability protection over IRA investments. Moreover, all self-directed IRA investments will be titled in the name of the LLC offering the IRA owner with more privacy. With a self -directed IRA LLC with “Checkbook Control’ you will be able to buy real estate by simply writing a check. 

All types of IRAs can be transferred tax-free to a self-directed IRA LLC. A self-directed IRA with “checkbook control” is popular with IRA investors seeking to invest in alternative assets, such as rental properties, fix and flips, tax liens, or cryptocurrencies that require a high frequency of transactions.

A Self-Directed IRA is essentially an IRA that allows for alternative asset investments, such as real estate or even cryptocurrency.  Traditional financial institutions do not allow IRAs to invest in IRS approved alternative assets, such as real estate, because their focus is on earning fees through traditional investments.

We do.  We handle all IRS reporting with respect to the IRA including filing IRS forms 1099-R and 5498.

It generally takes anywhere from 2-3 days to set-up the Self Directed IRA LLC structure. Our in-house retirement tax professionals will complete all the necessary IRA rollover or transfer paperwork in order to help transfer your existing retirement funds tax-free to the new passive custodian so that your funds will be available for investment in a matter of days.  

You should monitor your self-directed IRA investment since the account is self-directed and IRA financial is not a fiduciary.  From a reporting standpoint, you will need to provide IRA Financial with an annual value of your self-directed IRA account, cash and fair market value of all assets held in the account each year. 

Only if you are planning to take an in-kind distribution or are over the age of 73 and are required to take required minimum distributions (“RMDs”). An independent third-party should sign the valuation form.

Simply complete a Deposit Form on our app and then send in the funds by wire or check.  Remember to include your account # on the check or wire.

Your funds sent to IRA Financial are held at Capital One bank.  The funds are FDIC protected up to $250,000.  However, once the funds are invested and sent from IRA Financial to facilitate your investment, IRA Financial is no longer in charge of those funds and you are 100% responsible for the investment.

IRA Financial “literally” wrote the book on the self-directed IRA.  Our founder, Adam Bergman, Esq, has written 8 books on self-directed retirement plans and over the last 15+ years has helped over 24,000 self-directed clients invest over $3.2 billion in alternative assets.

IRA Financial self-directed IRA is specifically designed and customized for each type of investment.  Whether it is real estate, private equity, venture capital, hedge fund, private business, cryptos, precious metals, hard money loans or much more, our self-directed tax experts will work with you to design the perfect self-directed IRA solution for your investment.  Additionally, IRA Financial is the only self-directed retirement company that provides annual consulting, IRS tax reporting/filings, BOI FinCEN reporting, and full IRS audit guaranty.

See for yourself why IRA Financial is one of the leading providers of self-directed IRAs in the country:

• Customized self-directed IRA design for your investment
• Flat annual fees
• No transaction or asset value fees
• No wire of check fees
• IRA & 401(k) personalized rollover support
• IRS tax reporting, including IRS Form 5498 & 1099-R
• BOI Reporting with FinCEN
• LLC IRS tax filing (Form 1065) and UBIT tax filings (Form 990-T)
• Free self-directed roth IRA conversion
• Free RMD support
• Free tax research on self-directed IRA topics

One-on-one tax support on the “disqualified person” and “prohibited transaction rules.”

• One-on-one tax consultation on UBTI and UDFI rules
• Free access to our best-selling Self-Directed IRA books
• Free access to our educational webinars, podcasts and newsletters
• Self-directed IRA IRS audit guaranty
• Free HSA & Coverdell account for year 1 (value of $920)

No and we are the only self-directed IRA custodian not to do so.

Yes. IRA Financial is a South Dakota state chartered non-banking trust company.  IRA Financial Trust is regulated by the South Dakota Division of Banking.  As a non-fiduciary trust company, we are a must meet the capitalization, compliance, anti-money laundering, consumer protection, and cybersecurity requirements as set forth by the South Dakota Division of Banking and protect the interests of our customers first and foremost.

No.  We believe all our clients irrespective of account size should get the same amazing services.  Plus, we want all our clients to become seven figures retirement investors so why would we take more fees because you are successful.  We want all our clients to succeed and become super successful retirement investors.

Yes. You are permitted to make multiple investments with your Self Directed IRA LLC as long as they are not prohibited transactions. For example, you can use a portion of your IRA funds to purchase real estate and use another portion to buy mutual funds.

Many “traditional IRA” custodians advertise themselves as offering a Self Directed IRA but what that really means is that you can direct your IRA as long as you direct into one of their offerings. In other words, with a self-directed IRA at a brokerage firm, such as Vanguard, you are generally only permitted to invest your IRA funds in investments in equities, mutual funds, bonds or investments offered by the custodian. Whereas, in the case of a Self-Directed IRA, you will have the ability to invest in almost anything you want, such as real estate, investment funds, precious metals, cryptocurrencies, notes, private businesses, etc.

Yes, you may have multiple IRA investments within your Self-Directed IRA.  In fact, IRA Financial does not charge you any additional fees for maintaining multiple investments in your self-directed IRA like many other Self-Directed IRA companies.  

Yes, there is no limitation on the number of self-directed IRAs or Self-Directed Roth IRAs you may have.