The entire process of creating a self-directed IRA usually takes two to three weeks from start to finish. For those who need a faster delivery time, expedited service is available. Creating a self-directed IRA usually takes about 10 days. The IRA with checkbook control allows the owner of the IRA to issue checks directly from the IRA for various purposes, including investments, such as buying real estate.
A checkbook IRA helps streamline the payment process by eliminating delays, since landlords can issue checks themselves instead of waiting for the depositary to make payments from the account. A checkbook IRA can also reduce transaction fees, since the depositary is not involved in the payment. Self-managed IRAs are similar in many ways to other individual retirement accounts (IRAs), meaning they have tax advantages designed to encourage Americans to save for retirement. Kirk Chisholm, wealth manager and director of Innovative Advisory Group, an investment advisory firm that specializes in self-managed IRAs, says he met an experienced real estate investor who had been buying properties with his IRA.
Brokerage firms act as custodians for many types of IRAs, but most reputable brokers don't offer self-managed IRA accounts. The LLC provides asset protection that protects the IRA, the owner of the IRA, and the IRA depositary from liabilities that may arise from investments owned by the IRA LLC. For most retirement savers, the range of assets available through a normal IRA: stocks, bonds, CDs, ETFs, mutual funds and REITs (i.e., real estate investment trusts) offer more than enough diversity of investments. Generally, the holder of the self-directed IRA LLC account is the unpaid administrator of the LLC and manages investments through the IRA LLC checking account.
Investors should also be careful not to accidentally violate the complicated IRS rules for self-directed IRA investments. A self-directed IRA is a traditional or Roth type of IRA, meaning that it allows you to save for retirement with tax advantages and has the same IRA contribution limits. The exclusive IRA LLC checking account allows you to make investments in real time and avoid the expensive transaction fees normally associated with self-directed IRAs. For those who choose the Roth option for a self-directed IRA or a 401 (k), the rules are pretty much the same, except that no minimum distributions are required at any age.
The Self-Directed Individual Retirement Account (SDIRA) is for investors who are determined to go beyond the usual investments that are available for retirement accounts, in some cases. Given the complexity of self-managed IRAs, you may want a financial advisor with experience managing investment transactions for self-directed IRAs to help you make investments with due diligence. A self-directed IRA is for those who demand access to alternative investments in their retirement savings. Advocates of self-managed IRAs claim that their ability to invest outside the mainstream improves their diversification, but a self-directed IRA can just as easily lack diversity as any other retirement account.
It's the best retirement vehicle for IRA investors who want control and the opportunity to invest in alternative assets. McManus, who has invested in real estate and other assets through a self-directed IRA for about 15 years.