self directed IRA Archives - Innovative Advisory Group

28 Smart Questions to Ask Your Self Directed IRA Custodian

Self Directed IRA / By Kirk Chisholm / 04/11/2022

Are you looking for a new self-directed IRA custodian or administrator? Perhaps you are already using one and are not happy with their performance or service. Whatever your reason may be, this report should provide you with a better understanding of self-directed IRA custodians and help you assess which one is the best fit for your investment needs.

The process of choosing a self-directed IRA custodian can be challenging. There are a lot of things to consider, the financial industry jargon can be confusing, and it is hard to find unbiased information. In order to make things easier for you, let’s start off by defining…

5 Common IRA Prohibited Transactions That Could Tax You

Self Directed IRA / By Kirk Chisholm / 04/04/2022

If you are like most investors, you probably have not heard of prohibited transactions. Prohibited transactions specifically apply to retirement plans such as self-directed IRAs or 401ks. It is estimated that less than 80% of investors fully understand the flexibility that a self-directed IRA offers, so most IRA account holders won’t have reason to come into contact with this rule. If you do use your retirement plan to invest in alternative investments, then please keep reading.

What is a prohibited transaction?

A prohibited transaction can be described as an improper use of your IRA account assets by a disqualified person. The term prohibited transaction in this case applies to retirement plans such as a self-directed IRA, or 401(k) The IRS defines a prohibited transaction as:

The $100 Million Dollar Mitt Romney IRA – How You Can Use These Strategies to Build One Yourself

Self Directed IRA / By Kirk Chisholm / 04/28/2021

The Big IRA and the recent Government Accountability Office report

In 2012, during the presidential election campaign between Barack Obama and Mitt Romney, the issue was raised about Mitt Romney’s over-sized IRA. At one point the IRA is reported to have had as much as $102,000,000 in it. Yes, you read that correctly.

Mitt Romney’s IRA was worth $102,000,000.

Even compared to his reported $250 million net worth, this is a sizable chunk of capital to have accrued in his IRA given his approximate 40 years of working experience. How did he do it?

The recent Government Accountability Office report

In October 2014, the U.S. Government Accountability Office (GAO) released a report, “Individual Retirement Accounts – IRS could bolster enforcement on multi-million dollar accounts, but more direction from congress is needed”. According to the GAO, they found that there were 314 taxpayer IRAs which had an account balance of over $25,000,000 and 791 taxpayers with balances between $10,000,000 and $25,000,000. That is a total of 1105 people who have been great investors, extremely lucky, or both. Either way, they have found a way to capitalize on the tax benefits of a Traditional IRA or Roth IRA by growing their capital in a tax-deferred or tax-free manner.

While it may not be easy to accumulate over $100 million in your IRA, you can still use the same strategies that Mitt Romney used to accumulate a sizable IRA account balance.

The Real Estate Investor’s Guide: Using a Self Directed IRA to Buy Real Estate

Alternative Investments, Real Estate, Self Directed IRA / By Kirk Chisholm / 12/27/2018

“Every nickel I make gets put back into real estate.”

This is what an investor told me my first week of working on Wall Street. At the time I didn’t understand it, but this quote epitomizes the mind of the typical real estate investor. All they know is real estate, all they trust is real estate, and they are not remotely interested in any other type of investment.

I get it. Real estate is a very attractive asset class. I discussed some of the reasons for this here, These Top 7 Powerful Tools Can Create Legacy Wealth from Real Estate, and Inflation – The Secret to Building Wealth in Real Estate. Real Estate is unique in a number of ways. One of which is the ability to use massive amounts of leverage. When leverage is paired with inflation, you have a powerful combination.

As great of an asset class as real estate is, many real estate investors still come up frustrated.

While real estate investors may choose to invest every nickel they have into real estate, they are reluctantly forced to invest their retirement accounts into stocks, bonds, and mutual funds. Some investors are so turned off by non-real estate investments, they choose to not contribute to their IRAs or 401ks at all. This is mainly due to the “inadequacies” (in their mind) of the other available investments.

If they only knew the truth…

So rather than saving for their retirement in a tax-deferred or tax-free account, and potentially getting the significant tax deductions, they choose to ignore the retirement account option completely. Until now…

The Big List of Alternative Investments – 75 Investments That Can Help You Invest Outside The Stock Market

Alternative Investments / By Kirk Chisholm / 10/06/2015

A few weeks ago I wrote about 10 alternative investments that you have never heard of. I got so much positive response from it, that I decided to add to it by creating the Big List of 75 Alternative Investments so investors could have more options to diversify their portfolio. This is available as a special report here.

In 2008, many people lost money by investing in the stock markets around the world. There was a cascade of events that caused people to flee the markets in favor of cash, safe bonds and other assets such as gold.

More than 7 years later, this fear has stayed in many investors’ psyche due to the massive losses that they took on their stock portfolios during that difficult period of time. It is hard to forget such a traumatic experience. Some investors were only a few years from retirement and they lost 50% of their money. What if the stock market had not come back so sharply? Worse yet, what if the investors sold at the bottom and stayed in cash?

More importantly, how could this have been avoided?

10 self directed IRA tips to help real estate investors maximize profits

Real Estate, Self Directed IRA / By Kirk Chisholm / 07/30/2015

“Self Directed IRAs are one of the best laws the US government has ever passed”

Can I invest in real estate with my Self-Directed IRA?

“Self Directed IRAs are one of the best laws the US government has ever passed”, an investor once told me. It is hard to argue that point. In 1974, congress passed the Employee Retirement Income Security Act, often referred to as ERISA, enabling US taxpayers to save money for their retirement in a tax deferred manner. The best part of this program (outside of the tax deferred nature of it) is that they allow you to self-direct your savings.

ERISA established the individual retirement account (IRA) as a staple in many investors toolbox for retirement savings. The IRA allows investors to invest in virtually any investment. While most investors think that they are restricted to stocks, bonds, and mutual funds, the choices are much more interesting. Some ideas that I have seen include: real estate, tax liens, private mortgages, dressage horses, farmland, sports franchises, timberland, physical gold and silver, raw land, private company stock, oil & gas LPs, franchises, and more. With all of these choices and more, you should have already come up with some ideas that could make for interesting investments.

Real estate and real estate related investments is definitely the most common asset type when it comes to self directed IRAs. Whether you are a professional investor or a novice, you probably have at least a basic understanding of how real estate works. Here are 10 self directed IRA tips for investors who want to invest in real estate with the IRA.

How Self Directed IRAs Can Help Protect You From Stock Market Crashes and Halted Trading on Exchanges

Self Directed IRA / By Kirk Chisholm / 07/09/2015

I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years. – Warren Buffett

If you were paying attention yesterday, then you probably heard that the New York Stock Exchange (NYSE) halted trading for 3.5 hours and Chinese stock market continue to crash. So much for Wall Street having a lazy summer.

Should you worry about these events?

Yes… and No.

As of today you should not have much to worry about… unless you have money in Greek banks, then you are allowed to sweat. While you may not have much to worry about today, what if these events were more pronounced? What if they impacted your investments in a more direct way? What if the Greek crisis causes stock markets to crash. What if the stock market closed and didn’t reopen for 5 years? Would you be happy with your investments?

Warren Buffett has made a statement in the past that investors should invest as if the stock market would be shut down and not reopen for the next 5 years. What companies would you want to hold in this scenario? Would you want to hold stocks at all?

Lets take that concept a step further. Do you have 100% of your retirement funds in mutual funds, stocks, or bonds? If so, then why? Is it because you want to invest in the stock market? Or is it because you are not aware that you can invest outside the stock market? If it is the later, then you are in good company. More than 80% of the investing public is not aware that they can invest their IRA outside the stock market. Less than 10% is actually investing in alternative investments with their self-directed IRA or self-directed 401k.

Are traditional investments better than alternative investments…

Worried About Fraud with your Self Directed IRA? SEC says, Ask a Financial Advisor

Self Directed IRA / By Kirk Chisholm / 01/14/2015

In their September 2011 Investor Alert, Self Directed IRAs and the risk of fraud , the SEC outlined typical fraud risks when using a self directed IRA.

If you are worried about the risks of fraud when using a self directed IRA, then do as the SEC recommends in their Fraud Alert, “Ask a professional”.

The top three fraud risks with self directed IRAs that they focus on are:

Misrepresentations regarding custodial responsibilities
Exploitation of tax-deferred account characteristics
Lack of information for alternative investments

While these may be common fraud risks that the SEC sees with their enforcement efforts, the risks attributable to alternative investments inside self directed IRAs expand beyond just fraud risks. There are other risks which are important to consider when using a self directed IRA. Investors should also consider:

8 Common Mistakes Using a Self Directed IRA

Self Directed IRA / By Kirk Chisholm / 09/18/2014

I decided to write this post because over the years while working with clients, I have come across the same mistakes over and over again. Some of these mistakes are from a misinterpretation of the rules, some are through a lack of knowledge in certain areas, and the most common one being unaware of the capability to invest in alternative investments inside a self directed IRA. While most of the rules are easy to find, unfortunately they don’t all appear in one place. I wrote this post to help address these common mistakes using a self directed IRA.

What is a self directed IRA?

I want to define “self directed IRA” for people who are unaware of the definition. A self directed IRA is an account with preferential tax treatment, which is capable of investing in alternative investments. These alternative investments could be assets such as real estate, tax liens, private mortgages, gold & silver, horses, livestock, farmland, medical equipment, and more. While a self directed IRA can invest in traditional assets such as stock, bonds and mutual funds, it is typically used to invest in alternative investments. For further information about what a self directed IRA is, please read the following post about self-directed retirement accounts

My Story: How I Learned About Self Directed IRAs

Self Directed IRA / By Kirk Chisholm / 09/15/2014

Self Directed IRAs are not a widely known or understood area in the investment community. The term is typically used to describe what an IRA is, an Individual Retirement Account, which is self directed by the account owner. Most people know that this type of account can be used to invest in stocks bonds and mutual funds. What is not widely known is that this type of account can also be used to invest in real estate, tax liens, private mortgages, private businesses, medical equipment, horses, gold and silver coins, and more.

Most people who know me have been aware of my interest in investing in alternative assets with a self directed IRA for many years. What they may not be aware of is…

What is a Self Directed Retirement Account (SDRA)?

Self Directed IRA / By Kirk Chisholm / 08/21/2014

The Self Directed Retirement Account (SDRA)

A Self Directed Retirement Account, or SDRA, is a term used to describe a defined contribution plan, or rather a retirement account which is able to be invested in any investment, both traditional and alternative investments, at the discretion of the account owner. All of these retirement accounts have preferential tax treatment for the individual. While not all retirement plans or accounts are self directed, these are examples of some that are:

Self directed IRA
Self directed Roth IRA
Self directed SEP IRA
Self directed SIMPLE IRA
Self directed Beneficiary IRA
Self-directed Solo 401(k) (or Solo K)
Self-directed 401k

Although each of these account types is defined in the Internal Revenue Code (IRC) as a type of retirement account, the IRC rules applicable to each are different. It is important to note that there is no term in the Internal Revenue Code (IRC) which is defined as “self-directed”. All retirement accounts listed above are self directed by their nature according to the IRC.

How do I know if my retirement account is self directed?

Retirement accounts can be separated into 2 categories: Defined Contribution, and Defined Benefit. An example of a defined benefit retirement plan would be a pension plan

self directed IRA