Self Directed IRA -To Close the Retirement Income Gap, Contribute Early and Often to Yours

A recent study from the Insured Retirement Institute had a number of disturbing findings that drive home the importance of contributing to your Self Directed IRA early and often.

  • A 65-year-old male in good health today has a 50 percent chance of living to age 87, and a 25-percent chance of living to age 93.
  • A 65-year-old female in good health today has a 50 percent chance of living to age 89 and a 25 percent chance of living to age 95.
  • A 65-year old retiree would need more than $1 million of investable assets, plus Social Security income, to generate a reliable income through age 95.
  • By waiting until age 70 to retire, the retiree can reduce the estimated nest egg required to generate retirement income through age 95, but only modestly, to $720,000.

The use of lifetime income annuities can effectively eliminate longevity risk, of course. But at today’s anemic interest rates, the thought of locking in your future retirement income using the current low returns on investment doesn’t seem like a great idea.

Lifetime income annuities also effectively eliminate any legacy to your loved ones, once you have outlived any return of premium guarantees. There’s got to be another way.

It turns out there is. By starting early, and taking advantage of the freedom you have using a Self Directed IRA to maximize risk-adjusted returns of your retirement portfolio, while also increasing your portfolio diversity.

For best results, you do generally need to start early for two reasons:

  • The younger you are, the more risk you can accept in the expectation of higher returns. As you get close to retirement age, you may need to reduce your exposure to high-return asset classes like venture capital, private equity and partnerships where you have significant control. These are all perfectly legal to own within a Self-Directed IRA, but tend to be volatile in isolation.
  • The more years you have before you need to begin taking withdrawals, the more time your investments have to compound, tax-deferred or tax-free in the case of Roth Self-Directed IRAs.

With today’s relatively low dividends on stocks, high P/E ratios on a historical basis, and low interest rates on bonds, it’s imperative for most of us to seek out ways to eke out some additional return without taking undue risk. Self-Directed IRAs allow our clients to use their retirement capital to pursue these opportunities on a tax-advantaged basis.

According to the IRI’s report, a 50-year-old saver who makes the maximum allowable contributions to a 401(k) plan, including catch-up contributions, can make up a big chunk of the estimated retirement income gap if he or she earns 5.5 percent per year, on average, on his or her investments. This savings schedule and rate of return would theoretically generate some $239,000 in additional retirement resources over 20 years. Additional contributions to self-directed or conventional IRAs and outside savings can close the gap completely.

The alert reader, however, will note that in order for that ‘gap’ to be closed, the 50 year old would have to have a starting point of about $400,000 to $500,000 saved up already, because it’s this amount, plus earnings, that you would have to add to the amounts generated between ages 50 to 70.

Furthermore, many investors don’t have a choice about working to age 70. Many will have health issues, or economic pressures that force them to leave the work force earlier than planned.

And so we’re back to the original point: To have the best chance of a stable retirement income at acceptable levels of risk, while still preserving a legacy for heirs, you should start saving early and often, and maximize your returns on investment at a relatively young age.

American IRA, LLC specializes in assisting retirement savers who choose to hold any number of non-traditional asset classes within their IRAs, 401(k)s, SIMPLES, SEPs and even Coverdells and HSAs. Whether you are interested in using your retirement account to pursue opportunities in real estate, venture capital, private equity, oil and gas, partnerships, precious metals or anything else, we have the expertise to help you remain in compliance with IRS rules concerning these accounts and their holdings and provide you and the IRS with full accounting and reporting – all at a fraction of the cost of most firms that handle IRA and other retirement accounts.

To learn more, contact us at 828-257-4949 or visit our website at

We look forward to serving you.

Self Directed IRAs -What You Don’t Learn in School

Truth be told, they don’t really teach you about retirement in school. Unless you elected to attend some personal finance class, you probably hadn’t even heard about IRAs except by some other means; school was spent learning about history and chemistry and math, but never about the math of retirement. Even if you did learn about IRAs, it’s probably a stretch to say that you learned a great deal about Self Directed IRAs and the nearly unlimited options they give you in investing for retirement.

We’re here to change all that. Obviously, you can’t re-live your school days, but you can make up for lost time by learning about Self Directed IRAs in the here and now—specifically, you can read more about what we have to say about these retirement accounts that school declined to teach:

Self Directed IRAs are Easy to Manage

If you encountered the term “Self Directed IRAs” at any point, you probably thought of them as the kind of option that only serious investors would want to consider. Why? Because people who don’t know about all of the freedoms associated with this type of IRA don’t realize just how simple they can be. In fact, many people dismiss the idea of directing their own retirement account out of hand because they haven’t given thought to that kind of intensive management in their own affairs.

But “intensive management” is a stretch. Your Self-Directed retirement account can include an investment in real estate, for example, featuring a property manager who handles the rent collection for you. Does that sound very difficult to manage, relative to other types of real estate investments? We didn’t think so, either.

You Can Invest in a Lot of Different Asset Types

When you learn about IRAs—even if it’s part of a personal finance class—you probably don’t learn much about the options available to you. In fact, you might say it’s the number one objection many people bring up when reacting to the concept of self-directing their own IRA. They figure, “Well, I can only invest in stocks and bonds, and I’d rather not invest in that kind of thing.” They think they’re not good enough at beating the stock market.

It’s a good thought—the stock market is in fact hard to beat—but what people are missing is the fact that there are all sorts of asset types you can invest in when investing for retirement. The IRS allows you plenty of leeway, including investing in real estate, precious metals, and even private companies with an IRA. The simply change you need to make is that you need to direct your own retirement account to make this happen.

“Diversification” Isn’t Just a Word

When you learn the basics of investing in a class, you’re likely to encounter this word “diversification.” It usually means, in the mainstream at least, that you should invest in both stocks and bonds, including all sorts of different stocks in order to protect yourself.

But what happens when the stock market tanks?

The stock market is a consistent source of long-term wealth, to be sure, but it’s far from perfect. It has ups and downs just like any other investment vehicle. If you truly want diversification, you should considering adding other asset classes, including precious metals, to your retirement portfolio.

If you’re interested in learning more beyond the most basic look at Self Directed IRAs, keep reading our work here at or call us at 828-257-4949. You’ll be amazed at what you didn’t learn in school—and sometimes learning what you didn’t learn can make a big difference.

Self Directed IRAs – Good for Investment Beginners?

Getting started with investments can be intimidating, especially if you’re young. When you’re young, it’s hard to see how your wealth might grow if you set it aside right now and watch it for fifty years. But you’d be amazed at how quickly an investment can grow if you tackle investing in a smart way. And you don’t have to be young to be an “investment beginner,” either—even if you’re older, you can accomplish a lot by using things like Self Directed IRAs.

“Self Directed IRAs.” Hmm. There’s that phrase again. It might not be familiar to investment beginners—but that doesn’t necessarily mean it’s wrong for them, either. With that in mind, let’s answer this question of whether or not Self Directed IRAs are “good” for investment beginners—or if beginners might want to start more slowly.

Defining the Self-Directed IRA…And the Beginner

First, we’ll have to define exactly what an “investment beginner” is. Much to our chagrin, it’s a relative phase. What one person might consider an “investment beginner” could be someone who already has a substantial amount of investments…while someone else, with no knowledge of investments and no investments set aside, would rightly consider themselves an investment beginner.

Let’s say for our purposes here that an investment beginner is anyone who’s never opened an IRA before, or has opened only the most basic IRA without a lot of research into what they’re all about and how they can be best utilized.

Most people who are relatively new to the world of investing assume that directing their own IRA investments is a bad idea. But that doesn’t mean it necessarily is a bad idea. For example, most people assume that they need a manager to look over their investments and take care of all of their stocks and bonds…but a Self-Directed IRA isn’t like that. Instead, a Self-Directed IRA could be considered a way of expanding your options. How so? Let’s look at the myriad ways:

Expand Your Horizons through Self-Directing

The best way to acquaint a beginner to investing is to make them fully aware of their options. Unfortunately, a lot of new investors get intimidated by the usual advice and make only conventional decisions…the problem is, this doesn’t necessarily reflect the kind of portfolio that they’ll want to construct over a long-term period to give themselves a solid retirement nest egg.

With a Self-Directed IRA, you have all sorts of retirement investment options, including:

  • Real estate: commercial, retail, residential, etc.
  • Precious metals: gold, silver, etc.
  • Private companies
  • Tax liens
  • Private lending

The list goes on and on. In fact, despite what many people tell retirement “newbies” about retirement investing, you’d be shocked at how many different options there are available to you.

You might wonder: why do so many options work better for an investment “beginner”?

The truth is, more options allow you to choose the investment that suits you best. And because there are so many options, you’ll be able to pick one that you’re comfortable with over the long-haul. These investments represent a great way to diversify out of the traditional stock market investments and feel more secure about your retirement, even during periods of a bear market.

Getting Started with Self Directed IRAs

If you want to learn more about Self Directed IRAs, be sure to keep reading more here at Here, you’ll find all sorts of information about investment types, account types, and what retirement investment can look like when you open it up to self-directing. Be sure to contact us at 828-257-4949 if you want to learn more.

Self Directed IRA – Do Gold and Silver Belong?

When you look at today’s stock market prices, it’s tempting to want to call it an emergency and sell off. After all, a tumultuous stock market means that people turn to other ways to preserve their retirement. Two of the most powerful tools in their arsenal? Gold, silver, and the Self Directed IRA.

Precious metals have a long history as a “hedge” against the stock market crashing and inflationary prices, but do the facts really stand up to that history? And is a Self Directed IRA the best vehicle for those precious metals?

Here we’ll take a look at those very questions and come up with hard answers. Let’s examine the history of gold and silver as safe retirement vehicles that might serve you in your Self Directed IRA:

Gold: A Popular Tool in the Self Directed IRA

First, let’s look at the idea that gold and silver can help you protect your wealth in the case of economic emergency. There are typically a few arguments you’ll hear from people who invest in gold and silver:

  • Precious metals tend to hold their value over time, which serves as a hedge against unstable monetary policies and inflation.
  • Gold and silver are the last bastion of monetary value in a true economic emergency.
  • Since it’s difficult to acquire gold and silver, their prices tend to be relatively stable, which can’t be said of fiat currencies.

In the case of the first point—that precious metals tend to hold their value over time—it’s true. Measuring the value of gold and silver in today’s prices actually gives you a fairly accurate look at the value of money in the past. Some people have even taken a look at Shakespeare’s finances and made sense of it by calculating his income in the cost of today’s silver.

But that’s an extremely long-term view of precious metals; just because they hold their value over centuries doesn’t necessarily mean they’ll hold their value over decades, does it? The average Self Directed IRA is hoping that the value will hold stable and increase for decades, after all. The problem here is that there isn’t much history to work off of. The price of gold was fixed until the United States abandoned the gold standard in 1971, when President Nixon ordered that gold no longer be convertible directly to U.S. dollars. Gold prices spiked in the late 1970s and again in the early 2010s, but they’ve never reverted as low as these original prices.

Owning Precious Metals in Your Self Directed IRA

Whether you want to own a relatively large percentage of your portfolio in gold and silver generally depends on your outlook on the economy. Precious metals has seen spikes after periods of economic hardship, but there’s no direct causal relationship between falling stock prices and the price of precious commodities. What’s important to remember, however, is that gold and silver’s “fixed” status—they’re difficult to mine—means that the supply remains stable. And with a stable supply comes relatively stable prices.

As gold is priced in U.S. dollars, your investments in precious metals in a Self Directed IRA will also depend on how much you value a diversified portfolio. When you hold all of your assets in a single currency, some investors aren’t comfortable. Once again, it depends on your outlook. But if you’d like to learn more about owning gold and silver as a stable portion of your retirement portfolio, be sure to contact us at by calling 828-257-4949 or continuing to read our website. You’ll learn more about these investment opportunities as well as the other retirement investment vehicles available to you when you direct your own IRA.

Self Directed IRAs -How to Avoid Common Mistakes

One of the chief fears people have about Self Directed IRAs is that they’re afraid that they’re going to make mistakes. But mistakes are a part of life.

In fact, mistakes are part of just about every investment strategy: it’s your ability to prevent and adjust to mistakes that defines your success. That’s why it’s important to know how to minimize mistakes and learn from them the best you can: after all, when you work towards a better financial future, there will be turbulence even on the most peaceful rides. Here’s how to avoid and deal with common mistakes in Self Directed IRAs:

#1: Do your Self Directed IRAs research.

One of the fastest ways to ensure that you make a mistake? Go headlong into them without any research. Action is important, but the phrase “knowledge is power” is around for a reason. If you don’t know what you’re doing, you can make some of the classic mistakes such as not knowing how to handle any of the taxes, not understanding what limitations each account might have, and not understanding the limitations on the account types. Doing your research might not be fun—in fact, at times, it might feel like homework—but you’d be amazed at how quickly it can change your disposition from “confused” to “knowledgeable.” Be the latter.

#2: Give yourself a plan.

Dwight D. Eisenhower one said that plans weren’t that important, but that planning is everything. The reason he said that is because planning gives you the preparation and knowledge to deal with uncertainties in life. The truth is, no one knows how their investments are going to end up. That’s just a fact of life, and it’s part of the risk you take by engaging in investing at all. But if you enter the arena with at least a plan, then you can use that plan to gauge just how well you’re doing. If your plan isn’t working, you’ll know which parts to adjust and you can move on from there.

If you don’t plan at all, then you’ll often succumb to the whims and winds of the market. You might not know how to adjust if you’ve never put any thought into the construction of your portfolio at all. Plans might not always hold up, but remember what Eisenhower said: planning is everything.

#3: Make specific goals.

One of the fastest ways to ensure that you never get where you’re going is to never have a specific goal driving you there. Consider driving across the country using GPS. You wouldn’t tell your GPS to head “east,” would you? No, you’d give your GPS a specific location and then work on the steps that lead up to that specific location.

Specific goals often work the way with Self Directed IRAs. Just give yourself one thing to accomplish every month, even if it seems like a simple goal at the time. You’ll be amazed at how quickly these goals add up. But keep an over-arching “end goal” that’s specific; this allows you to adjust your investment strategy as necessary because you’ll have more measurable results to work from.

If you’re interested in adding a Self-Directed IRA to your portfolio, keep reading our articles and guides here at to give yourself a solid footing from which to research. You can also contact us at 828-257-4949  if you’re still confused about some issues. Remember: knowledge is power. If you want to avoid mistakes with Self Directed IRAs, you’re going to have to know what those common mistakes are. And with knowing comes better action and better results.

Self Directed IRA Guide -Diversify with Precious Metals

When people say that they’re diversifying their assets, they don’t go into details. But some people—and these people are often known as “goldbugs”—are all too happy to tell you about their strategy: they use a Self Directed IRA to purchase gold or silver.

If you’re unfamiliar with the process, let’s take a look at investing in precious metals and see what it really means to diversify with a Self Directed IRA:

Self Directed IRA: Meet the Precious Metals

If you want to know your precious metals, you’re first going to have to learn exactly what they are. And that means knowing the individual metals themselves. Here are a few quick things you can learn about these precious metals and what separates them from each other:

  • Gold: Gold is renowned throughout history as one of the most common forms of money. There’s a reason for that. Gold is malleable, which means it can be separated and shaped easily, but it’s also resistant to rust, which means that it doesn’t lose its value over time. Gold is expensive these days, often over 4 digits per “troy ounce,” and generally easy to store because of this high value-to-weigh ratio.
  • Silver: Silver is immensely valuable as well, though compared to gold, it’s an inexpensive option. With current silver prices at some $14 per troy ounce, silver can be a bit of a “beginner investment” for anyone looking to hold a substantial amount of physical precious metal bullion. Silver is highly durable like gold and even has uses in medication and healing thanks to its antibacterial properties. Perhaps that’s why silverware is so popular.

Other metals include platinum and palladium, though gold and silver are traditionally the main investments that “goldbugs” seek out in order to diversify their portfolio.

Precious Metal Diversification: How Does It Work?

Perhaps you’ve read about “hedging against inflation” with gold and silver and you’re not sure how that process works. The truth is, hedging against inflation isn’t as simple as buying gold and silver and calling it a day; many of the numbers do not support a direct relationship between inflation and the value of gold.

When it comes to investing in precious metal bullion, you’ll want to think of gold and silver as a physical holding of monetary value. It’s like moving your dollars out of the dollar and into a tangible investment that you can hold. Sure, you can hope that the value of your gold and silver will go up against the dollar so that you can sell your investments for more than you paid, but for many people, the inherent value of gold and silver is that they are a different type of value in your portfolio—a value that stands very little chance of degrading over time because of the quality of these metals themselves.

Many goldbugs like to point out that you can take your gold and silver, get in a time machine, and still have wealth with you because gold and silver have been so consistently valued over the years. That’s one reason why many people think gold and silver are a great way to hold value even at points of economic crisis. It’s no guarantee of short-term results, but many goldbugs tend to think long-term when it comes to these investments.

If you want more information about precious metal investing through a Self Directed IRA, be sure to visit our section on precious metals. You can also call us at 828-257-4949 to learn more about what it means to invest through a Self Directed IRA.


Self Directed IRA – The Secrets of Diversified Holder

Want to do more with your money than the traditional 9-to-5 office worker does? Then you’re going to need to expand your definition of financial security to include the term Self Directed IRA.

Specifically, you’re going to have to learn how to diversify your assets so you don’t feel like you’re holding on to any one industry. And if you’re smart and do your research, you’ll find a lot of advantages to Self Directed IRAs along the way. Here are some of the not-so-secret “secrets” out there:

Secret #1: A Self Directed IRA Protects Your Assets.

If you’re ever curious about how “risky” a Self Directed IRA really is, consider that these are still retirement accounts. Retirement accounts are among the most protected financial accounts you can have, which is why so many experts recommend them for building long-term wealth.

One example: the Real Estate Self Directed IRA. In investing in real estate through a Self Directed IRA, you’re able to use non-recourse loans in order to use leverage. A non-recourse loan is a loan in which the lender can’t come after you or your assets if you default on the loan; instead, they can only come for the capital invested in itself. This means that your net worth is protected against total disaster, which lowers the overall risk associated with investing in real estate. This is the kind of protection that people who really know how to diversify will utilize to its full extent in order to maximize their financial security.

Secret #2: Options. Lots of options.

Maybe it’s not such a “secret,” but if you asked anyone about the concept of an IRA they probably wouldn’t even know what “Self-Directed” means, let alone that it was possible. The truth is, you get access to a lot of options when utilizing this kind of IRA. There are so many options in fact that the regulations tend to point out which investments you cannot make with these accounts.

After all, take a look at all of the options at our investment options page and you’ll start to get an idea of just how flexible an IRA can really be. Everything from real estate to private companies and joint ventures are possibilities when you direct your own IRA. That’s the kind of flexibility most people just don’t know about, which is what makes it a “secret” of someone who holds a diversified account.

Secret #3: Private loans.

Okay, now we’re really stretching the definition of the term “secret,” because this is a legitimate way to grow capital under a Self Directed IRA. In fact, it’s how banks get their money: loans. If you know how to sniff out a winner, a private loan can provide some of the best passive income there is. This means that your retirement savings can grow even after you’ve already made the decision to invest in a private loan, giving you plenty of options for focusing your attention and your energy elsewhere. True, there is inherent risk with loans—just as there is with any sort of investment.

If these kinds of “secrets” (which really aren’t so secret) appeal to you, then you’ll want to continue reading up on the concept of the Self Directed IRA and learn what it can do for you in order to achieve more diversification in your portfolio. Keep reading our blog posts here at, explore our guides and downloads, and remember that you can always call us at 828-257-4949 if you want to learn more about what it takes to Self-Direct a retirement account for greater financial security and peace of mind.

Self Directed IRA – What You Didn’t Know It Could Do For You

What can a Self Directed IRA do for you?

It’s an important question, but you’d be surprised at how many people actually know the answer. It’s fewer than you think. For most people, the idea of investing is as simple as buying stocks. But there are more options available to you out there if you want to learn them—and there are more advantages you can use when you realize all of the different account types, as well. In order to expand your concept of retirement investing, we put together a brief list that we believe most beginning investors need to consider:

#1. A Self Directed IRA can add financial security.

If you’re already familiar with the concepts of a Roth IRA, traditional IRAs, and more, then you know all about the protections that come with the usual retirement accounts. Self Directed IRA accounts are no different. In fact, you’ll find that they come with some benefits as soon as you start utilizing their flexibility for maximum impact.

One of the most important areas in which you can do this is through non-recourse loans when investing in real estate. Non-recourse loans are loans in which a lender can’t come after your other assets should you default on a loan…they can only come after the value of the loan itself. That means that if you invest in real estate with a non-recourse loan through a Self Directed IRA, many of your assets remain protected. And you still get to use leverage in order to build equity over time!

#2: The flexibility to choose from an exhaustive list of options.

When most people think about retirement—and let’s be honest here—they think about their work 401(k). This is especially true the younger you are. The younger you are, the further off retirement seems, which makes it seem less valuable to start investing in your future. And people get stuck in this bubble, never really looking at all of their options until it’s too late.

Don’t wait until it’s too late. Take a look at all of the Self Directed IRA investment options available to you today. All you have to do is review a few of them to expand your concept of what it means to invest in real estate. Simply browsing through these allows you to see all of the different avenues you have available to you. There are more retirement accounts than a 401(k), and there are more assets than just stocks.

#3: Achieving diversification of asset classes.

Most people take “diversification” to mean choosing a variety of stocks. But if you really want to diversify, you’ll have to learn this concept asset classes, which really refers to the different types of investments you make. When you learn the asset classes—real estate, private company shares, etc.—you see a greater degree of what’s available to you.

Diversification means looking at alternative options like precious metals, for example, and making a decision to make your investments not only larger, but more broad. Casting a wider net generally means you’ll stand a greater chance of catching more fish—and in the case of hardship, you’ll have different asset classes to “fall back on” as well.

If you’re interested in learning more about how a Self Directed IRA works, be sure to continue reading our articles here at We cover a range of topics in our menu options above, acting as a “guide” to the world of Self Directed IRAs. And if after all that, you’re still stuck, you can contact us directly by calling 828-257-4949 and letting us know what you need to know.

Self Directed IRA Bits of Wisdom

There are a lot of quotes out there. But not all of them apply to taking the reins over your own financial destiny as some people do with a Self Directed IRA.

Fortunately, we sifted through a lot of the wisdom and found some of the most relevant quotes when it comes to investing and Self Directed IRA investing with yourself as the captain in charge of where your financial boat goes. Here are some of our favorite words of wisdom that relate to investing, money, and, of course, controlling your own destiny:

“To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.”

-Benjamin Graham, the Intelligent Investor

Why is this such an important quote? Because it shows you just how common it can be to achieve “satisfactory” investment results—and, after all, isn’t that all we really want? Sure, some of us might pursue even bigger gains, but if you end up happy with your investments, then that means you were probably successful to one degree or another. And as Benjamin Graham notes, it’s more than possible to become a successful investor even if you’re not an expert. You don’t have to be afraid of the markets out there—you simply have to know a few time-tested strategies of diversification and thinking long-term.

“Mutual funds are an overrated investment heavily promoted by Wall Street.”

-Peter Schiff, Crash Proof

Okay, maybe we don’t agree with everything the controversial financial mind has to say, but it’s not too wacky to consider that a portfolio consisting only of mutual funds isn’t always going to do as well as you think. If you happen to need your money during a bear market, you’re out of luck. If you happen to invest just as the market turns, you’re out of luck. Diversification out of funds and out of stocks is important if you want a wider net. This doesn’t have to mean that you get out of funds and stocks entirely, of course. But you should think about what a “wide net” means to you.

“It’s tangible, it’s solid, it’s beautiful. It’s artistic, from my standpoint, and I just love real estate.”

-Donald Trump

The real estate mogul clearly has a passion for real estate, and why not? The reasons he gives make sense. Real estate is a tangible investment that you can see and touch. It’s the kind of investment that never goes out of style, because everyone always needs a place to live and a place to do business. With a Self Directed IRA, investing in real estate is easy…in fact, there are ways to use leverage to invest in real estate for retirement if you know the proper rules.

“An investment in knowledge pays the best interest.”

-Benjamin Franklin

Knowledge truly is power, especially when it comes to money. Knowing your options is key. One of the best things we love about self-directing an IRA is that it helps people understand what goes on in their portfolio. It forces them to consider their goals, their ideals, their principles, and it forces them to create a portfolio on their own. It helps people educate themselves about all of the investment types that are out there. And that’s why we work so hard to include our Self Directed IRA Investment Knowledge Center. There’s plenty of knowledge there—and knowledge is the best investment—which will help you along your journey to retirement and financial independence. And if you’re interested in learning more, you can continue to browse or simply call us at 1-866-7500-IRA(472) to get in touch.

Self Directed IRAs and Your Taxable Estate

Self Directed IRA, self-directed 401(k) accounts, SEPs and SIMPLE plans are normally part of your estate.

That means that upon your death (or the death of your surviving spouse, if any), any amounts in your estate, including your Self Directed IRA assets, will be subject to the federal estate tax.

Effectively, your estate will likely have to pay about 40 percent of anything it owns in excess of $5.43 million, as of 2016. The latter amount is adjusted upward annually for inflation.

If you have assets worth more than this amount, then, and they aren’t necessarily highly liquid (that is, easy to sell quickly without having to discount heavily), then you may need to do some planning to ensure that your heirs will have access to enough cash to pay the estate tax within six months of your death.

This can be a problem for some Self Directed IRA owners. Real estate, in particular, can be illiquid and tough to sell in time to raise the necessary cash. The same is true if you have significant investments in other asset classes that are popular with Self Directed IRA investors:

  • Tax liens and tax certificates
  • Private lending
  • Hard money lending
  • Precious metals
  • Commercial lending
  • House flipping
  • Partnerships
  • LLCs
  • Closely held corporations
  • Farms and ranches

Each of these can be very lucrative investments for skilled Self Directed IRA owners. But the can also be very illiquid. If all your available cash is lent out on long-term mortgages, for example, it can be tough to raise significant amounts of cash in the short-term to pay the estate taxes without having to have a fire sale and unload assets at bargain basement prices.

This is why many of our more successful Self Directed IRA-owning clients make use of estate planning strategies to maximize the legacy they are able to pass on to their loved ones, and minimize the burden on their families.

If you believe your estate will exceed the estate tax exemption threshold when you pass away, however, there are some things you can do to preserve your financial legacy and maximize the amount you leave to your heirs. Here are some of the more common strategies.

Roth conversions.

Many people choose to convert large amounts from traditional IRAs to Roth IRAs. You can do the same strategy with assets in 401(k) plans, as well. When you convert, you must pay income taxes on the amount converted. However, anything you pay out in income taxes is money that won’t be eventually subjected to the effective estate tax rate of 40 percent, which is higher than any income tax bracket, even for very high earners.

This strategy works best if you can use assets from outside of your IRAs to pay the income taxes.

Roth IRAs and 401(k) Plans

By the same token, taking the income tax hit up front and choosing to make contributions to a Roth IRA or Roth 401(k) plan can also move assets out of your taxable estate and lower your eventual overall estate tax rate. Assets in these accounts grow tax-free, and income from them in retirement is tax free.

Second-to-die life insurance

These life insurance policies pay a tax free cash death benefit on the death of the second spouse – right when the estate tax bill will become imminent. They are therefore ideal tools for estate tax planning. Many people use irrevocable life insurance trusts, which moves the life insurance policy itself out of the taxable estate. Otherwise the life insurance would become subject to the estate tax all by itself.

Strategic gifting

Simply giving away some of your wealth to loved ones can be a tremendously effective and personally rewarding estate tax strategy as well. As of 2016, there is a $14,000 gift tax exclusion in effect per person per year. That means a married couple can give as much as $28,000 to each child, for example, without tax consequence.

You can give higher amounts, as well, with no immediate tax consequence. You just report the gift and any amounts over the exemption are counted against the lifetime exemption to the income tax.

You can’t ‘give’ away assets in your self directed IRAs without generating possible taxes and penalties – it will count as a distribution, unless you make the withdrawal for a qualified hardship exemption. But you can execute this strategy with other assets and it still works just as well as an estate tax mitigation technique.

American IRA is a leading authority on the administration of Self Directed IRAs. With offices in Charlotte and Asheville, North Carolina, we work with successful investors all over the country. Contact us today at 866-7500-IRA(472), or visit us online at and peruse our extensive library of informational blog posts, articles and e-books.