When you choose a self-directed IRA with checkbook IRA services, you enjoy an affordable, flexible and convenient way to direct yourretirement money for future prosperity. A checkbook IRA plan gives you control, which appeals to aggressive and conservative investors who want more choices. Many taxpayers do not realize that the Internal Revenue Service permits people to invest in everything from precious metals and real estate to franchises and tax liens. As long as you have earned income, you qualify. Many people take their old 401(k) plans and roll them into a self-directed IRA. By using checkbook control services with a self-directed IRA, you cut the ongoing transaction fees imposed by your 401(k) plan administrator. A self-directed IRA means you serve as the sole trustee.
The IRS prohibits certain transactions
One of the first things to do is familiarize yourself with the prohibited transactions laid out by the IRS. To avoid severe tax consequences, follow the guidelines and avoid jeopardizing the tax-deferred nature of your self-directed IRA. Experts point out the IRA rules are actually quite clear and simple. For example, the basic rules include not investing in life insurance contracts, not pledging an IRA as a security for a loan, not investing in certain collectibles and not performing a prohibited transaction. To be clear, prohibited transactions include selling or leasing a property to a disqualified person such as yourself or a close relative. When you buy a rental property with a self-directed IRA, you don’t use it as a vacation property or allow relatives to rent from you. If you do decide to use it for your own benefit, the IRS considers it a distribution, which could trigger tax penalties. If you think you would like to eventually use your investments for personal use, consider setting up a Roth self-directed IRA.
The self-directed Roth offers advantages
Without a doubt there are advantages of a self-directed Roth versus a traditional account. With a Roth, you fund the retirement account with post-tax dollars so you don’t owe taxes when you take the money out or decide to move into a rental home you bought using checkbook IRA services. It’s nice to know you can withdraw your contributions to a Roth. Unlike with a traditional retirement account, you don’t need to take distributions by a certain age. As long as your modified adjusted gross income falls within the appropriate guidelines and you had earned income, a Roth account could help your financial situation.
Gain an edge with real estate investing
When it comes to investing in real estate, having checkbook IRA services gives you an edge in many situations. For example, if you want to invest in a foreclosure, you often need to quickly gather funds together. You can place a bid on a real estate property more easily when you have a self-directed IRA with checkbook control. With the rental market exploding across the country, it’s a great time to receive rental income. Of course, with a self-directed checkbook IRA, you still need to keep several issues in mind. Your self-directed IRA holds the title to the rental property. You pay all expenses such as property management fees and maintenance through the checkbook IRA. Also, yourrental income flows back into your self-directed IRA because it is a retirement account.
Invest in what you understand
Another important thing to know about a self-directed IRA is your ability to diversify your portfolio with investments you understand. Savvy investors invest in what they understand by choosing alternative investments. Some of the investments that resonate with people include mortgages, private hedge funds, commercial real estate, land, precious metals and limited partnerships. But if you know a lot about a particular investment such as a franchise or alpaca farm, you can capitalize on your knowledge with a self-directed IRA.
At New Standard IRA, we help set up retirement accounts that are truly self-directed. For more information on checkbook IRA services, please contact us.