Questions About A Self Directed Ira

Naturally the first question should be, "What is a Self Directed IRA

?" A Self Directed IRA is the same as a regular IRA except that you have control of how it is invested. A truly Self Directed IRA lets you invest your IRA money where you want to.

"Is this legal?" is the question that follows. When Congress passed ERISA as part of the Securities Act in 1975, it brought about banks and brokerage houses marketing IRA and 401K plans. They pushed what they wanted to sell: stocks, bonds and mutual funds.

There was nothing in the IRS code that stated you could only invest with a brokerage house (or bank), or that you could only invest in stocks, bonds and mutual funds, but that is what the population came to believe. Banks and brokerage houses want you to invest in those, because that is how they make money. They don't want you to know you can invest in other things as well.

Following the stock market crash and the corporate scandals and corruption, frustrated investors have begun to look for alternative investments. They want to be in control of their own investments. Many want tangible investments such as real estate.

When they asked about other options, they were often told it couldn't be done. Although this isn't true, since their brokers can't make these other investments, they wouldn't allow it. Brokers would suffer financial losses if their clients made such a move.

The next question is, "What can my IRA invest in?" An easier question would be, "What can't my IRA invest in?" There are very strict regulations on an IRA that must be followed. The IRS doesn't give a list of what you can invest in, they tell you what you cannot invest in: life insurance contracts and collectibles.

That being said, here are some examples of things you could consider investing your IRA in: residential or commercial real estate, raw land, trust deeds/mortgages, private notes and loans, and private stocks. You could also consider: Limited Liability companies (LLC), Limited Partnerships (LPs), and tax certificates. Then of course there is the traditional stocks, bonds, mutual funds, annuities, and currency; and futures, options, receivables, and commercial paper.

"What is ERISA?" ERISA stands for the Employee Retirement Income Security Act. This act passed the responsibility for an employee's retirement plan from the employer to the employee. The only two investments prohibited are life insurance contracts and collectibles.

by: John Coktostin

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