Setting up a Self-Directed IRA? You Really Need to Know These 5 Things

Posted On May 23, 2018

One of the pieces of research we cite the most is the lack of Baby Boomer retirement savings, especially in the younger half of the Boomers. This lack of savings has many implications from their longevity in the workplace to Gen X’s inability to get promoted. 

Today I’m posting a guest blog from Rick Pendykoski about a self-directed IRA – a type of retirement savings tool. If you’re a Boomer and haven’t begun retirement savings, maybe this is the right one for you.


If you are setting up a self-directed IRA to expand your financial portfolio beyond stocks and bonds, then here are 5 important things that you need to keep in mind before you get started:

  1. What is a Self-Directed IRA?

A self-directed IRA can be a simple, traditional, Roth, or an Inherited IRA where the custodian allows the IRA to be invested in a wide range of assets including real estate, precious metals, private company stocks or promissory notes as permitted by the law. It is a great wealth creation tool because all your returns grow tax-free for life and it also provides large tax deductions over and above estate planning benefits and asset protection.

  1. What Can You Use Your Self-directed IRA to Invest in?

Under the current law, self-directed IRA investments include precious metals like gold and silver, rental real estate, LLC     interest, SME stocks, trust deed lending and secured loans to others.

  1. Can I Use My Self-directed IRA to Invest in my own Company or Business Deal?

The transaction rules prohibit you from using your self-directed IRA to invest in a company you own or in a personal deal. You would also violate the prohibited transaction rules governing a self-directed IRA if it benefits a disqualified person which includes the IRA owner, the owner’s parents, spouse, children and spouses of children.

  1. How Does a Self-Directed IRA Give You Checkbook Control?

Wondering what self directed IRA with checkbook controlis? In simple terms, checkbook control enables the account holder to exercise complete control over investment decisions by eliminating the need for a third-party administrator which is both time-consuming and expensive. A self-directed IRA with checkbook control brings you the ability to make investment decisions immediately, write a check and add assets in an instant.

You can handle your retirement reserve your way when you have a self-directed IRA with checkbook control and also enjoy tax breaks while keeping your assets protected from creditors. It is an absolute win-win with almost unlimited investment options to maximize your returns.

  1. Self-Directed IRA vs Solo 401(k) – What’s Better for Your Retirement?

A solo 401(k) makes perfect sense for someone who is self-employed with no employees other than the business owners and spouses. But, if you are not self-employed, then investing in a solo 401(k) is not advisable. A self-directed IRA is a better alternative if you have a retirement reserve with enough funds in your retirement account so they can be rolled over and invested using a self-directed IRA.

Another factor that needs to be considered when deciding between a self-directed IRA and a 401(k) is debt on real estate investments. If the account owner is self-employed and there is debt involved, it is recommended to choose a solo 401(k) because it is exempted from UDFI tax. Otherwise, you can choose to go with a self-directed IRA that compounds over time to create lasting wealth, protects your hard-earned assets from creditors and creates a legacy for future generations.

At the end of the day, whether you choose to go with a solo 401(k) or a self-directed IRA with checkbook control, both the options will come with their own share of risks and rewards.


Author Bio:

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, email him at rick@sdretirementplans.comor visit

Categories: Financial Services, Retirement