Many people whose finances took a terrible beating during the Great Recession (the 2008 “subprime mortgage crisis”) are actively searching for superior alternative investments. With our economy still struggling to know up from down, traditional IRAs just aren’t as attractive as they have appeared in the past. This alone is the driving force behind the rise in popularity of self-directed IRAs (SDIRA). For those of you in the military who have served our country—we salute you—this is similar to the Thrift Savings Plan. The SDIRA retirement account doesn’t act like a standard IRA. Instead, it offers a huge gamut of features traditional accounts can’t, and these options help explain its prominence. Let’s examine some of these alternative options that are becoming very popular with investors.
You actually have some latitude
Without a doubt, this is the prime attraction: having options beyond money market accounts, mutual funds, bonds, stocks and cash. Unlike traditional accounts, your SDIRA investment opportunities are not hampered by these meager bank offerings that are so unsexy. Your self-directed account opens up a whole new world of options to explore: precious metals, bitcoin, real estate, tax liens, businesses, rental properties, debt instruments such as mortgage notes and countless more; all of it tax-sheltered. Looking for a diverse portfolio? This is the way to achieve it. A standard IRA simply cannot provide you this degree of choice.
As you might guess, IRAs controlled by a bank or a custodian often limit your options. Frankly, the ability to play the field is only realized with the “checkbook control” IRA—this is the one that’s growing wildly in popularity. There are a few key reasons why savvy investors consider this one above all others.
Checkbook Control (Self-Directed IRA) LLC
Do you like the idea of autonomy? If so, you’ll understand why this is a big deal with investors who are still bruised and smarting from their investment decisions during those cases where someone else exercised authority over their funds. Having real control is the one true lure of the SDIRA, but it’s not the only good reason to consider checkbook control.
A SDIRA also provides…
* Availability of funds once held by trustees under lock and key. Your money can be retained in local accounts providing you access when and where you need it.
* Reduced fees. Now that you no longer need to contact a custodian each and every time you plan an investment, your transactions will incur far fewer fees.
* Agility and speed. Again, since you have cut the custodian out of the equation and no longer have to seek anyone’s approval for a new strategy, you can get on with the business of investing all that much faster.
* Increased Opportunity. For the reasons we’ve mentioned above, you simply have more investment types to consider and more opportunities to increase profits. This is balanced by the fact that there can be some additional hoops to jump through in order to go forward with this kind of IRA. (Likewise, the IRS has some additional rules to follow if you don’t want to see yourself facing substantial penalties.)
* LLC security. Any of your assets sequestered outside the LLC are shielded from attack.
* Privacy control. The investments you direct are actually made in the name of the LLC, rather than in the name of the account owner. This affords you some peace of mind and privacy, and is the opposite of self-directed custodian or bank controlled IRAs that divulge the account owner’s details to the public.
Again, it’s good to be reminded that increased freedom begets increased responsibility. There are very specific IRS regulations that must be adhered to. Every opportunity and instrument must be carefully examined to avoid fees or fines. That said, the checkbook control LLC offers many exciting investment opportunities that just aren’t possible with traditional IRAs.