Is a Self-directed IRA Safe?
All un-invested cash in your self-directed IRA is FDIC insured.
As a note, FDIC insurance only covers cash balances, not assets. All credit card transactions are safe — American IRA is certified by SecurityMetrics. All accounting is processed through a top-rated trust accounting system. We maintain professional insurance coverage, including a crime shield policy and an errors and omissions policy.
Asset Vesting with Your Self-directed IRA
All assets are vested in the client’s name at the time of purchase. American IRA, LLC for the Benefit of Client’s Name IRA.
Investing with Your Self-directed IRA
Investing within a self-directed IRA is completely within the investor’s control. Is it safe? Yes, to the extent that the investor controls it. Here’s something that’s overlooked many times when we’re talking about safety between the securities industry, and let’s say in this case we’re talking about the real estate industry. Each investment has its own characteristics as to safety.
In the real estate investment arena, take a look at this example – $100,000 investment in 2000 inside a self-directed IRA in a single-family home. In 2013, the value doesn’t matter. The investor’s not selling the property. It may have gone up and it may have gone down.
Here’s an absolute certainty. It had 12 years’ worth of rental income so far and it’s still free and clear, versus investing in securities, which are absolutely out of your control, out of the investor’s control completely or anybody else’s control for that matter.
With $100,000 invested in 2000 in Washington Mutual Bank, the 2013 value is zero. Washington Mutual Bank was the biggest bank in the country when it failed in the early 2000’s. There is no guarantee in the securities industry any more than there is in the self-directed industry, but at least in the self-directed industry you have a way of controlling your risk by investing in what you know and understand, and you can do your own due diligence.
Types of Investment Accounts within a Self-directed IRA
Here are the types of investment accounts that you can utilize. It’s not just an IRA.
- The Self-DirectedTraditional IRA, which is the one you’d be familiar with, which allows for you to make a tax deductible contribution.
- The Self-Directed ROTH IRA on the far right is the one that you hear a lot about, which is the account that is absolutely tax free when the profits come out at the end. However, you do not get a deduction when you make the contribution.
- A Spousal IRA can be either a traditional or a ROTH. The way that works is that if you’re under 50, you’re only allowed to put away $5,000 a year. If you have a nonworking spouse, they’re also eligible for an IRA, either a traditional or a ROTH, and they too can put away the same $5,000.
- Another type of account is an employer based plan, which is a SEP IRA. If you’re self-employed, we provide servicing for SEP IRA Plans – Simplified Employee Pension plans – which is an employer funded plan. We also provide services for the simple, which is an employee funded plan with a contribution from the employer.
- The Self-Directed 401(k), which is a plan that’s for people who are self-employed – a sole proprietor, LLC or corporation – and for people who don’t have any common law employees, meaning that they don’t have anybody that’s on W-2 for greater than 1,000 hours a year. It can be a husband and wife that are in a business. It could be a couple of partners. The Solo 401k, provided you qualify for it, basically is a self-directed account on steroids. It gives you so many features and opportunities that are absolutely incredible.
- A Coverdell Education Savings Account is an account that you can put away for anybody. Typically it’s grandchildren or children. That too can be self-directed.
- You can put money away in a Health Savings Account, and that works in many ways like a ROTH. You put the money in there, except you get a deduction. You can pay your medical expenses out of it, and it comes out absolutely tax free and you pay the medical expenses. It’s a great tool.
The Sky’s the Limit!
With the multitude of investment accounts available and the wealth of investment types allowed within those accounts, the sky really is the limit when it comes to what you can do with your self-directed retirement account.
For more information, or to explore your options, call American IRA today at 866-7500-IRA (472). We look forward to working with you.