What is a Self Directed IRA?
Definition: An IRA in which the IRA owner directs all investments in the account. There is no legal distinction between a self-directed IRA and any other IRA except with a truly self-directed IRA the account agreement allows the broadest possible spectrum of investments.
The account owner can choose any investment except a few that the IRS prohibits (i.e. Artwork, Life Insurance, Rugs, Antiques, Metals, Gems, Stamps, Coins, Beverages and Certain other tangible personal property).
Don’t be confused with brokerage firms ―in house‖ self directed accounts which simply means the IRA owner can invest in anything they sell not necessarily what the owner wants. The account owner is not limited to a menu of specified securities, stocks, bonds, mutual funds, or CDs. A truly self directed account provides for true diversification using both traditional and non- traditional investment types determined by the owner and his professional advisors.
Fact: Americas Traditional investments such as bonds started in the 1770s and stocks established a foot hold during the Industrial Revolution where as non-traditional investments such as real estate, gold, and lending were documented in the pre-biblical period!
The following is an example of the types of investments that truly self directed clients choose because they can use their expertise, knowledge and can exercise some control. This list is by no means all inclusive: Single family, condominiums and Apartments buildings
Raw land, Leveraged and un-leveraged property Commercial Property-retail, warehouse, office, etc. Precious metals- Gold, Silver, etc. - certain coins and bullion
Mortgages, notes, Trust deeds, leases, etc.
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Account receivables Foreign property investments Private placements-LLCs, LPs, Trusts, corporations, JVs, etc.
There are no penalties or taxes due when transferring an account to a truly self-directed account. There is no distinction in the Internal Revenue Code for a truly self directed IRA.
Self direction is not new but has been available since the 1970s. The contribution limits, distribution, transfer, rollover rules and requirements are all the same. The one difference you will notice is on your statement in the investment classes chosen.
Which Accounts Can Be Self-Directed?
Self-Direction is open to the following types of Retirement and Tax-Advantaged Savings Plans: Traditional IRA, ROTH IRA, SEP, Simple, 401K, Owners 401K, Defined Benefit and Defined Contribution Plans Educational Savings Account (ESA) Health Savings Account (HSA) 403B plans may be rolled over after
separation from service.
529 plans cannot be self-directed. continued on page 5 ---->>>
Copyright MMXI Kentuckiana Real Estate Investors Association•PO17592 • Louisville, KY• (502) 276-1810 www.KREIA.com
DISCLAIMER: KREIA does NOT pre-qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
Saturday Workshop with Carl Fischer – Feb 25th 8:30-4:00pm Register Now! www.KREIA.com
Members $49 / 2 for $79
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