I came across an article “Amazing Power”, by Terry Coxon, focusing on exposing hidden potential within your IRA. Now, I had been aware of this loop- hole, but the article struck me as a good topic of discussion because so many people are unaware of this veiled advantage.
With a regular IRA you have someone handling everything–charging you a fee for their services–while you are not involved in any part of the decision-making process, beyond selecting which fund you want to put the money in. No one would invest money into something they had no knowledge of, yet with a regular IRA that is exactly what you get.
With a self-directed IRA you choose a custodian to oversee your investments and assets. However, the custodian can restrict certain investments. This may cause delays, missed opportunities, and extra work for both you and your custodian and all the while, you would still be paying a middleman fee for restricted services.
A more effective plan is to set up a self-directed IRA and create an LLC (limited liability company), and make the LLC the custodian of your investment funds. This gives you control of your investments without having to go through a custodian and their administrative determinations about what you can and can’t invest in.
An additional bonus–no middleman means less fees and less hassle for you. Your new custodian is you, and your LLC.
Some examples of profitable investments:
- Operating business
- Foreign real estate
- Equipment leasing
- Private lending
- Rehabilitate property
- Seize bargains
Protecting your IRA is of the utmost importance. With the national debt still staggering, you need to be aware of the potential invasion of your IRA by the US government. This may seem extreme and out of the realm of possibilities, but it is a very, very real threat.
Countries around the world (Ireland, France, Poland, and Hungry) have recently raided their citizens’ pension plans and IRA’s, forcefully replacing cash investments with government bonds.
With the majority of IRA investments in stocks and mutual funds, the U.S. government could conceivably force investors to distribute a portion of their IRA’s to government bonds, creating huge government profits at the expense of your money.
Protect yourself from any possible foray; create a self-directed IRA and make your LLC be your custodian. You made your money; you should be the one to decide how it is handled.