Can You Use a Brokerage Account in a Self-Directed IRA?

Can You Use a Brokerage Account in a Self-Directed IRA?

When you read articles here at American IRA, it’s typically about the non-traditional retirement investments you can make when using a Self-Directed IRA. So we wouldn’t be surprised if you start to suspect that this is all a Self-Directed IRA can do: help you with a non-traditional retirement portfolio. But the world of public stocks and bonds is also important to anyone planning retirement—and the good news is, you can use a Self-Directed IRA to use a brokerage account and begin buying, selling, and trading stocks. Here’s what you’ll need to know.

The Basics of Self-Directed IRA Brokerage Investing

First of all, remember that self-direction is simply an approach to retirement investing, not a unique account type. For that reason, you can buy and sell stocks in a SEP IRA, a Roth IRA, a Traditional IRA—whatever is capable of carrying a brokerage account in any case. With Self-Direction, you’re simply the one in charge of managing the account. So yes, you can use a Self-Directed IRA to invest in a brokerage account, and it’s surprisingly easy.

What Are the Benefits of Opening a Self-Directed IRA Brokerage Account?

There are a few advantages you’ll want to track:

  • Paying less in fees. Moving funds from a Self-Directed IRA to a brokerage account within that Self-Directed IRA won’t incur wire and check fees. This means that if you want to move money around and easily trade stocks with retirement tax protections, you can do so. It’s easy to do and doesn’t require that you’ll pay fees on those expensive wire and check fees.
  • You can diversify well. We often talk about the value of diversification as a function of different types of asset classes. But that’s usually from the perspective of holding a lot of publicly traded stocks. With a Self-Directed IRA brokerage account, you can hold many of those mainstream stocks and funds to diversify your portfolio and not simply rely on returns from real estate and precious metals. It’s good to have a diverse mix of asset classes, and the public stock market is certainly an asset class that counts in that mix.
  • When you work with a Self-Directed IRA, you work with a custodian. If you use written direction with American IRA, we can potentially get funds from your brokerage account within just two days. This gives you the flexibility of moving money quickly if there’s an opportunity you need to pounce on.
  • More accessibility. If you have a brokerage account with a company that has locations nationwide, such as TD Ameritrade, you can easily work with local offices at your convenience, which makes it more accessible as a strategy for investment.

What Rules Should You Consider?

Remember that even with Self-Directed IRAs, there will be rules you have to consider as you build a retirement plan. For example, it will take approximately 5-10 business days to open your brokerage account in this case, which means that you won’t be able to take advantage of that hot meme stock quite yet.

You also can’t use options, meaning you can’t create an account that can be at risk of going below a $0 balance. This is a regulation in place that helps promote stability in retirement funds. If you want to use options, you’ll have to open a taxable brokerage account with the appropriate platform.

Also, remember that in-kind transfers are not allowed, which means if you want to convert your account, you’ll have to sell the assets first.

Want to know more about how it works? Now’s the time to reach out by calling us at 866-7500-IRA.