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Self-Directed IRA

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What is a Self-Directed IRA?

Congress first authorized the IRA, or “Individual Retirement Arrangement,” as part of the landmark Employment Retirement Income Security Act of 1974. Congress had taken notice that many Americans were not covered by traditional workplace pensions, and so they created the IRA to help encourage Americans to save for their own financial security in their retirement.


The Self-Directed IRA was also authorized by Congress in 1974. A Self-Directed IRA is the same as a Traditional IRA. It is just set up to hold some non-traditional assets, like real estate, farms and ranches, closely-held businesses including partnerships and LLCs, cryptocurrencies and tokens, venture capital investments, hedge funds, private placements, private lending, equipment leasing, and a wide variety of other assets. These nontraditional types of investments are called alternative asset classes.


With a New Vision Trust Company self-directed retirement account, you have the freedom to decide what to invest in.  American IRA serves as a Third-Party Administrator (TPA) providing educational and administrative services on behalf of the Custodian, New Vision Trust Company.  We work with you and your professionals to maximize the tax-deferred and tax-free potential of your retirement account.

Understand Your Self-Directed IRA Plan Options

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


Traditional 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.


Roth IRA: Similar to a Traditional IRA, except you make after-tax dollar contributions so you’re 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 or after tax Roth deferrals. Traditional 401(k)s can be used to self-direct into alternative assets as well as securities.


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.


Solo 401(k): A 401(k) plan that a self-employed individual, with no employees can use for retirement that offers high contribution limits.  The option is available to borrow from a Solo 401(k) plan.


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 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 Self-Directed IRA, managing it themselves. Sometimes called a Checkbook IRA. 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 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 an 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 IRS 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 New Vision Trust Company

Although we have thrown a lot of abbreviations and words at you, you should know that self-directing your retirement is extremely easy.  The steps are very simple:


Open a Self-Directed IRA with New Vision Trust Company. 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.  American IRA the TPA for New Vision Trust Company will be the administrator for the self-directed accounts.

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.

Select your investment. Direct us in writing utilizing the appropriate form on our website or contact our office and we will be happy to assist you through the process.

For more information about Self-Directed IRAs, please click here.