SDIRA’s give investors a way to pick investments that they are more familiar with, and to diversify away from traditional stocks and bonds allows them to get the income and tax advantages they want. We encourage clients to look at these investments as part of their total financial strategy, you can request more information on making a Self-Directed IRA part of your plan here.

What is a Self-Directed IRA?

A Self-Directed Individual Retirement Account (SDIRA) is an individual retirement account (IRA) that gives you more control over your retirement savings by expanding the choices you have in your IRA. The SDIRA must be administered by a trustee or a custodian, and will likely require investment management and a tax strategy to be successful. The account, however, is directly managed by the account holder, thus the name “self-directed.” 

A Self-directed IRA allows you to make a variety of different investments that are usually not available in regular IRAs. It also preserves the qualified status, so funds can pass back and forth from your IRA without taxation. This allows you to capture cash flow from one set of holdings and channel them to another.  

Self-Directed IRAs can be either Traditional (tax-deferred ) or Roth (tax-free). Familiarize yourself with the difference here.

IRAs established and administered by brokerage firms, banks, and other institutions, tend to limit you to bonds, mutual funds, derivatives or stocks. Self-Directed IRAs allow you to invest in alternative assets, such as LLCs, gold, limited partnerships, real estate, and more. This allows you to invest in ways that you may be more comfortable with, have unique insight into, and has nuanced upside that only you may be familiar with. 

By law, every IRA has to have a custodian; so, the choice of custodians is critical. Working with InSight allows you to get in touch with world class custodians, get access to discounts, and have the SDIRA work in coordination with your other investments in one unified strategy.

Traditional vs. Roth Self-Directed IRA

Self-Directed IRAs are both traditional IRAs or Roth’s and are set up for whatever fits the clients InSight-Full® plan. But there are different eligibility requirements, tax treatments, contribution guidelines, and distribution rules you should be familiar with. Here’s some of the differences we ask that our client become familiar with:

Benefits of Self-Directed IRA

• A Self-Directed IRA brings you the freedom to diversify your financial portfolio into lucrative assets like property, mortgage notes, foreign currency, annuities, raw land, limited liability companies, and many other investments.
• Build Wealth for Future Generations
• Excellent Tax Advantages as a tax-advantaged account, a Traditional Self-Directed IRA brings you the benefit of significant tax deductions 
• Control – Investors have full control over their retirement funds as long as you are making investments that meet the requirements of your retirement plan.

How does a Self-Directed IRA work?

• Open a Self-Directed IRA Account – a qualified IRA custodian that specializes in these types of accounts that works well with your financial advisor. 
• Fund the Account – Transfers and new contributions are the main funding vehicles for self-directed IRAs. Work with your InSight CFP® professional to determine which assets are the best to move. Almost any account can be rolled into a SDIRA so it’s important to determine what is best for you both now and in the future. 
• Identify the Investment – work with your InSight CFP® professional to identify the investment, mark the anticipated cash flow, and confirm the investment meets the Required Rate of Return of your InSight-Full® plan.
• Establish the LLC – we coach our clients to establish state-approved LLCs for each client. The LLCs are “owned” by the Self-Directed IRA and become the investment arm for the IRA.
• Request Funds to Purchase IRA Investment – We assist clients in the transferring of funds from the IRA (custodian) to the new self-directed IRA LLC checking account. 
• Buy the Asset and enjoy the proceeds – simply write a check and immediately take advantage. Move rental, royalty or other income back to the IRA for investment elsewhere.

Why is Checkbook Control important to InSight?

Speed and convenience, buying real estate is about being a qualified buyer and quickly making a decision and executing. We think having control over the checkbook is an essential feature for working with an SDIRA custodian. We also think that as you manage the asset you will need to make improvements, investments, and changes and having control over the checkbook puts all of that in your hands. Checkbook control eliminates the need for a Third Party Administrator or TPA. 

What are the Investment Options for a Self-Directed IRA (SDIRA)?

Almost limitless – provided that investors follow the guidelines laid down by the IRS. Working with your InSight CFP® Professional to make sure the process is followed and the investments stay qualified. Some the common investments are but not limited to:

• Real Estate – residential and commercial
• Raw Land – Undeveloped
• Physical Precious Metals
• Trust Deeds/Mortgage and Mortgage Pools
• Private Notes and Loans
• Private Stock Offerings
• Limited Liability Companies
• Limited Partnerships
• Tax Certificates or Tax Liens
• Annuities
• Currencies and Cryptocurrency
• Commercial Paper

We recommend that you consult your InSight-Full® plan to determine what investments make sense for your risk tolerance and your liquidity needs. 

What are the SDIRA Rules?

A SDIRA has all of the same rules as a Traditional IRA and then a few more. It’s important that both you and your CFP® Professional are familiar with the complete regulatory requirements:

• IRA Contribution Limits – See this years limits here.
• Disqualified persons
  • The IRA holder and his or her spouse, ancestors, lineal descendants, and their spouses
  • Investment advisors and managers
  • Any corporation, partnership, trust or estate in which the IRA holder has a 50% or greater interest
  • Anyone providing services directly to the IRA, such as a trustee or custodian
• Prohibited Transactions
  • Collectibles – artwork, rugs, antiques, metals, gems, stamps, collectible coins
  • Beverages
  • Stock in an S-Corporation
• IRA Distribution Rules – IRA distributions, or the withdrawal of an asset or cash, can be made at any time. However, certain criteria will determine whether there are penalties and taxes associated with any distribution.