top of page

Self Directed IRAs

Individual Retirement Accounts are accounts set up during a person’s life which grow tax free until that person takes distributions in which to fund their retirement. They are recognized by the IRS, mutual fund advisors, stockbrokers, and taxpayers all over the country as being legitimate vehicles for retirement preparation. Self directed IRAs are the same account; however self-directed accounts rely on the judgment of the investor to make the investments. This is a bit out of the ordinary for most investors, but it is a legitimate and a recognized retirement planning device which relies on the principals of the IRA, while putting the investor in control.



Self-Directed IRAs are easy to set up and require no financial expertise to do so. The IRA account holder merely calls a broker who administers self directed IRAs. You ask the broker to aide you in converting your IRA into a self directed IRA. The broker will then send you two forms to fill out. Once they are filled out, you send them back. Depending on how long your mutual fund IRA administrator takes to perform the process, it should be completed within 30 to 45 days. Once completed, the broker you have chosen will alert you that your self directed IRA has been set up and is ready for your control. You then take the reigns and make the decisions as to the investments.



Generally, IRA’s were created to benefit the investor DURING THEIR RETIREMENT and absolutely not sooner. With that principal in mind, it is easier to spot the transactions which are prohibited. Generally, if you or your spouse receives a direct benefit, such as having the IRA invest in your company, such a transaction is disallowed. IRA holders cannot invest in items which might defeat the purpose of investing all together. These items include antiques and other items that are questionable. The investment must generally be business or commodity related. Gold, silver, and platinum, although they may be considered antiques, can be purchased. It can be said that the authorities who wrote the rule (concerning enjoyment of benefits during retirement, but not during a taxpayer’s working life), specifically meant that you should wait until retirement to obtain direct benefit from the investment.



Given that self-dealing is prohibited, what transactions are allowed? The answer is pretty much anything else. Once the self directed IRA is set up, the IRA account holder can invest in real estate, gold, silver, stock, bonds, and even closely held business ventures which you own. However, if the business venture is owned 50% or more by you, the IRA holder, the transaction becomes a prohibited transaction. Therefore, if you are investing money in a company, you should make sure your interest in the partnership or corporation is less than 50%. To do so otherwise will cause premature taxing and penalties on the money in the self-directed IRA.



In conclusion, IRA’s were meant to benefit individuals during retirement. Most mutual fund managers who administer IRAs are very competent in investing for growth. However, the authorities have allowed people to invest their own funds in their own ideas. Given this privilege, in some circumstances, investors may benefit from self-direction of an IRA. To do so is easy to set up and administer. Contact the professionals at The Center for further guidance. 

bottom of page