What company/bank institution supports self-directed IRAs?

Question

Hello Hello Successful People of Bigger Pockets,

So, I have heard of being able to move monies that are in Retirement Accounts/Roth IRAs in to Self-Directed accounts in order to use those said monies to invest in real-estate without penalty. However, finding a company/platform that actually supports that, seems to be difficult. Is there anyone who can give me more guidance on this topic?

Please and Thank You!

I hope you are having a wonderful day,

~Marie

Brian Eastman · Answer

Account Closed

There are dozens of companies that offer truly self-directed IRA and 401(k) retirement plans capable of investing in non-traded assets like real estate.  Several including mine are active here on Bigger Pockets.

Mainstream banks and brokerages do not provide services for alternative asset investing as it is very specialized.

There are also different types of service offerings.

Trust companies act as custodian and processor, so they hold the funds, sign every document, issue payment, receive deposits, etc.  Think E*Trade or Vanguard, but just with people pushing paper instead of computers doing stock trades.  This type of 3rd party processing works OK for singular, static investments like private placements.

Other companies offer Checkbook IRA and Solo 401(k) programs that put you in direct control of the funds under the umbrella of the retirement plan.  An example would be an IRA with a specialized trust company like above, but the IRA just makes one investment into a LLC that the IRA owns but you manage on behalf of the IRA.  That takes the custodian out of the processing loop, which is much more nimble and cost effective for more dynamic assets like rental property, short term private lending, etc.

So, as you continue your research and get feedback here on BP, think about what type of program will best suit your needs and be sure to ask questions along that line.  Get on the phone and speak with a few of the providers that are active here on BP.  You will pretty quickly be able to tell who is just selling something and who can become a valuable member of your team.

Scott Curtis · Answer

Marie,

There are several components to your question.

1. Yes, subject to plan rules in your existing account, you can move funds from one plan to an SD-IRA. Your specific retirement plan will be able to tell you what rules may be in play. You may be able to move all, none, or only a portion -- for example, only those funds and gains related to a rollover but not new contributions. If you move from retirement to retirement, you should be able to avoid penalty, as long as you follow all the instructions. Otherwise, the IRS may treat the transfer as a withdrawal.

2. To find an organization for your SD-IRA, what you're looking for is a "self-directed IRA custodian." If you search for those words on Google, you will see a number of entities that offer these services. Many, but not all, will have "trust" in the name, and the should have plenty of materials available to outline the process to do what you're doing available with no obligation. Banks and other more typical entities aren't what you're looking for. By searching these forums, you may be able to find specific info about different custodians and even posts by individuals who work at those custodians.

3. Speaking from my own experience, I recommend you identify the custodian that best meets your needs and objectives for your type of investments. They will have different fee structures and what might be a great entity for very passive investments, like limited partner shares, might not be good for someone who has more activity and will thus rack up fees.

Hope that helps.

Scott