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Non-Traditional IRA Custodians Offer You Freedom to Choose Your IRA Investments Directly

Non-Traditional IRA Custodians Offer You Freedom Of Choice

Non-Traditional IRA Custodians Allow You to Invest Your IRA Your Way Without The Interference or Limitations of a Brokerage House

Did you know that if you have an IRA account, you have the freedom to choose your investments?

This is no less true even if you have your IRA at a brokerage like Charles Schwab or TD Ameritrade. Since these brokerages earn a commission when you trade with them, many custodial brokerages prefer you invest in their fishpond of stocks, bonds, and mutual funds. However, you have the right to direct your own investments, even when your IRA is held by a traditional brokerage. Too few IRA holders know that!

You may be left wondering why you haven’t heard about this feature before? And, that is a fair question. Here are some proposed reasons…

1. Most people with an IRA account are just not aware and have not been educated about IRAs.

2. Large brokerage houses spend a lot on marketing the investments they sell – and for better or worse it flat out works.

3. Most financial advisors are captive and are only trained to sell financial products for these brokerages and it is not in their best interest to tell you about all of your options available under the law.

4. Some financial advisors think it is illegal and may have never thoroughly read IRC 4975.

5. As odd as it sounds, there is a body of thought within the financial community that considers investing outside of the box (truly diversifying) and having to know the IRS rules for yourself is risky.

6. Large financial institutions can set their own rules as to what you are allowed to invest in, so long as they don’t violate the IRS guidelines. So, if, for example, a custodian decides to restrict the rules set by the IRS, then they are free to do so.

7. Investing in non-traditional assets is not scalable for the large financial institutions. In order to scale their business, financial service companies would rather choose the path of least resistance and make investments from their desk.

8. These brokerages don’t make a living educating you about other investment possibilities on which they do not make a commission.

The brokerage companies won’t tell you about all of your options because it makes no sense; unless they can make cents from your retirement, you will never hear a peep from them. No commission equals no marketing dollars, and no marketing dollars means no business for the big players.

In another interesting side note, it is amazing how many more realtors do not promote SDIRAs to their investor clients, especially being they stand to gain from doing so. I guess The National Association of Realtors (NAR) has not fully gotten behind an educational initiative to do so just yet. Hopefully, that day happens soon for their benefit.

It should also be noted that setting up a self directed IRA is not exclusionary to non-traditional assets. In other words, although in most cases you can’t invest in non-traditional assets when standard brokerage firm. The converse is not true for an IRA with Sunwest Trust. An IRA established with us does not prohibit you from making investments as you see fit or with a large brokerage house. If you are interested in both, then contact our office and we will walk you through the process of how to set up your IRA in this manner.

 

Traditional, Commission Based Vs. Non-Traditional IRA, Fee-Based

On the other hand, non-traditional IRA custodians such as Sunwest Trust are fee-based companies that charge an annual fee and do not receive commissions. Instead, they offer you the freedom to choose your investments the way you see fit. We will allow you to invest in anything the IRS doesn’t prohibit. The IRS will not allow you to invest your retirement account in collectibles, life insurance, and S-corps. For more complete information on IRC 4975, visit the Cornell website.

So what will the IRS allow you to invest in? We have just about seen it all. We have seen people invest in tangible assets such as real estate properties, physical precious metals, private company stock, cattle, racehorses, tax certificates and a variety of other creative investments.

Related Party Rules

When making investments like these, there are a few additional rules that you need to remember regarding whom you can invest with. The IRS also places restrictions on who you can enter into a business transaction with, namely you have to avoid what are know as disqualified parties. A disqualified party includes the IRA owner (you) and certain family members, namely ascendants and descendants, including one’s mom, dad, grandma, grandpa, or children, for example.

For a more complete understanding of disqualified parties, you can review IRS Publication 590. In all cases, especially if you have any doubts about the rules regarding IRA investing, we suggest speaking with a tax professional or an attorney before making any investments. This bit of due diligence on your part will likely save you a lot of future headaches, especially in the event the IRS ever decides to audit your IRA.

Free Book Offer, Just Email Us

As we have said previously, the Self-Directed IRA Handbook is a book that we’re making available free of charge, written by a friend of ours, Matt Sorenson. If you would like this book, then you can email us, and we would be happy to send it to you. This book will give you a lot of information, and it will help you know what questions to ask your CPA or tax professional.

Also, be sure to make use of our “Ask the Experts” on our webpage. Also, you can call our office at 1-800-642-7167.

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Terry White

About Terry White

I started my business career after getting my degree in Accounting from the University of New Mexico in 1983. My first job was as a controller for a local title company, and in 1987 I started First Financial Escrow, Inc. Over the years I played a part in several startup companies including First Financial Equities, Inc., First Financial Trust, Inc., First Financial Marketing, Inc. and Asset Ventures, Inc. In 1997 First Financial Escrow, Inc. was able to purchase the escrow accounts from Sunwest Bank and changed its name to Sunwest Escrow. As the market changes, Sunwest has grown and changed along with it. Besides my wife, Sheila, we have three boys, two daughters-in-law, one grandson, another grandson on the way and a future daughter-in-law. Sunwest is my passion, and I enjoy coming to work every day to see what will happen next. I enjoy fly fishing, spending time in Colorado, biking and watching my boys play soccer.