I currently have $40k between my Roth and Traditional IRA (and another $125k in my TSP, but that will have to wait until I leave full-time employment to transfer that). I will continue to max out my IRA with contributions for the next 3 years. I've done some research on self-directed IRAs and they seem like a solution to enable me to pursue some alternative investment strategies with that IRA money.
A few questions I have for folks that use self-directed IRAs:
-Who do you use as your custodian? My understanding is this is quite important to not end up on the wrong side of the IRS.
-Any resources you recommend? It seems like most literature out there is catering to either the uber-wealthy or the uber-paranoid.
-Any advice for an ERE-minded individual as it relates to self-directed IRA?
Self-Directed IRA
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Mister Imperceptible
- Posts: 1669
- Joined: Fri Nov 10, 2017 4:18 pm
Re: Self-Directed IRA
From what I looked at, the benefits of using alternative strategies are diluted by high fees (high annual service fee charged regardless of total balance, as well as high transactional fees, amongst others) and make investing smaller sums seem not worth it.
I invested outside of retirement accounts in a fund not publicly traded that (so far) has outperformed and would have (so far) justified the fees had I used retirement account monies in a self-directed IRA, but I eschewed that option in the interest of diversification and efficiency, and ended up using a Solo Roth 401(k) instead.
The self-directed IRA also takes away the benefits of some alternative investments. Real estate cannot be purchased using debt (eliminating leverage and tax deduction benefits), or rented out to a relative, or used for personal habitation. Gold coins are held by the custodian and could hypothetically be confiscated by the government, hence losing off-the-grid utility.
My research was not at all exhaustive and I would be as interested as you if anyone else had input, but that was my take. Unless you are investing a significant sum or are absolutely sure a particular alternative investment will outperform, it is not worth the hassle and the fees. I kept my alternative investments outside retirement accounts.
I invested outside of retirement accounts in a fund not publicly traded that (so far) has outperformed and would have (so far) justified the fees had I used retirement account monies in a self-directed IRA, but I eschewed that option in the interest of diversification and efficiency, and ended up using a Solo Roth 401(k) instead.
The self-directed IRA also takes away the benefits of some alternative investments. Real estate cannot be purchased using debt (eliminating leverage and tax deduction benefits), or rented out to a relative, or used for personal habitation. Gold coins are held by the custodian and could hypothetically be confiscated by the government, hence losing off-the-grid utility.
My research was not at all exhaustive and I would be as interested as you if anyone else had input, but that was my take. Unless you are investing a significant sum or are absolutely sure a particular alternative investment will outperform, it is not worth the hassle and the fees. I kept my alternative investments outside retirement accounts.