South Dakota Self-Directed IRA

South Dakota Self-Directed IRA

South Dakota Overview

If you can stand some frigid winters, South Dakota is a great retirement destination. Prices are still reasonable, despite the recent growth from the Oil Shale Boom. In fact, in many parts of the state, some seniors are able to live just on Social Security income. There’s no income tax, sales taxes are quite moderate, and property taxes are generally manageable.

South Dakota is business friendly, as well, which means there are opportunities not only for those looking to work in their retirement but also for younger loved ones who can work and make their careers nearby.

Despite the low tax rates (or perhaps, in part because of them), South Dakota gets high marks for financial stability. Which means the Rushmore State is less likely than other states to be forced by fiscal pressures to raise taxes in the future – though a recently discovered wealth of shale oil helps.

The combination of retirement-friendly factors earned South Dakota the top ranking in Kiplinger Magazine’s list of the best states to retire in 2018.

Golf enthusiast will find great courses at the Golf Club at Red Rock in Rapid City, Dakota Dunes Country Club, Minnehaha Country Club in Sioux Falls and Hart Ranch Golf Course in Rapid City.

The winters are long and cold, though, with average January temperatures in the 20s.

South Dakota retirees should be very aware that South Dakota’s economy, for better or for worse, will likely be closely tied to oil prices. As long as oil prices remain high enough for shale oil to be profitably extracted, South Dakota’s economy will likely perform well. If there’s a major global oil glut that sends oil prices down, South Dakota may experience some tough times.

Why a South Dakota Self-Directed IRA?

Stocks. Mutual funds. CDs. Bonds.

For years, you have heard that these are the types of investment vehicles through which to secure your retirement. The stock market tends to appreciate over the long haul, after all, and bonds are conservative and low on risk. Mutual funds have popped up in recent decades as one of the most popular investment vehicles as well, closely monitoring certain aspects of the stock market.

What most people do not know is that these are not the only investment types available for retirement.

In fact, if you choose self-direction, you will find that the IRS allows for all sorts of different types of investments in a retirement account. You can invest in gold and precious metals, real estate, private companies, and more. There are a few select limits on the sorts of investments you can make, but the good news is: you often have more legal options than you have limits.

For many people, a South Dakota Self-Directed IRA means freedom, opportunity, and self-determination. It means not being satisfied that the “market” is the only market that exists. It does not mean you have to switch away all of your old investments. But if you want to invest in real estate or gold to help ensure a secure retirement, those options are indeed open…

And, like other IRA types, South Dakota Self-Directed IRAs come with all sorts of investment protections.

Understand Your South Dakota Self-Directed IRA Plan Options

Let’s take a moment to consider the various retirement account types:

  • Traditional Self-Directed IRA: A retirement account in which you can invest pre-tax or after-tax dollars, and in which your investments grow tax-deferred, meaning you will pay taxes on them once you begin withdrawing them. When you start making retirement withdrawals–defined as withdrawals after you turn 59.5 years old–the money is treated as income.
  • Self-Directed Roth IRA: Similar to a Traditional IRA, except you make after-tax dollar contributions so you are paying taxes on the front end. This allows your investments to grow tax-free. After the account has been established for 5 years and after you turn 59.5, your withdrawals are tax and penalty-free.
  • Traditional 401(k): A qualified plan that allows employees to make pre-tax elective deferrals. Business owners who want to self-direct can use these as well and allow employees to self-direct their accounts.
  • Self-Directed SEP IRA: Simplified Employee Pension that allows employers to make contributions to the retirement of their employees. An employer can also contribute to their own retirement with a Self-Directed SEP IRA.
  • Self-Directed SIMPLE IRA: Savings Incentive Match Plan for Employees. A “tax-favored” plan that small businesses and individuals can set up for their employees.
  • Self-Directed Solo 401(k): A 401(k) plan that a self-employed individual can use for retirement that offers high contribution limits.

As noted throughout, these same accounts offer a high degree of self-direction if you want to direct your own accounts.

A Variety of Investments

One of the chief benefits of directing your own retirement account is that you get to choose your investments from a wide range of options:

  • Real estate: Apartment buildings, commercial property, retail space, raw land, etc. If you want to earn an immediate income for your retirement account with your investments, rent can be one of the most powerful ways to ensure that. You can also use leverage in a South Dakota Self-Directed Real Estate IRA when using non-recourse loans.
  • Private IRA Lending: You can negotiate the terms, interest rate, and length of the loan, as well as other variables like the monthly payment amounts and whether the loan is secured or unsecured.
  • Private companies: Public stocks are what most people think of as “investments,” but there are also private stocks to consider. There is a lot of opportunity for growth in private company stock, but also plenty of risk to consider.
  • Tax liens: With a high rate of return, these investment types are ideal for self-directing investors with smaller accounts.
  • Precious metals: Gold, silver, platinum, palladium. These metals are famous as a “hedge” against economic downturn, which is why many people turn to them as a way to avoid putting all of their eggs in the stock market basket.
  • Single Member LLC: An investor can create an LLC to be owned by their South Dakota Self-Directed IRA, managing it themselves. This gives a significant degree of protection; however, you will likely want to consult with a professional to learn how to do this properly.

What You Can’t Do with a South Dakota Self-Directed IRA

As fun as it is to talk about the various options you can have with a self-directed retirement account, it should be noted that there are certain limits, as well. You cannot self-direct a retirement account to invest in life insurance, collectibles like art, gems/jewelry, coins, alcoholic beverages, and tangible personal property. As enticing as it might be to put that wine cellar under a Self-Directed IRA protection, it’s simply prohibited–so look for your protected retirement investments elsewhere.

Who You Cannot Do Business With

A disqualified person is anyone the Self-Directed IRA has decided is not “arm’s length” from the IRA.  Your IRA cannot engage in any transactions with these individuals or you risk the tax-status of your IRA.

A Disqualified Person is:

  • You
  • Your spouse
  • Any of your lineal ascendants or descendants (parents, children, grandchildren, and the spouses of children, grandchildren, etc. – including legally adopted children).
  • Any investment providers or fiduciaries of the IRA.
  • Any entity (a corporation, LLC, trust, etc.) where a disqualified person owns more than 50%.
  • Any entity (like previously listed) where the IRA account holder is an officer, director, a 10% or more shareholder, or a highly compensated employee.

 Getting Started with American IRA

Although we have thrown a lot of abbreviations and words at you, you should know that self-directing your retirement is not as complicated as it might sound. The steps are very simple:

  • Open a South Dakota Self-Directed IRA with American IRA. Make sure to put thought into the type of account you would like to open; review the options available to you and select the one that makes the most sense for your individual situation.
  • Fund your account. This is where the options can throw people off. Let’s take a look at them quickly:
    • Contribution: Simply putting money into the account throughout the year. This is what a lot of the funding will look like once the account is already opened.
    • Conversion: Withdrawing part or all of the cash/assets from a Traditional IRA and putting them into a Roth IRA is called a conversion. Once the cash/assets are distributed, you have 60 days to put them in the Roth IRA account.
    • Rollover: A tax-free distribution of cash/assets from one account to be put in another retirement account. You are permitted one rollover per year.
    • Transfer: Transferring cash/assets directly from one retirement account to another retirement account. Because you do not take direct possession of the cash/assets, you are allowed unlimited transfers and there is no tax.

How it Works

1.)  Open an American IRA Self-Directed IRA

  • Select the type of account that you would like to open.

2.)  Fund Your Account

  • Move money into your account by transfer, rollover or contribution.

3.)  Select an Investment

  • Find an asset you want your IRA to purchase and submit an Investment Form. American IRA will work with you and your professionals for a smooth closing.

4.)  Review the Instructions

  • Visit the “How it Works” page on our website to review the instructions for the asset you want to purchase and submit the paperwork required for the investment you have chosen.

5.)  Provide Payment Authorization

  • Submit Payment Authorization Forms for expenses that pertain to the asset your IRA has purchased.

6.)  Submit Deposit Coupons

  • Deposit income generated from the asset your IRA purchased by submitting a Deposit Coupon along with the funds.

Tax and Financial Considerations for South Dakota Self-Directed IRA Owners

The overall cost of living in South Dakota is relatively low, according to Sperling’s Best Places – about 5 percent below the national average. As of April 2019, the median home price in South Dakota was $185,300, compared to $219,700 elsewhere in the country. That’s lower than the average home price in neighboring North Dakota, which is over $205,000, according to data from Sperling’s.

Groceries are about 7 percent more expensive than the rest of the country, on average, also according to Sperlings data.

State income taxes on South Dakota Self-Directed IRA Income

South Dakota is one of a handful of states with no income tax. All forms of retirement income are free of income tax at the state level – though they will still be subject to federal income tax.

South Dakota sales taxes

South Dakota has a state sales tax of 4.5%. Local governments may add up to 2% on top of that, so the top sales tax in South Dakota is 6.5% for general items. Prescription drugs are exempt. There’s a sales tax refund available to low-income residents age 66 and older.

South Dakota Self-Directed Real Estate IRAs

South Dakota property taxes are somewhat on the high side, with an average effective property tax rate of 1.32%, according to but these high tax rates are largely offset by the generally low cost of housing in the state. So housing is generally affordable in South Dakota, even with the high property tax.

Real estate investors should take care to ensure you charge enough rent to cover the property tax, as well as the cost of winterizing and insulating properties in South Dakota.

The highest property taxes are in Bennett County, with an effective property tax of 2.17%. The lowest property taxes in South Dakota are in Faulk County (0.85%), Hand County (0.96%) and Sully County (0.96%).

South Dakota has a number of property tax deferral and mitigation programs available to qualifying senior citizens, disabled veterans, paraplegics and others.

The South Dakota Freeze on Assessments Program prevents the homeowner’s property from increasing in value, for tax purposes. This means that if the value of the home goes up, the homeowner will pay tax on the old lower value. Details, including the income and property value eligibility limits, are available here.

There’s also a property tax exemption available to disabled veterans. This program exempts $100,000 of the full and true value of the dwelling, or portion thereof, from property taxes.

After application is made and the property qualifies for the exemption, no further applications are needed. The property will continue to receive the $100,000 exemption until the property is sold or there is a change in use.

To be eligible for the exemption, you must meet all of these criteria:

  • The property must be owned and occupied by a disabled veteran or unremarried surviving spouse.
  • The property must be classified as owner occupied.
  • The veteran must be rated as permanently and totally disabled as the result of a service-connected disability.

Details here.

South Dakota Estate and Inheritance Taxes

South Dakota has no tax on inheritances and currently no estate tax.

Other South Dakota Taxes

As of 2019, There’s a gasoline tax of 48.40 cents per gallon on gasoline and 54.4 cents per gallon on diesel fuel.

South Dakota has a cigarette tax of 1.53 cents per pack of 20, and a tax on alcoholic beverages of 6%.

Benefits of Retiring in South Dakota

If you’re interested in seeking retirement in South Dakota, or if you simply want to think about it as a long-term option, you might consider a Self-Directed IRA. A South Dakota Self-Directed IRA will allow you to handle plenty of different investments under your own control—all while enjoying the tax protections of retirement accounts.

Are you interested in retiring in South Dakota? Want to learn more about how to take advantage of all of the retirement capabilities you have? Then it’s time to think about a Self-Directed IRA. Continue browsing this website to learn more about a South Dakota Self-Directed IRA or contact us at 828-257-4949 to learn more about how you can secure a retirement for yourself.

About American IRA, LLC

American IRA, LLC is one of the leading third-party administrators for self-directed retirement accounts in the United States.  The custodian New Vision Trust Company is a South Dakota regulated trust company.   Founder and president Jim Hitt has been investing his own personal assets in Self-Directed IRAs, including Self-Directed Real Estate IRAs, for more than 35 years, and has helped thousands of others declare independence from Wall Street investment companies with their high fees and limited investment menus and become successful Self-Directed IRA investors.

American IRA has offices in Asheville and Charlotte, North Carolina, and Atlanta, GA, but we serve investors from all over the United States and even expats who want to realize the benefits of self-directed retirement investing techniques in South Dakota Self-Directed IRAs, Self-Directed Roth IRAs, Self-Directed SEP IRAs, Self-Directed SIMPLE IRAs and even Self-Directed CESAs and Self-Directed HSAs.

An South Dakota Self-Directed IRA with American IRA, LLC can help you achieve greater diversification by making it easier to invest in alternative asset classes not commonly available from large investment companies. Self-Directed IRAs also allow you to take more direct control of your retirement assets, while minimizing exposure to needlessly high expense ratios, commissions, wrap fees, 12-b-1 fees and AUM fees commonly charged by Wall Street investment companies. Our much more efficient flat-fee, menu-based fee schedule frequently allows investors to save thousands in fees each year – particularly with larger accounts and buy-and-hold investors.

With an South Dakota Self-Directed IRA from American IRA, LLC, you can quickly and easily invest in alternative asset classes like direct real estate ownership, tax liens and certificates, mortgage lending, precious metals, and much more.

To get started, click here to open an account, or call American IRA today at 866-7500-IRA(472).

For other easy South Dakota Self-Directed IRA solutions, talk to our valued partner TurnKey IRA.