Of course the first question must be, "What is a Self Directed IRA?" The difference between a regular IRA and a Self Directed IRA is that you have control over how your money is invested.
Many brokers claim they let you decide where your money is invested, but to truly be a Self Directed IRA, you must be able to invest your money where you want to.
The next question is often, "Is this legal?" In 1975 Congress passed ERISA in the Securities Act.
This brought about brokerage houses and banks marketing IRA and 401K plans.
They encouraged you to buy what they wanted to sell: stocks, bonds and mutual funds.
Nothing in the IRS code said you could only invest with banks or brokerage houses, or that you could only invest in stocks, bonds and mutual funds.
People came to believe that, because that is what their bankers and brokers told them to invest in, since that is how they make their money.
Since the stock market drop, and with corporate scandals and corruption, many investors have become frustrated and began looking for alternative ways to invest their money.
They wanted to control their own investments.
Some wanted to invest in more tangible assets like 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.
Here are some examples of things you can invest in: residential or commercial real estate, raw land, trust deeds, mortgages, private notes and loans.
You could also invest in private stocks, Limited Liability companies (LLC), Limited Partnerships (LPs), and tax certificates.
You can still invest in stocks, bonds and mutual funds; along with annuities, currency, futures, options, receivables, and commercial paper.
Our final question for today, "What is ERISA?" The Employee Retirement Income Security Act has come to be called ERISA for short.
This act moved the responsibility for an employee's retirement plan from the employer to the employee.
The two investments it prohibits are life insurance contracts and collectibles.
To summarize to truly be a Self Directed IRA, you must be able to invest your money where you want to.
Many brokers claim they let you decide where your money is invested, but to truly be a Self Directed IRA, you must be able to invest your money where you want to.
The next question is often, "Is this legal?" In 1975 Congress passed ERISA in the Securities Act.
This brought about brokerage houses and banks marketing IRA and 401K plans.
They encouraged you to buy what they wanted to sell: stocks, bonds and mutual funds.
Nothing in the IRS code said you could only invest with banks or brokerage houses, or that you could only invest in stocks, bonds and mutual funds.
People came to believe that, because that is what their bankers and brokers told them to invest in, since that is how they make their money.
Since the stock market drop, and with corporate scandals and corruption, many investors have become frustrated and began looking for alternative ways to invest their money.
They wanted to control their own investments.
Some wanted to invest in more tangible assets like 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.
Here are some examples of things you can invest in: residential or commercial real estate, raw land, trust deeds, mortgages, private notes and loans.
You could also invest in private stocks, Limited Liability companies (LLC), Limited Partnerships (LPs), and tax certificates.
You can still invest in stocks, bonds and mutual funds; along with annuities, currency, futures, options, receivables, and commercial paper.
Our final question for today, "What is ERISA?" The Employee Retirement Income Security Act has come to be called ERISA for short.
This act moved the responsibility for an employee's retirement plan from the employer to the employee.
The two investments it prohibits are life insurance contracts and collectibles.
To summarize to truly be a Self Directed IRA, you must be able to invest your money where you want to.