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Shaping my retirement - Should I use Self Directed IRA's?

Updated: Feb 8, 2020

"It’s a great alternative way to invest, but it's more complex to understand and comes with risks, plus a look at The Entrust Group to help you with self directed IRA's”

By: Allan R Kirby Money Management blog discussion:  Should I use Self Directed IRA's for retirement planning.
mysmallbank money management

If there is one thing I have learned over the years, it’s that planning for retirement is never simple. With so many investment options, it can be very difficult to decide on what to do. For example, you may ask yourself, should I invest in ETFs (Exchange Traded Funds), bonds, precious metals, real estate or other alternative investments? Even when you do seek help from a financial advisor, you may find the advisor ends up spinning tails and using jargon that leaves you more confused than ever on what to do. Worse, as we have seen through the litany of scandals with major financial Institutions, you are never sure if your financial advisor has your best interests at heart. So you need to ask yourself, what should I do?

What choice to make

Most people find it’s too difficult to fully understand the stock and options markets as well as figure out bonds. This steep learning curve leads most people to avoid engaging deeply with their retirement investments. With investments being complex most people instead take a much more passive approach by utilizing a bank or investment firm to build a retirement fund that utilizes active or passive investing methods. Generally speaking, most of the money invested using this approach will be in stocks, bonds, ETFs , real estate investment trusts etc...Even if a person is active, they will tend to buy ETFs, which offer a diversified portfolio with low risk and provide a good return using a simple method solutions for investors.

“Self-Directed IRA’s could be a good choice to complement your retirement investments"

For some, the traditional method of investing may not be suitable, especially those who feel the banks provide a cookie cutter solutions that are not flexible enough. In these cases taking control of retirement may mean looking at self-directed IRA’s. With a self-directed IRA, you decide where the money goes and how long it stays there to make the most profit from your investments. Since your custodians ultimately invest according to your decisions, it opens up a lot of room for you to invest in alternative investments that are limited with a bank. However, whether or not you should use this type of method really depends on your ability to be very active with your retirement planning. Additionally, there are rules and limitations for self-directed IR’s, for example: Insurance, S Corporations, Collections such as coins and antiques, plus, you cannot invest in real estate that you are currently benefiting directly from as part of your investment (Owner/Occupier).

“Self-Directed IRA’s Investments can include: Real Estate and Vacant land (Undeveloped), Gold, Silver, Oil, Gas, Mineral rights and even Water rights, Cyrpto and livestock"

There is value to alternative investing

As a multiple real estate owner myself, I can see the value added by using a self-directed IRA and it’s a great tool to use for your retirement. But keep in mind that I am a person who is very familiar with the complexities of owning additional real-estate, such as local bylaws dealing with parking, occupancy, renovations, rentals and up keep requirements along with specialized insurance and tax costs. These hidden rules and costs usually come as a surprise to many who are new to the real estate rental market. Many people assume that you can

just buy a home, rent it on Airbnb and you're set for life, but end up getting slapped with huge fine, high insurance costs or even worse, having the place damaged and is not covered.

What you need to know: There are a number of things that you need to know before you start to look more seriously at self-directed IRA’s.

1. Self-directed Fees can be much higher and fees can also vary depending on the firm you use and the type of investment.

2. Lack of liquidity– Remember you have a wide range of investment opportunities. However owning a property for example could be more illiquid, meaning it could be difficult for you to sell quickly and worse, you may need to sell at a discount if your pressed to get money quickly.

3. Rules and Regulations – Yes there are a number of rules that you need to understand such as Self-Dealing Rule and Disqualified Persons (IRS code 4975). You will need to ensure you fully understand all the rules and regulations of your self- directed IRA and investments.

4. Concentrated Investments – Meaning you’re not diversified. If, for example, you put all your retirement in one investment and that investment fails or its value is reduced by a substantial amount, it could have a major impact on your retirement plans.

5. Watch out for fraud – It’s your responsibility to ensure your investment is legitimate as noted by the SEC. Custodians generally don’t evaluate, the quality or legitimacy of any investment in the self-directed IRA or its promoters. Check out a warning by the SEC on self-directed IRA's . Like other investments, unless you are an expert in the field, you will need to take your time and learn as much as possible. If you are approached by a promoter, you need to look at it from all angles not just take the word of a self-directed IRA promoter. This would include the list price, and expected returns which could affect your investment.

6. Contribution Limits. Every year, the IRS sets limits to how much you can contribute. Each self-directed retirement account has set limits provided by the IRS on a yearly basis. Check the contribution allowance for your account type to make sure you know what your limit is.

7. Early Withdrawal – Remember that many retirement accounts require you to wait until retirement age to use your savings without a penalty. This means that early withdrawals will not only be taxed but penalized as well. The IRS has defined the rules with regard to early withdrawal but to be clear a self-directed IRA will not allow you to side step early withdrawal rules.

Who to talk to?

There are a number of companies that provide services to help you. After a detailed search and review, I found three good companies. These are Regal Assets, Advantage Gold and The Entrust Group. Overall all three appear to be well run organizations that provide help in getting you started with self-directed IRA’s. However, for this article I decided to provide a short review of The Entrust Group, which I was in contact with in order to get some additional information.

This is what I liked about them:

1. The Entrust Group has been in business for close to 40 years.

2. It has an A+ Better Business Bureau (BBB) rating.

3. Annual fees are scaled and clearly stated on their website.

4. No minimum Investment is required.

5. Learning material is provided through their learning center such as in person educational events, blogs and live webinars.

“Don't take it from just myself see Chamber of Commerce review of The Entrust Group"

The following are additional information I obtained after talking to the The Entrust Group.

Opening an account

When a client decides to open a self-directed IRA account, is it necessary to meet face to face? As noted by Entrust: “Rarely but upon occasion. There is not a necessity to meet face to face since accounts can be established online or by emailing/faxing new account application documents. Applicants must submit a copy of a government-issued photo ID for signature and identity verification. Their name, address, social security, and DOB are confirmed using LexisNexis, and the OFAC search is also done through LexisNexis


Bill Neville, Business Development Manager at The Entrust Group highlights that the most common set of questions or concerns from clients are centered on “How does it work, how long does it take, and what are the fees.” Most people establishing accounts are doing this for the first time, so I am usually walking them through the total cradle to grave process – how to open and fund the account, how to fund their investment, what are the rules around prohibited transactions and disqualified persons, what can and can’t you invest in, etc” Finally, clients do seem to find The Entrust Group's Webinars tremendously useful and helpful. Therefore it appears that the learning center is a good source of information to help you get started.

Final Thoughts

The time and details required to fully understand Self Directed IRA’s are beyond the scope of this article. However, I firmly believe this is a great alternative way to invest in retirement if you do your due diligence and find a good organization to help you out and get things started. There are many organizations to help you get started such as The Entrust Group, but you as an investor who is looking into self directed IRA’s, need to take the time and effort to determine what your investment needs are. When it comes to self- directed IRA’s, the ultimate responsibility is with you, the investor. For example, if you buy a real-estate property and create an Airbnb that turns out to be a disaster, accumulating liabilities such as costly damages, regulatory problems, insurance etc.. the onus is on you to correct the problems and foot the bills. Keep in mind If you are someone who does not want to engage deeply with your investments or find it difficult to understand, it may be better to just let the experts handle your retirement planning.

This is a blog written by Allan Kirby, who writes and produces Personal Finance and Money Management articles and videos along with My Success Magazine.



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