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What is a Self-Directed IRA?

Are you looking for an alternative to the volatile stock market for retirement planning or other investing purposes? Is there a specific investment type, business or industry that you know and understand? Looking to take direct control of your retirement funds?

A Self-Directed Individual Retirement Account (IRA) may be just what you’re looking for!

What is “self-direction?” Well, for starters, it’s simply a marketing term. Depending on your custodian and plan paperwork, you may be able to self-direct your IRA (Traditional, Roth, SEP or SIMPLE), Solo 401(k), Coverdell ESA and potentially even your 401(k) plan. You can also self-direct a joint, trust, business or individual custodial account.

With a self-directed retirement account, you can invest in traditional assets like

  • stocks
  • bonds
  • mutual funds
  • exchange traded funds (ETFs)
  • public REITs
  • annuities
  • money markets
  • certificates of deposit (CDs)

 

 

 

However, a concept like “Self-Directed IRA” just means that you, the investor, are able to “self-direct” your investing. This often leads investors to choose assets not normally offered at traditional financial institutions such as real estate, precious metals, private equity and even digital currency!

The IRS has never published a list of investments that we CAN buy with an IRA. It has simply listed the items we CANNOT buy:

  • Self-Directed IRA Basicslife insurance policies
  • collectibles, including works of art, gems, rugs, antiques, stamps, alcoholic beverages and certain metals and coins (see IRC 408[m][3] for some exceptions)
  • stock in an S corporation

See IRS Publication 590-A or 26 U.S. Code § 408 for more on prohibited assets.

How does “self-direction” work?

Via a simple 3-step process, you can be on your way to self-directing your account:

So, with an account like a Self-Directed IRA, you can purchase an apartment complex, loan money to a startup company, participate in marketplace lending or crowdfunding opportunities, structure your account via a single-member LLC and so much more!

The most common investments held in Kingdom Trust self-directed accounts include

The above is by no means a comprehensive list, as your investment options are nearly endless!

Kingdom Trust’s self-directed solutions for individuals provide enormous flexibility, but remember there are certain rules you must follow when investing using retirement funds. You and your team of professionals must understand the tax ramifications of each account type or transaction and follow prohibited transaction rules as you consider any investment.

To get started with a Self-Directed IRA, contact Client Services today! We are happy to help and can walk you through the account opening and transfer processes.