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The Self Directed IRA: What Can an SDIRA Do For You?

DISCLAIMER: I’m not a financial advisor and this is not financial advice. Investing involves the risk of loss. You agree that you alone bear all the risk of any financial or investment decision that you choose to make. All content is for informational purposes only.
A Self-Directed IRA can offer you a decidedly tax-efficient investment vehicle where you are in complete control of your investments. How do they work? What can you invest in? Who can you trust with something as valuable as your retirement?
We also examine some of the most chosen “alternative” assets for SDIRA investment, with a focus on precious metals and cryptocurrency, as well as the how, what, and where.

What is a Self Directed IRA?

The term Self Directed IRA applies to any Individual Retirement Account where you have say in buying and selling assets. However, over time, it has come to refer to something more specific.
When we refer to a Self Directed IRA (SDIRA) we’re actually talking about a type of IRA where account holders have complete control. You are in charge of making investment decisions. In addition there is access to a wider range of investments compared to a “regular” IRA
For these reasons SDIRAs one of the most flexible ways to buy tax-advantaged investments. Along with full control and a wider range of investments available come many responsibilities. You are also solely responsible for management, for legal compliance, in addition to any research and due diligence needed before making decisions. The company holding the SDIRA, referred to as custodians, are prohibited from providing financial or investment advice, so the buck stops with you.
While you may be responsible – the truth is that there is a lot of assistance available in terms of information and suggestions from intermediaries such as bullion dealers and gold investment companies.
While these companies have a vested interest in your investment in gold, silver or even bitcoin, the best dealers have teams of experienced expert advisors who know the market in-depth and can offer something close to impartial information.
If receiving expert information that would normally cost $100s for free in addition to tax-advantaged wealth-protecting assets set up for growth sound like a great combination, then a SDIRA may be right for you.

Allowable Assets

A standard IRA is limited to paper investments. This normally includes mutual funds, company stocks and annuities. On the other hand, SDIRAs can hold an incredibly wide and diverse range of alternative assets.
Since there are many types of acceptable assets, it’s easier to review the assets that cannot be held in a Self-directed IRA.
The IRS merely gives a short list of prohibited investments:
Investments outside of that list are likely to be acceptable. The most frequently held alternative assets in SDIRAs are commodities, limited partnerships, real estate, tax lien certificates – and of course precious metal bullion bars and coins.

But wouldn’t precious metals and coins be considered collectibles by the IRS?

The IRS specifically mentions antiques, gems, stamps, metals and coins as being collectibles. However there are exemptions for specific types of investment-grade precious metals bullion bars and coins.
Bullion bars and coins that meet certain purity and manufacturing standards, provided they are valued solely on their precious metals content with no additional premium for age, rarity, beauty or any other factor which would cause them to be considered collectibles are allowed by an IRS exemption.
A self directed IRA gives investors a potent and highly tax-advantaged investment tool. In addition to being able to invest in common paper assets, it provides the opportunity to invest in many other types of investments within an IRA.
A self directed IRA holds amazing power if you are willing to assume the responsibility.
SDIRAs are best for people who already know something about alternative assets or are willing to learn.
Gold has been protecting wealth for millennia. It is a proven hedge and diversifier. In the following information we will cover gold’s benefits and historical successes. This will include reviewing how gold has withstood market crashes, recessions, depressions, war and more. In this way it has protected assets in addition to experiencing growth.
Utilizing a SDIRA to provide for the addition of precious metals like gold and silver to your retirement plan may be a smart move for growth but, more importantly, one that could protect your account should the next market crash happen sooner rather than later.

How Do Self Directed IRAs Work?

Self directed IRAs are available as either traditional or Roth just like a typical IRA. As an investor you can make tax-deductible contributions (traditional SDIRA) or receive tax-free distributions (Roth SDIRA).

A tradition SDIRA allows you to save money on the front end because the contributions are tax-deductible. A Roth SDIRA saves you money on the back end since you have already paid taxes on these monies so the distributions will not be taxable.

Other differences between traditional and Roth include income limits, required minimum distributions and early withdrawals. You’ll need to choose based on your personal situation and input from your advisors including your tax specialist can be helpful.
Either way, every SDIRA will consist of as a minimum two parties:
The IRS requires that a qualified party act as the legal custodian for self directed IRA account holdings.
For example, a precious metals IRA custodian should be IRS authorized as a service provider for precious metals IRAs. Their duty is to track metals values and total account values, all transactions you make and taxation issues. Basically, to care for your account.
In addition, there will be third parties, intermediaries and facilitators.
For a precious metals IRA these third parties will include:
  • Bullion dealers or metals brokers – provide the physical bullion and may help with advice
  • Transportation services – high security shipping services experienced in carrying high-value assets
  • Vaulting companies – IRA approved metal depositories for secure vaulting of IRA metals
As the investor you don’t typically deal with these individual moving parts. A professional gold IRA company like Goldco will do all of this for you instead. They work with the best in the industry to provide you secure, efficient and fast service.

The custodian acts on your buy and sell requests and facilitates money transfers while also handling shipping and vaulting. They also ensure full compliance with often complex IRA tax legislation.

Working with both the right bullion dealer and custodian is essential to avoid costly mistakes.
Learn what to ask when looking for the best suited Self Directed IRA specialists – inside Goldco’s free IRA Investor Guide
gold investing guide pdf

Which Self Directed IRA Investment?

You have a lot of options when it comes to investments within a self directed IRA. The most common are paper assets just like a regular IRA or 401k plans hold. You could potentially add almost anything as long as it’s not collectibles, life-insurance or a super high-risk derivative.
An important point is that you must not take a personal gain from the asset. Self-dealing, taking personal benefit from any type of asset owned inside your IRA, is explicitly prohibited by the IRS. Examples would be real estate rental payments paid into your personal bank account or living in a home owned by your IRA.
You do want your assets to be diversified. Their volatility, risk and potential for growth along with a degree of stability and reliability.
Only you can decide the levels of risk you’re willing to take in order to make larger capital gains.
The stock market does rise consistently over time: provided you make allowances for a 50% or worse drop every 9 to 11 years.
Lower-risk investments, like certain certificates and bonds, may also rise slowly over time and be less susceptible to severe drops. Unless you added them 20 or 30 years ago will they alone provide enough for your retirement?
Which brings us to precious metals and what many are hailing as the new gold (more on that in a moment).

Self Directed IRA with Precious Metals

Used by the richest 1% to ensure their assets survive financial crises and market upheaval for generations, precious metals are proven wealth protection tools.
With the IRS relaxing restrictions on what can and cannot be placed in an IRA, you now have the chance to take advantage of these valuable tools for protection and financial gain inside a tax-advantaged account.
Gold and silver inside self-directed IRAs can add a whole new dimension to your investments.

Gold in an SDIRA

Gold is more than a proven wealth-protection tool that can safeguard generations of wealth and the finances of entire countries. It is a long-term solid performer that has aplenty of annual rises of 9% over the past 45 years.
Gold’s protective power in IRA accounts was most noteworthy in our most recent banking crisis. The yellow metal surged while everything else, including real estate, fell through the floor, due to a global crash and deep recession that caused the values of millions of retirement plans to plummet by 50%.
Those nearing retirement felt the biggest difference. Those invested primarily in paper stocks and bonds, had their retirement plans – and thereby their lifestyle plans – cut in half. Those diversified with gold were comparatively unaffected, even making a small overall profit on the back of gold’s actions.
Do you agree with an increasing number of highly-paid experts that our world seems on the verge of something potentially far worse than 2008? If so, adding even a small amount of gold, such as 5% of your IRA’s value, could help if they’re right. It could also benefit you if they’re wrong, with it’s average 9% yearly growth.

Silver in an SDIRA

During periods of market stress, a silver-backed IRA can also increase in value because silver has the inherent potential for massive price increases. If you’re an investor for whom market-beating capital gains are as important as protection against inflation and crises, a silver-backed IRA can also act similar to a Gold IRA.
This was clearly demonstrated during the financial meltdown in 2008.
We know that gold surged 116% between its low in 2008 and its high in 2011, boosting IRA accounts. However silver’s less stable nature saw investors make an astonishing 448% profit when the paper markets burst. This put silver IRAs well into profit at a time when company stocks were crashing.
Market analysts believe that silver is hugely undervalued. It currently costs between 80-85 ounces of silver to buy an ounce of gold. This ratio is at an historic high. Considering silver’s average value across the 21st century was 45:1, then at current prices, silver should be selling for $32/oz. With averages,
there are times we also drop below them. 2011 saw the ratio at 35:1. If we were to return to this ratio today, silver would be in a position to reach $51/oz – matching its 1980 high.
Consider that the ratio was as low as 15:1 in the late 1960’s and 1970’s and that means there is potentially room in there for significant gains.
Nothing can ever be guaranteed, but with these potential near-term values, it may make sense to add silver for the possibilities it can provide your SDIRA.

Self Directed IRA with Bitcoin

Bitcoin is what many are hailing as the new gold and… you can now add Bitcoin and other selected cryptocurrencies within self-directed IRAs. This brings both high volatility coupled with huge potential for gain – and loss – into retirement accounts.
Bitcoin captured the market’s attention in 2017 when it’s price rose from $900 to $20,000 in a single year. It’s meteoric rise was followed by falling like stone in 2018. Bitcoin’s history has swung like a seismograph many times – making over 300,000% in some years and dropping 80% in others.
Millions of retail investors with no market knowledge bet large on continued gains when it started rising in 2017 and it saw a climb of over 2000% on the year.
Since then the market seems to have stabilized some with the swings not being as severe with new money coming back in as respected analysts are predicting a positive returns. Less volatile than it was, and with fiddle investors long gone, Bitcoin is starting to look like a good investment both for short term flash gains and longer term growth.
Bitcoin and other cryptos are a greater gamble than precious metals. But for those who are more open to risk it offers a big potential win even if you only turn over a small percentage.
Discover what precious metals and Bitcoin can do inside your IRA with Goldco’s free IRA Investor Guide
gold investing guide pdf

Self Directed IRA Rollover

A Self Directed IRA Rollover is the process by which funds are moved from a traditional retirement account to a new self-directed IRA. Although these funds are typically distributed to you, the transfer and reinvestment process, if completed correctly and within the proper timeframe, should not cause tax consequences.
It could be that you want to transfer money from an employer-sponsored retirement plan to a new self directed IRA by using a rollover. A rollover preserves the tax-deferred status of the assets. When properly done, there are no current taxes to pay and there is no early withdrawal penalty either.
In all cases, the funds must be reinvested within 60 days of completing the transaction or the IRS will consider you to have made a distribution. If it is an early distribution, you will be taxed and penalized accordingly.

So How Does A Self Directed IRA Rollover Work?

Step #1: Select a Custodian to Accept Your Rollover

There are many custodians and trustees available. However, only some of them regularly work with physical precious metal or bitcoin investments. Work with a professional IRA provider specializing in these fields because they have direct and consistent contact with the best suitable IRA custodians.
The frequent business the precious metals IRA dealer sends the custodian will result in an easier and quicker process. In some cases benefit financially thanks to reduced fees.
To get started you fill in a simple form to create a suitable new self-directed IRA account with your chosen custodian. This can be coordinated through your precious metals dealer. In the current times the form is most likely to be a digital form for faster processing. This provides the added benefit of having your new SDIRA active in 2-5 days, sometimes sooner.

Step #2: The Rollover of Funds

Next, you make a distribution from your existing retirement plan, and transfer the funds into your new SDIRA plan. This is the actual rollover.
The administrator of your existing IRA may issue your distribution in the form of a check or direct deposit made payable to your new trustee (an IRA transfer), or to you (an IRA rollover).
If the rollover reinvestment occurs within the correct period of 60 days or less, there is no taxable event. If you extend the period beyond 60 days, it becomes a taxable distribution, which is why it’s important to work with knowledgeable specialists.

Step #3: Buying Your New Assets

When working with a precious metals IRA specialist, you will probably already have discussed the metals to buy. IRA specialist gold dealers help advise you on the best investment metals most suited to your personal financial plan and needs.
Some metals portfolios can be built on their potential for capital appreciation as well as wealth protection. whereas others may look at gold or silver’s hedging ability to safeguard riskier assets.
Once the investment metals are chosen, your dealer will lock in the prices at a market rate you’re happy with. Then your new trustee will transfer the payment funds to the precious metals dealer.
Finally your physical precious metals are transferred via insured delivery directly into your chosen depository vault. At this point the IRA rollover is complete. You now have tax-advantaged metals protecting your retirement funds should the worst happen in addition to potential growth.

Where to Start an SDIRA?

The first step in the entire process is finding a self-directed IRA specialist you are comfortable working with.

Many companies call themselves SDIRA specialists, but these are split into two types:
  • Those providing assets for use in SDIRAs
  • Those providing custodial services for SDIRAs
Both types usually have counterparts they prefer to work with which is an advantage to you as an investor because it improves speed and efficiency. However, custodians are not permitted to provide any investment advice and therefore will not make recommendations.
This is why it’s easier to start choosing the type of assets you want in your SDIRA, for example precious metals. Then choose a company (i.e. a precious metals dealer) who provides the assets as they will typically have a lot of experience working with one or two custodians. These companies work with the best custodian partners who make the whole investment process easier for their customers (you).
As an example, the precious metals dealer Goldco is an IRA specialist who provides assets and vaulting for both precious metals and bitcoin SDIRAs. They have arranged tens of thousands successful self directed IRAs for satisfied clients. During this time they have established an excellent working relationship with Equity Trust for custodian services and with Delaware Depository Services Company, Brinks, and International Depository Services Group for vaulting services.
Want to know more? Get your free Self Directed IRA Guide – a unique physical investor kit delivered direct to your door.