A self-directed IRA is a nontraditional retirement account that allows individuals to invest in alternative investment options typically not allowed within traditional retirement plans. This allows individuals the ability to select from a broader spectrum of investments providing a well-diversified retirement portfolio. Consider this, not all self-directed accounts are considered equal. Many of the mainstream financial institutions offer self-directed IRA accounts, but customers are only offered proprietary or “in-house” investment options.
A true self-directed IRA can include many of the following assets:
- Domestic or Foreign Real Estate (residential & commercial) Rentals, Land, Development, Renovation
- Private Equity
- Business Acquisitions (Existing or Upstarts) Including Franchises
- Angel Investor
- Notes & Mortgages
- Private Hedge Funds
- Precious Metals
- Limited Partnerships / Joint Ventures
- And many more
You can achieve the above with tax advantages all within a self-directed IRA. Many individuals and business owners seeking to recover from the stock market downturn have just become aware of how they can benefit from a true self-directed IRA. Oddly enough, these types of account have been available for several decades. Only about 2% of Americans have positioned themselves to better prepare for their futures. Enhance the value of your portfolio and reduce overall risk through diversification.
If you fear you lack the necessary resources to meet your ideal retirement lifestyle, take control today. The traditional planning methods alone may not be enough to secure your family’s future. Whether you have direct experience or can partner with an investment sponsor, a self-directed IRA could be a smart way to grow your savings more aggressively.
Are There Disadvantages of Self-directed IRA?
Although a self-directed IRA provides greater control over your investment strategy, it also comes with some responsibility. Some transactions may be considered prohibited and if ignored come with penalties. For the most part, there are prohibited transactions and prohibited investments. It is recommended that you work closely with a neutral third-party administrator or custodian who can help provide guidance. Many of these companies serve as custodians of the assets held within the accounts and provide insight to help make informed decisions.
A well informed investment sponsor can help serve as an additional resource to guide you from making investment decision that will place your IRA at risk of penalties or losing its tax advantage status. Just remember, your IRA is a separate entity and you or your ascendant or descendant are not allowed to benefit directly or indirectly from the assets or transactions related to your IRA.
In addition, you are not allowed to invest in life insurance, S-corporation or assets considered collectibles. Of course this is only a high-level explanation and serves only to provide some insight into prohibited transactions. Your custodian will understand the regulations and how to process the appropriate documentation related with your account.
What Sources can fund a Self-Directed IRA?
Have you recently completed a job transition or been impacted by a departmental downsize. If so, you can roll over the funds from a previous employer’s 401(k) plan to fund your self-directed IRA. Also, you can transfer funds from a current traditional IRA account expanding your investment options. You can also make an election to keep your existing IRA account for stock and bond transactions and open a self-directed account for your other investments.
Can Business Owners Benefit from a SDIRA?
A self-directed IRA can provide many benefits for the self-employed. Whether simply investing to fund retirement or part of an overall exit planning engagement involving an internal transfer or third party sale, a self-directed IRA can provide many financial advantages. Self-employed individuals may open a Simplified Employee Pension Plan (SEP) IRA. A SEP plan allows employers to contribute to traditional IRAs (SEP-IRAs) set up for employees. A business of any size, even self-employed, can establish a SEP.
If you are a sole proprietor or a small business owner with zero employees excluding your spouse, then consider establishing a solo 401(k) account. This type of account allows for greater contribution limits to fund for your retirement.
At Crowne Equity Partners LLC, we seek to provide opportunities for business owners to diversify their portfolios secured by multifamily real estate investments. Remember, a well-diversified portfolio serves to reduce risk and to maximize overall returns. Feel free to contact us for a free consultation at 405-945-1955 or email invest@cepinvestira.com
