What Investors Need to Ask Their Self-Directed IRA Provider

what investors need to ask their self-directed IRA provider

An individual retirement account (IRA) allows you to save for retirement, even if you don’t have a plan provided by an employer. IRAs can offer tax advantages, such as deducting your contribution the year you make them or withdrawing your contributions and earnings tax-free in retirement. A self-directed IRA (SDIRA) lets you take advantage of the tax benefits of an IRA while investing in less-conventional assets. 

If an SDIRA sounds like an appealing option, there are several questions to ask self-directed IRA providers before you open an account. You want to ensure the provider will do everything it can to maintain your tax-advantaged status and that it gives you access to the assets that interest you most. 

7 Questions to Ask When Choosing a Self-Directed IRA Provider

A self-directed IRA gives you the freedom to invest in assets that most standard IRAs don’t offer. You need to find a provider and an IRA custodian for non-traditional assets. Do some due diligence before you decide to work with a self-directed IRA provider. Read up on the provider online and make sure it’s an IRS-approved self-directed IRA custodian. It’s also good to ask the provider several questions. 

1. Who Is the Custodian for the IRA? 

A qualified IRA custodian needs to hold your self-directed IRA. The IRA provider and the custodian are the same company in some cases. In others, an IRA administrator or provider finds a custodian for the IRAs it manages. Accuplan Benefits Services is a self-directed IRA provider. American Estate and Trust, our sister company, serves as our IRA custodian.

In any case, it’s important to know who the custodian of your account is. The IRA custodian needs to follow regulations and meet the IRS standards for a qualified custodian

2. What’s the Size of Your Company?

Size matters somewhat when you choose an SDIRA provider. Bigger doesn’t necessarily mean better. If a provider has thousands of clients but only a few support people, you might have to wait before your questions get answered. 

Alternatively, a larger company can signify that the provider is successful and has a good reputation. 

3. What Asset Types Do You Offer?

The feature that makes self-directed IRAs attractive to many is that they let you invest in almost anything. Still, it’s worthwhile to confirm that the investment types that interest you most are available with the provider. 

The provider might not have a list of every type of investment available through it since the list could be long. If there’s a particular asset type you’re interested in, such as precious metals or real estate, confirm that the provider offers it. In some cases, such as with precious metals, the asset might be available, but there can be restrictions. 

It’s worth knowing that some assets are always excluded from self-directed IRAs. You can’t invest in life insurance, stamps, firearms or gems using a self-directed IRA.

4. What Is Your Fee Schedule?

An IRA administrator or custodian will most likely charge fees for their services. The type and amount of fees directly affect your investment returns. The more fees there are and the higher they are, the lower your returns. Some providers, such as Accuplan, charge a flat fee for services. Others charge a percentage based on the value of your assets. 

Along with an annual fee, the provider might also charge a transaction fee, a setup fee and a termination fee. 

When finding out about the fee schedule, ask if you need to have a minimum balance in your account.

5. What Activities Are Prohibited?

The IRS code created IRAs to give people a way to save for retirement. For that reason, you can only use the funds in your IRA for retirement. If you withdraw from the IRA before retirement age, 59.5, you usually have to pay a penalty tax. 

Some types of transactions are explicitly prohibited with an IRA. You can’t borrow against your IRA, nor can you use funds from a self-directed IRA to buy personal property. Ask the IRA provider for more details on what you can and can’t do with the money in your IRA.

6. How Do You Handle Security?

You don’t want a third party to get access to your self-directed IRA account. Before deciding to work with a provider, ask about the security of its platform. You want to determine what specific procedures the provider uses to keep data secure, such as strong passwords, encryption and multifactor authentication.

7. Do You Offer Roth or Traditional IRAs?

IRAs are tax-advantaged, but the tax advantage depends on the type, either traditional or Roth. With a traditional IRA, you contribute to the account with pre-tax dollars. When you file your tax return for the year, you deduct the amount you put into your IRA. You pay tax when you withdraw the funds in retirement.

You pay tax on Roth IRA contributions the year you contribute. Once you start withdrawing the money in retirement, you don’t have to pay income tax on it, nor do you pay tax on any earnings in the account. 

The self-directed IRA provider will most likely offer both options, but it’s worth asking before opening an account.

How Accuplan Works

Accuplan has the widest selection of assets in the self-directed IRA industry. When you open a self-directed IRA with us, you can choose to invest in the following:

  • Real estate
  • Precious metals
  • Private loans
  • Cryptocurrency
  • Private equity
  • Trust deeds
  • Tax liens

We have decades of experience in the industry and have been serving as self-directed IRA administrators since 2007. Once you open an account with us, you get access to our intuitive investment platform. We built the platform with the unique needs of investors in mind, making it user-friendly. If you need assistance, one of our representatives is available to walk you through the platform and show you how it works.

create an account with Accuplan

Create an Account With Accuplan

If you’d like to do more with your retirement savings than invest in stocks, mutual funds or bonds, a self-directed IRA might be the right option. You can contribute up to $6,000 annually, or $7,000 if you’re over age 50, either pre- or post-tax. Setting up an account takes just a few minutes. Create your account or contact us with any questions.

This information shouldn’t be relied upon for investment advice but is for informational and educational purposes only. It is not intended to provide, nor should it be relied upon for accounting, legal, tax or investment advice.