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Self-Directed IRA LLC: How to know it’s right for you

You can use a Self-Directed IRA LLC to diversify your retirement portfolio, especially when you want to invest in assets not included in traditional IRA.



A Self-Directed IRA LLC could be exactly what you need if you want to diversify your retirement portfolio, especially for asset classes not included in traditional IRA investing.

This is a good option to consider if you want:

1. Tax-deferred growth

One of the biggest advantages of traditional IRAs is that your gains are tax-free until you make a withdrawal. You get the same benefit with a Self-Directed IRA LLC. Taxes will be deferred on any income or returns from investments through the account, and only distributions are liable for tax.

2. More investment choices

Traditional or Roth IRA funds are usually invested in stocks, bonds and mutual funds. Unlike traditional investment vehicles, a Self-Directed IRA LLC allows you to choose from a wider range of asset classes. You can use a self-directed IRA to invest in real estate, precious metals, tax liens or even an unrelated business.

3. Portfolio diversification

Choosing different types of investments is the best way to secure your retirement accounts, and a Self-Directed IRA LLC allows you to do that more effectively. With a larger variety of asset classes to pick from, you can allocate funds to IRA real estate, alternative investments and more.

4. Greater access to funds

If you want to access traditional IRA accounts for an investment, you have to wait for the IRA custodian to approve your request. With time-sensitive investment opportunities, any delay in this process could mean losing out. However, a Self-Directed IRA LLC offers you complete control.

5. Convenience and efficiency

You can make investment decisions faster and more efficiently with a Self-Directed IRA LLC. For instance, if you’re thinking of investing in real estate with your IRA funds, all you need to do is set up an electronic balance transfer or write a check from the IRA associated bank account.

6. Limited liability protection

Your investments are protected from attack with a Self-Directed IRA LLC, since your liability is limited. For instance, if you invest in IRA real estate, the IRA assets held outside the LLC are shielded against claims resulting from design or construction defects in your real estate investment.

7. Protection against creditors

If you’re filing for personal bankruptcy, your Self-Directed IRA LLC will shield up to $1 million of your IRA assets. Your Self-Directed IRA LLC investments will also be protected against creditor attack outside of bankruptcy in most states, so you can safeguard your retirement.


A self-directed IRA LLC is ideal when investing in real estate, tax liens or other time-bound opportunities. (Photo by DepositPhotos)

Factors before choosing a Self-Directed IRA LLC

These three factors will help you decide if a Self-Directed IRA LLC is a good fit:

1. Types of investments

If you’re planning to purchase real estate, tax liens or other time-bound investment opportunities, a Self-Directed IRA LLC is ideal. For long-term passive investments such as precious metals, a self-directed IRA may be better.

2. Transaction frequency

If you will often be making investments or transactions for active assets such as auctions or hard money loans, a Self-Directed IRA LLC will help you save money on transaction costs, review fees, and other expenses.

3. Account setup costs

Setup and transaction costs depend upon the self-directed IRA custodian handling the account. Remember, in addition to custodian fees and setup costs, you may also be charged for storage, insurance or wire fees.

If you aren’t sure whether a Self-Directed IRA LLC is the right way to meet your retirement goals or want to know about tax compliance, prohibited transaction types and other IRS rules, consult a financial advisor or tax professional.

(Featured image by DepositPhotos)

DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.

Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning, and over the last 10 years has turned his focus to self-directed accounts and alternative investments. Rick regularly posts helpful tips and articles on his blog at SD Retirement as well as, SAP, MoneyForLunch, Biggerpocket, SocialMediaToday, and NuWireInvestor. If you need help and guidance with traditional or alternative investments, get in touch with Rick.