Self-Directed IRA

[Donald Latson]

Is the Self-Directed IRA investing world anybody's specialty?

[Justin Windham]

@Donald Latson

What can be done with a self directed IRA or 401k is almost unlimited. There are so many possibilities, that it's hard to come up with enough examples to paint a good broad picture of all your options. The main restrictions are on the people and entities with which your IRA or 401k can transact. These are "disqualified persons" and include you and many of your family members.

So while a self directed IRA or 401k can invest into real property, you wouldn't be able to direct your IRA to buy a piece of property that your father currently owns, for example. Similarly, while you could write a check out of your Solo 401k plan for a loan for someone to start up a business, you could not do so if that someone were your spouse, or your son for that matter. These "prohibited transaction" rules help to ensure there are no conflicts of interest between what is best for your retirement account and what may be best for you. As a fiduciary to your own retirement account, you're not allowed to invest those funds in your own self interest or engage in what is commonly referred to as "self dealing." The penalties for doing so are pretty stiff, so it really is best to understand the rules before transacting.

Other than that, these retirement accounts can be really powerful, flexible, relatively low cost vehicles that provide great tax benefits without keeping you locked into the stock market like traditional retirement accounts.

What did you have in mind for your investing?