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As we discussed last week, the Individual Retirement Account or IRA came into the market in 1974 but really evolved in the 1990’s as Self Directed IRA’s (SDIRA) started to take hold.

The SDIRA allows for the owners of the accounts many more options for alternative investing. It still provides the normal financial market options but along with those, gives access to tens of other investments that banks and large custodians do not allow, such as real estate, primarily because they do not have the expertise to manage these effectively.

Prior to researching and selecting an investment, you need discuss with your current custodian to see if they allow for self directing. Chances are they do not, but it is worth checking into before you start the process of a new account. Assuming they do not provide this service to you, the next step is to select a custodian that specializes in this activity.

When selecting your new custodian, verify the process they will take you through to do the investment once you have selected it. As the process is more complicated, it usually means there are additional costs and delays that can bring down the return on your investment, and in some cases the opportunity entirely as the custodian took too long to approve it.
Items to consider:

Annual fees
Transaction fee
Investment review fee
Process to approve investment
Time required to approve investment

There are several companies that have streamlined procedures to open your account, approve your investments and process payments, all important aspects to the investment world. To start with you must open your account with the new custodian, arrange for the transfer of your funds from the old custodian and then select your investments.

You are also allowed to set up a check book controlled account to reduce fees and streamline the actions, this can also be a dangerous situation, if you break any of the rules for self dealing you account could possibly be subject to penalty and taxes. It has been said that the IRS is taking a watchful eye with this type of SDRIA

A key when setting up the account is to consolidate all of your retirement accounts into one. This is simple, once the account is open it doesn’t matter if it is a 401k, 401a, 403b, SEP, etc. Any qualified account can be moved into an SDIRA to provide for streamlined management of your funds.

Next week, we’ll discuss investment options in real estate.


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