It may seem daunting and too difficult to understand and maintain a Self Directed IRA. You probably think that there are too many rules and issues that you don't know that will get you in trouble or you think it is a better option to stay with a regular IRA at a brokerage company because of these issues. While it can be a bit more effort on your part to have a self directed IRA the benefits that come with having one can be worth any effort on your part. Before you begin to have these thoughts let's talk about self directed IRA rules and why it is much easier than you think.
One of the first things you should do when self directed IRA investing is learn and understand the rules so that you don’t get in trouble with the IRS. By knowing the rules of Self Directed IRA investing you will have confidence utilizing and maintaining your self directed IRA account.
Most people think that Self Directed IRA rules differ from that of IRAs held by a brokerage account but that is not the case. They follow the exact same rules. The following accounts are available with a self directed IRA: Traditional, Roth, SEP, and Simple accounts. The main difference is the type of investments you invest in. With a regular IRA you are only investing in stock, bonds, and mutual funds. With a Self Directed IRA you can invest in real estate, private placements, gold and silver, loans, and many other non traditional investments.
Whether you have an IRA with a brokerage company or a Self Directed IRA you must follow the following guidelines on investment options.
- You cannot invest in life insurance contracts.
- You cannot invest in collectibles. This includes art works, gun collections, stamp collection. Basically any asset that could be deemed a collector could be disqualified. You can buy gold and silver coins in an IRA as long as that coin would not be classified as a collector coin.
- You cannot invest with related parties. This would include yourself, parents, children. In addition, any person that could have influence over you (brothers, sisters, girl friend or boyfriend) could be considered a related party if the IRS can prove that person has “influence” over you.
As long as you follow the rules above, having and maintaining a Self Directed IRA is easy and a great alternative to a typical IRA from brokerage companies.
If you would like to discuss more about Self Directed IRA Rules or the investments allowed in an IRA feel free to comment below or contact us at Accuplan Benefits Services.
Author: Ben Barker, Self Directed IRA Professional