Return of Stock Market Volatility Underscores Need For Self-Directed IRAs and Diversification

February 2018 has been a stressful month for stock investors. Volatility is back with a vengeance: The Dow Jones Industrial Average components – what we used to call “blue-chip stocks” for their safety and staidness, took some big stumbles early in the month. This happens every once in a while, – but this time the declines triggered some program trading, computers were programmed to dump stocks as soon as the Dow, S&P 500 or some other signal dropped below a given level. The selling forces stocks lower, triggering even more program trade selling, and so a vicious cycle takes over.

And that, despite an economy that is prospering by most metrics, is how the Dow recorded a record 1,175 point loss on February 8th.

One might call it retribution for some bullish arrogance that has gripped stockholders over the last year. While we have seen a recovery since then (and stocks are setting new highs), the recent volatility has hopefully reinstated a healthy appreciation for risk: It is pretty scary to see 5 to 10 percent of your retirement nest egg disappear in a couple of days. Volatility can hurt.

Fortunately, the vast majority of our clients did not need to bat an eyelash. Indeed, some of them may even benefit from the volatility, as investors dump stocks looking for safer assets.

Self-Directed Investing means you do not have to worry about what the stock market does every day. Many of our clients have much of their long-term money invested in far more sound assets than stocks such as:

  • Rental properties
  • Commercial real estate
  • Tax liens and certificates
  • Gold and precious metals
  • Closely-held companies, LLCs and partnerships
  • Farms and ranches
  • Land
  • Private equity
  • Venture capital
  • Private lending
  • Mortgage lending
  • Equipment leasing

… and more.

While the value of each of these investments fluctuate, none of them are tied to the day-to-day fickleness of the stock market. Our clients have the luxury of being indifferent to most of the noise on Squawk Box and Jim Cramer’s Mad Money.

Most mature investors regard shows like these as a waste of time. The smart money is always way ahead of what the average consumer sees on TV.

As television and radio personality Dave Ramsey is fond of saying, “investing is a crockpot, not a microwave.” That is the approach taken by most Self-Directed IRA owners, who define holding periods in terms of years and decades, not hours and days. The longer your holding period, and the longer your investment time horizon, the less you have to worry about short-term volatility.

For alternative asset investors, there is no daily price index to track – and certainly no intra-day prices to obsess over. The focus is on the intrinsic value of the investment, and not on the opinions of millions of strangers – most of whom are not very smart anyway.

The lack of intraday pricing, and an overall more deliberate approach to investing and valuation, makes it much easier to avoid falling into the many traps of stock market speculation such as:

  • Focusing on the short-term
  • Panic selling on an impulse
  • Program trading causing you to sell when you should be buying
  • Thinking you are diversified when all your assets tend to move together

For many of our investors, the lack of correlation with the fickle stock market is a source of comfort. They derive piece of mind, knowing however fearful the talking heads on TV are behaving (generally at the wrong times), they do not have to participate in any correction or bear market.

Diversification is a fundamental principal of sound investing. Most individual investors do not do nearly enough of it, and find themselves over-exposed to a volatile stock market at the wrong time.  Self-Directed IRA strategies help you diversify, providing a much-needed hedge against stock market volatility – while still exposing you to opportunities for long-term growth and income.

If you want to do a thorough portfolio review, and find out how you can benefit from implementing Self-Directed IRA strategies in your own retirement investing, call us today at 866-7500-IRA(472).

Are You Ready for a Self-Directed IRA?

A Self-Directed IRA is a proven way for investors to gain access to alternative asset classes not normally offered by most Wall Street investment companies. Most of them readily offer access to trade stocks, bonds, ETFs and mutual funds. Some of them also support trading in options on stocks and margin trading. But for the most part, if you want to diversify your portfolio into other asset classes in order to increase your expected returns, decrease your exposure to volatility, or both, while preserving the tax advantages of a retirement account, you are going to have to look at Self-Directed IRAs.

Self-Directed IRAs is it the right fit for you? Some people just do not have the skills or financial sophistication to take personal charge of their IRA investments, pulling them from the control of a money manager. They may need the assistance of a professional mutual fund manager or stockbroker to help them manage their portfolio. Or, they may simply not have time for managing investments, because they do not enjoy it.

Who is Ready for a Self-Directed IRA?

A Self-Directed IRA can be an excellent match for certain investment minded people. If the following criteria apply to you, you may be ready for a Self-Directed IRA.

1.) You have professional-level knowledge of real estate, precious petals, private equity, technology, small business or some other asset that gives you a meaningful competitive trading advantage over the market.

2.) You understand the different kinds of risk that could affect your investments, including, but not limited to, market risk, systematic risk, interest rate risk, inflation risk, legislative risk and company or investment-specific risk.

3.) You generally have an independent or entrepreneurial spirit.

4.) You know how to read a cash flow statement and a balance sheet.

5.) You understand the rules governing prohibited transactions and prohibited investments in IRAs.

6.) You want to save hundreds and possibly thousands of dollars in fees every year, compared to the high assets under management (AUM), wrap fees, expense ratios, 12-b-1 fees and other fees the Wall Street firms charge.

If all these apply to you, it may be time for you to consider a Self-Directed IRA

There are some important things to understand before you invest:

Self-Directed IRA Rules

You cannot buy an investment in your own name, expecting to transfer it into a Self-Directed IRA later. The law prohibits your IRA from buying or selling to you, personally. Your IRA also cannot transact directly with your spouse, children, grandchildren, parents, grandparents, or any entities they control.

For example: John is an experienced real estate investor and finds a promising property that would make a great candidate for his first investment in a Self-Directed IRA. However, he does not have a Self-Directed IRA account set up with a custodian or third-party administrator. So he goes ahead and has his own real estate investment LLC buy the house. He cannot then transfer the house into his IRA. Since he controls the LLC, the IRS could disallow the entire investment, and force him to take a distribution on the entire value of the account. This would result in a big income tax bill and potential penalties for early withdrawal – plus a bunch of legal fees.

Making Your First Self-Directed IRA Investment

The correct way to go about buying your first Self-Directed IRA investment is to:

  • Contact American IRA, LLC directly at, or by phone at 866-7500-IRA(472).
  • Fill out a couple of forms to open an account. You can choose to open a Traditional IRA, a Roth IRA, or if you have self-employed income or a small business, a SEP IRA, SIMPLE IRA or a Solo 401(k).
  • Transfer funds from a qualified source into the account. If you qualify, you can make up to $5,500 in new contributions to an IRA or Roth IRA per year – and you have until April 15th to make IRA contributions for the previous calendar year. You can also roll over money from another IRA or qualified retirement account. In most cases, the best way to accomplish this is via a trustee-to-trustee transfer. This way, you will not take personal possession of the assets – and risk making a costly mistake. If you are transferring money from a 401(k), you also will not have to worry about your old 401(k) custodian withholding 20 percent to forward to the IRS to pay expected taxes.
  • Identify the asset you want to purchase for your Self-Directed IRA (or other retirement account).
  • Provide American IRA, LLC with detailed instructions on what to purchase, from whom, and for how much.
  • Have any attorneys involved draw up the title naming your Self-Directed IRA as the owner, NOT YOU. Mistitling the assets in a Self-Directed IRA can lead to big problems down the road.
  • Confirm the purchase is made correctly.

American IRA will log the transaction and ensure it is completed according to the law.

Note, American IRA handles the transaction. We do not determine whether the investment is appropriate for you or your portfolio. That is between you and your financial advisors. We work with your existing advisors to make sure your directions to us are handled promptly and accurately.

That is part of what it means to have a Self-Directed IRA: You take more direct and personal control of your retirement investments. You may hire some advisors to help you, but ultimately, you, and not some distant fund manager who does not know you or your goals, are in charge of managing your Self-Directed IRA portfolio.

Private Equity In Your Self-Directed IRA

Own tomorrow’s Dow components today! Or we hope, anyway. But you did not have to invest with Steve Jobs while he was still running Apple out of a garage in the 1970s to do well with private equity or private placements in a Self-Directed IRA. Just invest in solid, well-managed companies with good accounting and controls, who have a viable business that provides a good value and you can do just fine – and even get better returns over the long run, in many cases.

What is private equity?

When a small company wants to raise capital, it can borrow the money, or it can sell off a piece of itself to investors, who are then entitled to a share of all future dividends the company issues. If the company is publicly traded, it can sell shares over the stock market. But if the company is not publicly traded, it will seek out investors anywhere it can, and negotiate a share price privately.

Many companies do not want to go through the time and expense of issuing a publicly-traded security. Just maintaining a listing on boards like Nasdaq or the NYSE can cost tens of thousands of dollars per year. Unless they are getting major investment bank support to help them place their shares, it is just not worth it to these smaller companies.

Many smaller companies with no regular earnings cannot get traditional lender financing, either. Most traditional lenders just are not equipped to serve this market, as borrowers typically do not meet the lending criteria for the banks’ backers. They do not have the regular earnings to support income-based underwriting, and they may not have real estate or other kinds of readily marketable collateral that most banks rely on to justify a loan.

But Self-Directed IRA owners are not limited by these criteria. Moreover, Self-Directed IRA owners also frequently have the long time horizons that companies seeking investment need. For example, if you lend to or invest in a real estate developer, it may be years from the time you provide the financing to the time the real estate developer has a property completely built and sold off so that it has some cash to pay lenders and investors with!

Meanwhile, private equity seekers have to sweeten the deal, to compensate the Real Estate IRA investor for the cost of tying up their money for a long time. That usually means better terms, and better long-run expected returns. That is, private equity seekers (and private debt seekers as well) have to discount their offerings to attract investors.

Qualifying for Private Equity Placements for your Self-Directed IRA

Not just anybody can be a private equity investor and be eligible for direct placements. In order to invest in a direct placement of private equity, you must meet the definition of an accredited investor, according to Rule 105(a) of the SEC’s Regulation D.

Specifically, you must have a net worth of at least $1 million (not including your primary residence), OR;

You must have an income of at least $200,000 in the last two years if single OR;

Have an income of at least $300,000 in the last two years if married.

Reputable brokers or sellers will have you submit proof of your status as an accredited investor before selling you the shares or bonds, if it is a private debt placement.

Because of the substantial returns available in private equity (the potential is virtually unlimited), and the long time horizons involved, private equity placements can make excellent candidates for Self-Directed IRA investment.

Before you invest, though, understand that these investments, like many popular Self-Directed IRA assets, are frequently not registered securities, and are exempt from a number of SEC regulations and reporting requirements.

They also tend to be very early stage companies, subject to substantial economic risks. They may have unproven products, service offerings, inexperienced management teams, difficulty securing follow-on funding, and they could even be fraudsters. It is, therefore important to engage in a thorough due diligence process before you invest in any private placement offering within a Self-Directed IRA.

Nearly Half a Million Investors Choose Self-Directed IRAs – Here’s Why.

Self-Directed IRAs are nothing new.

The Individual Retirement Arrangement goes back to the passage of the Employee Retirement Income Security Act of 1974. And while the vast majority of accounts since then have been focused on conventional assets such as mutual funds, stocks, bonds, annuities and CDs, the law has always allowed for all kinds of alternative asset classes as well, since the very beginning. American IRA founder and CEO Jim Hitt has been using his own personal IRA to hold investment real estate for his own retirement security since the early 1980s. It has worked out so well that he founded the company to help other investors do the same thing. Since then, American IRA, LLC has helped thousands of investors leverage the tax advantages of Self-Directed IRAs, Roth IRAs, 401(k)s, SEPs and other tax-favored accounts with real estate, gold and precious metals, and many other alternative asset classes.

But the self-directed retirement account industry has generally been fragmented, and overall statistics about self-directed investing have been hard to come by. But recently, we have been able to learn more about how widespread and popular Self-Directed IRAs and other retirement accounts have become among the investor class.

According to the Investment Company Institute, the total amount of assets in IRAs totaled $7.3 trillion, with an additional $4.7 trillion in 401(k)s.

According to research from the U.S. General Accounting Office, there were nearly half a million self-directed retirement accounts nationwide: 488,333 was the official tally of the number of accounts, with somewhat fewer actual investors, since some investors may own more than one retirement account.

The total value of all accounts amounted to nearly $50 billion.

The number self-directed retirement accounts identified by the GAO broke down as follows:

  • IRAs: 485,517, with a total combined balance of $49,768,207,085
  • Solo 401(k)s: 2,816, with a total combined balance of $187,692,662.

Solo 401(k)s make up less than 1 percent of the total number of Self-Directed IRAs, as of 2015, and less than 1 percent of the total amount of assets.

The Self-Directed IRA and self-directed 401(k) markets, then, are still quite small, niche markets. But those who use these strategies tend to be educated and affluent and attractive clients to financial services professionals.

These are 2015 numbers. The total number of plans and the amount of assets within the plans have undoubtedly increased in the interim. As of this writing, the Dow Jones Industrial Average has just closed over 22,000 for the first time, bringing a lot of equity portfolios up with it. Real estate prices have also gone up over the last two years, as well.

Why Do Investors Choose Self-Directed IRAs?

The GAO surveyed custodians and administrators to learn why their clients chose to use Self-Directed IRAs and alternative asset classes in their retirement portfolios. Nine out of the 17 custodians surveyed reported multiple reasons: Avoiding the stock market, diversifying their retirement portfolios, concentrating on familiar assets, investing in a tangible or familiar asset, or investing in a company that is not yet publicly traded.

How to get started

With stocks hitting record highs, finding ways to diversify a stock-heavy portfolio into other asset classes may be more important than ever.

Getting started with self-directed investing is very easy – especially for experienced investors who understand investments like real estate, precious metals, corporations, partnerships and LLCs and other common alternative investments for retirement accounts. First, open an account with American IRA, LLC, and fund it. Then find an investment that is suitable for you. Send us supporting documents and tell us where to send the money. We will maintain the title, deed and other ownership documents on your behalf.

To learn more, call us today at 866-7500-IRA(472), or go online at and fill out the new account forms. If you have questions or trouble with the forms, call us and we will gladly walk you through them.

Our offices are in Charlotte and Asheville, North Carolina, but we work with Self-Directed IRA owners and solo 401(k) owners all across the country. We look forward to working with you.

With Stocks at All Time Highs, Self-Directed IRAs May Make Sense

The stock market continues to boom. The Dow Jones Industrial Average soared past 22,000 for the first time in history the other day. Meanwhile, Americans with 401(k) balances now have a record high amount of assets in them. While we’re happy that stock prices are doing well and that sentiment is supporting some healthy equity prices, history tells us that times like these are historically dangerous times for equity investors. It may be a good time for investors to move assets out of equities and into some alternative asset classes – and a natural tool to accomplish this is the use of Self-Directed IRAs

Why move into Self-Directed IRAs

The fact is that U.S. stocks, as measured by the broader S&P 500 Index is trading at a historically rich valuation. As of the market close on August 4th, the S&P is selling at 24.7 times trailing earnings. That’s well above the mean and median historical P/E multiples of 15.66 and 14.66 respectively.

Indeed, we’ve only seen valuations this high on a few occasions in stock market history: The 2008-2009 recession (when a corporate earnings collapse caused valuations to soar to 123.73 in May of 2009 before receding), the Internet bubble of 1999, and the biotech craze of the early 90s. Prior to that you have to go all the way back to the 1890s to see a P/E ratio at the current level – and even then it remained there only briefly.

Does this mean we think the current stock market bubble doesn’t have some room to run? Not at all. Nobody knows the future for certain, but there are reasons to believe the current U.S. and global growth rates will continue for some time. And a burgeoning affluent middle and upper class in China, India and elsewhere in Asia is creating a natural market for U.S. stocks that continues to snap them up.

But the U.S. employment isn’t going to get much better. The U.S. unemployment percentage currently at a 16 year low of 4.3 percent, which is essentially at full employment. American retailers and restaurants – the publicly traded ones anyway – are under a lot of pressure, and that’s going to be a drag on broad stock market indexes going forward. And as wages rise in response to the tight labor market, that’s going to squeeze margins of manufacturers and other companies with high labor inputs. So those act as quite a headwind that U.S. stocks are going to have to overcome.

Many of our forward-thinking clients have already taken some money off the table, and have redirected it towards alternative asset classes that have low correlations with U.S. stocks. If you have a stock heavy allocation in a retirement plan, such as a 401(k) or IRA, it may be time to consider opening a self-directed IRA, and diversify into other kinds of assets:

  • Residential real estate
  • Commercial real estate
  • Gold and precious metals
  • Tax liens and certificates
  • Farms and ranches
  • Land banking
  • Timber
  • Oil & gas investments
  • Limited partnerships
  • LLCs
  • Closely-held corporations in industries you know well
  • Private lending
  • Venture capital and private equity
  • Private debt placements

And many other potential opportunities with little or no correlation to what’s happening in U.S. stock indexes.

To get started, visit us at American IRA, LLC is a family-owned business that provides the third-party administration and transactional support needed so you can take direct control of your personal retirement assets, and declare independence from Wall Street. Our services enable you to direct your self-directed IRA and other retirement funds into non-conventional asset classes, while still remaining in compliance with laws and IRS regulations governing IRAs, 401(k)s and other types of retirement accounts.

Alternatively, call us today at 866-7500-IRA(472) for a no-obligation consultation. Our offices are located in Asheville and Charlotte, North Carolina, but we gladly work with investors anywhere in the country.

We look forward to serving you.

Self-Directed IRAs and Divorce

Few people plan for divorce. But it happens. And frequently, divorce involves the equitable division of retirement assets. The rules for Self-Directed IRAs are generally the same as those for conventional IRAs.

Generally, if one party gives up Self-Directed IRAs or other retirement assets to a spouse, there are no taxes or penalties on the transaction. Under Section 408(d)(6) of the Internal Revenue Code, the transfer of an individual’s interest in an IRA to a spouse or to a former spouse does not qualify as a taxable transfer.

However, whoever receives the assets from a spouse or former spouse takes on any future taxes or penalties that the assets generate.

So what do you have to do to qualify for tax-free treatment of retirement assets? IRC Section 71(a)(2) spell out what you need:

  • A divorce decree from a court, including judgments of dissolution
  • A decree of “separate maintenance”
  • A written instrument incidental to a divorce decree.

Often, court orders dividing IRAs and other retirement assets come out as separate documents from the divorce decree.

What to do when you receive an order dividing an IRA

It’s normally a bad idea to take a distribution from an IRA in order to hand money over to a former spouse as part of the divorce. You would wind up with all the tax and penalty liability while the spouse gets the assets – and loses the benefit of the IRA’s tax-favored status forever.

Generally, a better idea is for the party receiving the assets to set up an IRA asset of his/her own and then set up a Trustee to Trustee Transfer from the grantor’s IRA to the recipients. This way the transaction gets treated as a transfer, rather than as a distribution.

The transfer can be in the form of cash, or it can be in the form of property.

Special considerations for Self-Directed IRAs

While the rules are the same, some Self-Directed IRAs are invested in very illiquid investments. Where this is the case, you may want to take some time and liquidate the IRA investment, however long it takes to get a good price, before transferring the asset. Normally, there shouldn’t be a rush, unless one party needs immediate income and needs to take a distribution. Even then, if the self-directed IRA asset is an income-producing asset such as rental real estate, it should be a simple matter to work something out that’s equitable to both sides.

Fee structures

When it comes to significant transactions – like transferring 50 percent of an IRA to a former spouse – working with a flat-fee self-directed IRA account administrator can provide enormous cost advantages. For example, while many financial institutions charge a percentage of the transfer – especially if you have to liquidate assets – American IRA, LLC charges only a small flat fee to handle the paperwork on the transaction. The difference can be worth thousands of dollars in fees and commissions.

American IRA, LLC is a national authority on the administration of Self-Directed IRAs and other retirement accounts. Our offices are in Asheville and Charlotte, North Carolina, but we work with clients in all 50 states and the U.S. territories. For more information on how to handle self-directed IRA assets during a divorce, or to learn more about the cost advantages of Self-Directed IRAs, call us today at 866-7500-IRA(472), or visit us on the Web at

We look forward to hearing from you.







Self Directed IRAs: The Problem With Mutual Funds

Mutual funds were once a great idea. Most ordinary Americans don’t have the time, expertise or inclination to become stock market experts. Mutual funds made it easy and affordable for regular folks to pool their assets and with a single transaction, diversify a small amount of money across hundreds, or even thousands of securities, with a professional money manager at the helm.

More and more people are turning to Self-Directed IRAs. They are declaring independence from Wall Street and investing their money in ways that are much more cost efficient, and that provide a way to potentially achieve greater returns and more diversification benefit than

Traditional, open-end mutual funds, however, are no longer providing the value they once did. Indeed, most of them can’t even come close to outperforming a market cap-weighted unmanaged index of similar securities, once you take their expense ratios into account. Add in hidden costs like bid-ask spreads, capital gains taxes from high-turnover funds, churning, and the like, and the case for the traditional actively managed open-end mutual fund gets weaker every year.

But the reality is even worse. A large percentage of prominent actively-managed mutual funds actually behave like high-cost index funds. That is, they are closet index funds. Their performance is highly correlated with much more cost-efficient index funds – for which they charge a huge premium in expense ratios and other fees – sometimes up to ten times as much.

Self-Directed IRAs allow you, the individual investor, to sidestep the shortcomings of the Wall Street mutual fund industry, by allowing you to take more personal control of your retirement assets – and invest them in a wider variety of asset classes, including the following:

  • Rental real estate
  • Commercial property
  • Tax liens and investments
  • Partnerships
  • LLCs
  • Closely-held C corporations
  • Farms and ranches
  • Gold and precious metals

And much, much more.

The best part: None of these investments charge you a percentage of their value just for the privilege of owning them. All businesses have internal expenses, yes – and these reduce eventual profits. But the same goes for every company in a stock mutual fund portfolio. The fees a traditional open-end mutual fund charges – averaging nearly 1 percent per year, according to Morningstar – are in addition to the internal day-to-day business expenses of the underlying businesses in the portfolio – and are typically payments to the fund manager for underperforming what you could get from an index fund.

When you choose to use a self-directed strategy with American IRA, LLC, however, you don’t pay that 1 percent additional fee off the top to some money manager to underperform the market. Instead, you pay only for the transactions you actually make, using a simple, flat rate menu.

For most of our customers, this equates to hundred or even thousands of dollars per year in savings.

Meanwhile, Self-Directed IRA owners often own a wider variety of asset classes than those who restrict themselves to prominent mutual funds.

If you are tired of the shenanigans of Wall Street and the mutual fund industry, with their high costs, high fees and hidden expenditures that sap your portfolio over time, American IRA, LLC would like to work with you.

American IRA is among the leading companies in the country providing third party administration services for owners of Self-Directed IRAs. For more information, call us at 866-7500-IRA(472), or visit our Web page at

We look forward to working with you.



Want to Save on Fees with a Self-Directed IRA?

At American IRA, LLC, many of our clients are long-term buy-and-holders. They may hold real estate holdings, gold, or other assets for many years, with relatively few transactions. For that reason, many Self-Directed IRA owners and other investors stand to realize significant savings from declaring independence from Wall Street and their many high-commission products, wrap fees, surrender charges, 12-b-1 fees, and high expense ratios on products that usually fail to beat their index benchmarks net of their costs.

For example, many mutual funds come not only with a front-end sales load, but a 25-basis point ongoing fee to support the marketing expenses for the brokerage company. Not for you. You get no benefit whatsoever for this fee. Claiming your freedom to invest in what you know and understand with a Self-Directed IRA is a much better option.

It makes little sense to pay expense ratios and/or wrap fees of 1 percent each or more on assets that aren’t even being traded much.

Are you getting anything for the wrap fee?

Many times, the answer for our Self-Directed IRA customers in the past was no – they received little or no value for the ongoing wrap fees they were paying to Wall Street firms in perpetuity. This is why they became American IRA customers!

In some cases, these individuals were not even aware of how much they were paying out in needless fees every year until they called us and we walked them through the benefits of a flat fee schedule for services. Larger accounts are saving tens of thousands of dollars in fees just from switching from an expense-ratio and wrap-fee based fee structure.

Yes, these plans are suitable for some investors. But for our independent-minded, experienced investors that make up the bulk of our clientele, we found the were much better off using our flat rate per transaction fee schedule, available here.

Primarily, we offer one set annual administration fee. And it stays the same, no matter how large your account becomes. There are also smaller charges for specific transactions that simply reflect the costs of physically processing and mailing or wiring, as necessary. You would have to pay them with any firm.

With wrap accounts and expense ratios, the larger your account grows, the larger your fees become. With American IRA’s unique fee structure, as the value of your assets in your portfolio increase, your transaction costs and basic fees remain the same. So the larger your portfolio, the more sense a flat rate fee structure like American IRA makes for many investors.

After all, it’s not what you have so much that matters – it’s what you can keep. A Self-Directed IRA with American IRA can help you keep more of your money to fund your retirement lifestyle and financial security.

If you are tired of paying needless fees, commissions and expenses and receiving little value for your money? If so, we’d like to work with you.

Visit American IRA, LLC today at, or call us today at 866-7500-IRA(472).

3 Stubborn Myths About Self-Directed IRA

We’re constantly coming up against myths and misconceptions people have about Self-Directed IRAs, or IRAs in general. So it’s time to clear the air and put to rest some of the most common Self-Directed IRA myths we come across.

  • Self-Directed IRAs are risky. Well, this one can be true, and in practice, it often is true. But it doesn’t have to be – and it also depends on how the investor defines risk. But the Self-Directed IRA is just a type of account, that comes with a certain type of taxation and a few rules on the kinds of investments you can make within them and who the IRA can transact business with. You are perfectly free to create a Self-Directed IRA that is essentially risk free, for as long as you like. For example, you can create an account with American IRA, LLC, and fund it entirely with FDIC insured CDs, with no market risk whatsoever (though you have some inflation risk, so you can’t avoid risk altogether!

Your Self-Directed IRA is always as safe or as risky as you decide to make it. That’s the whole point: You can decide your own risk exposure. No outside money manager needs to be in a position to do that for you.

So, yes, you can dial the risk level way up, if you like, leveraging volatile investments, buying into venture capital funds or making big, concentrated bets on individual and speculative securities in emerging markets if you like. Or you can have one entirely stuffed with CDs, money market funds and fixed annuities. It’s entirely up to you.

  • I don’t need to name a beneficiary. You may not care about it personally. But chances are the people you do care about have a lot riding on that named beneficiary form, and Self-Directed IRAs and 401(k)s are no different. Failure to designate a named beneficiary in writing can have devastating consequences for loved ones. If you fail to name the beneficiary, then you are handing the keys to your life’s savings to probate lawyers, not to your family members and loved ones, who may really need quick access to that money.

You also wind up taking options away from loved ones, and effectively passing more money to the IRS, rather than your loved ones, than is necessary. For example, failing to name a beneficiary could force heirs to liquidate the entire account within five years, rather than spreading the benefit of tax free deferral or tax free growth over their lifetime – a much more tax-efficient solution.

  • I don’t need to roll old 401(k) balances to an IRA. Well, maybe you don’t. If your account balance is under about $5,000 or so, your old employer may keep it on the books. But you may run into problems if you need to access the money. 401(k) plans don’t have to honor the same emergency hardship withdrawal provisions that your Self-Directed IRA and conventional IRA accounts enjoy.

Plus, if you do cash out part or all of an existing 401(k), the plan sponsor will withhold 20 percent of the balance and forward that to the IRS against taxes. With an IRA, you control that process, not your former employer and the IRS.

That said, if you have substantial unrealized appreciation in assets within your 401(k) (for example, employer stock), then speak with a tax advisor before blindly doing a rollover.

American IRA, LLC is a third party administration firm specializing in Self-Directed IRAs, 401(k)s, SEPs, SIMPLE IRAs and other tax advantaged accounts. Our offices are in Charlotte and Asheville, North Carolina. But we are happy to work with investors anywhere in the country who are successful, open-minded, entrepreneurially minded, or just plain interested in controlling their own retirement assets rather than delegating that vital function to Wall Street advisors.

For a free consultation or for more information, call us today at 866-7500-IRA(472), or visit us on the Web at