July 14, 2025 • 30 mins
In this episode of the Directed IRA Podcast, Mat Sorensen and Mark J. Kohler tackle the ten most frequently asked questions they hear from clients, investors, and professionals about self-directed IRAs. Whether you're brand new to self-directing or looking to avoid common missteps, this episode offers clear, practical guidance grounded in real-world scenarios and thousands of consultations.
They cover what your IRA can and cannot invest in, how prohibited transactions work, when to use a checkbook IRA or IRA LLC, how UBIT applies to certain investments, and what type of account is best for your goals. If you've ever wondered whether you’ll pay tax to self-direct, how to fund your account, or whether you're too old or too young to get started, this is the episode for you.
Subscribe to the Directed IRA podcast for more episodes diving deeper into self-directed investing strategies. Visit directedira.com to learn more about taking control of your retirement investments.
Chapters
- 00:00 – Introduction to Self-Directed IRAs
- 02:50 – What Can You Invest In?
- 04:05 – Investment Restrictions and Limitations
- 06:55 – The Prohibited Transaction Rules
- 08:40 – Choosing the Right Account Type
- 12:45 – Checkbook IRAs and IRA LLCs
- 18:35 – Taxes, Penalties and Common Misconceptions
- 24:30 – Finding Your Investment Strategy
- 29:20 – Final Thoughts and Disclaimer
Directed IRA Homepage: https://directedira.com/
Directed IRA Explore (Linktree): https://linktr.ee/SelfDirectedIRA
Book a Call: https://directedira.com/appointment/
Other:
Mat Sorensen: https://matsorensen.com & https://linktr.ee/MatSorensen
KKOS: https://kkoslawyers.com
Main Street Business https://mainstreetbusiness.com
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:08):
Welcome everybody to another episode of the Directed
IRA podcast.
Excited to be here with youtoday.
My name is Mark Kohler.
I'm here with my incrediblepartner, the CEO of Directed IRA
, a trust company himself.
Matt.
There are some common questionsout there.
People keep asking and we areso excited about that because
questions mean inquiries andpeople catching the vision of
(00:30):
things.
But we got some answers forthem, I think, today.
Speaker 2 (00:34):
Yeah, we want to hit the most common questions.
We hear about self-directing.
A lot of these come up over andover again on the phones with
our team here.
Mark and I have done the 10,000consults as lawyers, answering
these questions, because formost people, self-directing your
IRA is a new thing.
They've never done it before.
Most of our customers come hereand they're like they've been
investing in the stock market,buying ETFs or target date funds
(00:55):
or mutual funds, and they'relike hold on, I can buy these
assets in my IRA and you need tolearn a few things.
You need to learn more thanlike typing in a few keystrokes
and hitting buy on a computer.
So it's not rocket science, butwe want to hit some of the
common questions for any of youwho are interested in this.
Maybe some of you just gotstarted and you're like I'm not
sure I understand everything onthere.
(01:16):
We want to hit some of thosecommon questions for you today.
Speaker 1 (01:18):
Yeah, I think we'll do kind of a speed dating round
three minutes each, see if wecan do even less than that.
And with every one of thesequestions there's a full podcast
or more.
A copy of Matt's book is a must.
Please go over to Amazon andlook at the self-directed IRA
handbook and I think it's justan incredible resource for
(01:41):
anybody self-directing.
You've got to have that book.
And, matt, it was funny.
I was just talking to one ofour video editors yesterday
Preston, in fact, I'll call himout and he was like oh my gosh,
I was editing your video andwhen you said self-directed IRA,
I was like, oh, that means Ican buy any stock I want.
And he's like I was blown away.
And this is an editor of ourvideos that was actually
(02:04):
listening to that show.
And it was really fun to seethe lights go off, even for our
outside video teams to startcatching the vision of this.
Speaker 2 (02:15):
Yeah, yeah, and I think it's something that's like
for us.
It's like staring at you know,we're like looking at this every
day, but for most people theyjust have never even heard about
this.
And even me, going back 2006,the first time I heard about an
IRA buying real estate, I waslike I don't think you can do
that.
I looked it up, talked to Mark,I was like turns out it's a
(02:35):
thing.
So we know where everyone'scoming from on this and don't
feel like you've got to mastereverything.
That's why we're here, our teamat Directed IRA.
If you need a lawyer at KQSLawyers, we're here to help make
it easy.
We've got a ton of educationalcontent.
But let's hit some of thecommon questions and I'll just
hit the first one out of thegate, if you don't mind, Mark
(03:00):
which is what can I invest in?
I mean, that's like.
The first question is so starttalking about, yeah, you could
buy real estate or a privatecompany.
They start thinking, oh, like apublicly traded REIT or a
publicly traded real estatecompany, no, no, no, I'm talking
about like the duplex down thestreet, the single family rental
, the little real estatesyndication, buying a $5 billion
building.
You put $100K in.
(03:21):
I mean, those are the types ofdeals your IRA can actually
invest in.
They can invest in other bigprivate assets, but they can buy
these, even these unique littleassets.
You can buy those, invest inthem with your IRA.
So know that those are like thecommon assets I would say real
estate, whether it's a rental, aflip, lending on it, a private
fund, precious metals, cryptothese are the types of assets
(03:44):
you can buy.
They're most common, but reallyanything's fair game.
We'll hit some restrictionshere in a second, but that's the
things you can invest in withyour self-directed IRA.
Speaker 1 (03:52):
I love it All right, okay, give me number two, let's
do it.
Speaker 2 (03:55):
All right.
Number two what can't I investin with my IRA?
Speaker 1 (04:00):
Boy, you gave me the trickier one.
I don't know if I can talkabout it that long because the
list is so short.
The one thing you cannot investin is You've been a lawyer
billing by the hour for 20 years.
Let's get very explicit.
I'll kind of give a little list.
One is you can't invest yourIRA into something that is not
(04:24):
allowed under law, like, forexample, under federal law.
Your IRA, because it's afederal, monitored or I guess
you'd say federally regulatedtax strategy or tool, cannot
invest in a cannabis operation.
Now, it's allowed at the statelevel in a number of states, but
(04:47):
it's not allowed at the federallevel.
So your IRA cannot invest insomething that is not allowed
under law obviously drug dealingor prostitution or something
really bad, but that would eveninclude cannabis because it's
not federally allowed.
Number two it cannot invest inS-corpor corporations.
Many of you may be a smallbusiness owner with an S corp
and you're like, oh, I'm goingto invest in so-and-so's S corp
(05:09):
or even my own.
I cannot do that with my IRA.
The third thing and I thinkwe'll probably have a question
on this regarding prohibitedparties is your IRA cannot
invest in something a prohibitedparty to you owns, like it
cannot buy stock you already own.
It cannot buy real estate youalready own.
It cannot invest in somethingyour mom owns or your dad owns
(05:34):
that they already own.
Now you can go invest together.
We'll probably get to that, butI think that's really the list
of something that's illegalanyway under federal law S
corporations or invest in or buysomething that you already own.
That would be not allowed,anything, you'd add, matt.
Speaker 2 (05:52):
Yeah, the only thing would be collectible items.
The tax code used to actuallywith retirement accounts, you
could buy collectibles with yourIRA, right, you could buy art
even.
You could buy a coin collection.
You could buy a coin collection, you could buy a wine
collection, you know.
But those turned into thebottle collections and Congress
was like, nah, we're not goingto let people buy these
(06:12):
collectible items.
They're kind of quasiinvestments with some personal
benefit or attachment that somepeople have to those things.
So they restricted collectibleslater on.
So now there are certain thingsthat are approved that could be
seen as a collectible, likecertain precious metals gold,
silver, platinum, palladium.
You can buy those Notcollectible value type precious
(06:33):
metals, but like gold bullion orcertain government issued coins
, like American Eagles, forexample, you can buy those and
actually physically own thosespecific precious metals.
So there are some exceptions,but take collectibles off.
And then life insurance is aweird one too.
401ks can do life insurance butIRAs can't.
But I think the big one, whichwould be the next question I had
(06:54):
, was what Mark was talkingabout, which is like well, what
is the main restriction or rulesI need to know when I'm doing
this with my IRA, and that isthe perfect transaction rule.
Speaker 1 (07:05):
So if that's question number three, that is a big one
.
Like what do I need to know?
Okay, we have a whole podcastwith 400 episodes.
No, that's a good one.
How would you answer that?
Like what do I?
Speaker 2 (07:17):
need to know in general, yeah, I think for most
people, this rule doesn't matter.
It's just the ones that aretrying to do something cute or
they've got some tricky dealsthey're trying to execute.
So what Mark said earlier is ifyou already own an asset, you
can't sell it to your IRA.
So the IRS says something.
Or let's just say, congresscreated something called the
prohibited transaction rulesthat says, hey, these IRAs are
(07:39):
special tax beneficial accounts.
The government doesn't collectas much money on them as they
can on other accounts.
So we're going to only let yourIRA invest with third parties.
It can't go buy an asset fromyou personally.
It can't go buy an asset fromyour spouse, your parents, your
kids.
There's these people calleddisqualified persons.
So if you're like, well, Iwanted to use my IRA to buy
(08:01):
property for myself or sell somestock or some options I
personally own over my IRA, justknow that's not going to work.
Can your IRA buy real estate?
Can it buy stock?
Can it buy options?
Yes, it just can't buy ones youalready own or anyone who's
considered a disqualified person.
So if you're like well, man, Iwas going to buy real estate.
I wasn't going to buy alreadyowned real estate, I'm going to
keep that, but I'm going to buynew real estate with my IRA.
(08:22):
That's totally fine.
So that's that.
Prohibited transactional.
There's more to that, as Marksaid.
We've got a lot of theirpodcasts on it.
But as a general rule, as longas you're just buying from third
parties or making investmentstrying to find the best deal,
not necessarily trying to moveassets you personally own or
close family members, you'regoing to be fine on that rule.
I like it All right.
Number four I'm ready, allright.
(08:45):
What account type should I setup?
Ooh, ooh.
Speaker 1 (08:49):
Well, that depends on , first, what type of account
you may already have.
So if you already have an IRAat Fidelity or Schwab or
somewhere, then you're going towant to open a self-directed IRA
and move that.
You kind of have to move itfrom IRA to IRA.
So if it's a traditional IRA,you would open a traditional IRA
(09:11):
at our company, the trustcompany, and then if you had a
Roth IRA at Fidelity, you'd opena Roth IRA where it's going.
Now, once you get it therelet's say you move a traditional
IRA you can convert it to aRoth.
Let's say you have an old 401kfrom a job five years ago and
it's just sitting there.
You don't know what's even init.
(09:32):
You finally call them andyou're like, oh my gosh, I got
50 grand in there.
I'd love to self-direct that.
I got a deal I'd like to dowith my brother or my sister, or
I've got this private companythat I'd like to invest in.
You can roll it.
That would be a rollover in asense, where you take it from
the old 401k and you'd open anIRA for it to go into.
Now, for the small businessowners out there, you already
(09:53):
have a solo 401k and you're like, oh, I'm just going to roll it
directly from the 401k into mysolo 401k.
So there's a variety ofaccounts that you might set up,
but the general rule is I wantto set up an account that's
going to receive the same typeof funds.
You could open a health savingsaccount.
Matt knows I'd love toself-direct my health savings
(10:13):
account.
You could open a Coverdelleducation account and start
building that.
So the world is your oysterhere.
There's not one particularaccount.
That's the right one.
It's what's best for you.
Speaker 2 (10:29):
Yeah, and we have many account owners here that
have a Roth IRA.
They have an HSA, they have atraditional IRA.
They might have multipleaccount types that they are
self-directing.
The one that we get quite a bitis well, I have a traditional
IRA but I want to do aself-directed Roth IRA.
Can I do that?
Well, yes, but you've got toconvert it to a Roth IRA.
So we have a Roth conversionapp where we open up the
traditional IRA to receive thetransfer of traditional IRA
(10:52):
dollars and then we immediatelyconvert it over to Roth dollars.
Now remember, when you converttraditional dollars to Roth,
you've got to pay tax on theamount converted.
So if that was a $100,000amount you moved over and
converted to Roth, you're goingto get a 1099 for 100 grand.
That's going to go on your taxreturn, your 1040.
And if you're in a 30% taxbracket, you're sending the IRS
(11:12):
30 grand plus whatever state,depending on the state you're in
.
So now the upside, of course,is that's growing and coming out
tax-free later.
But that's a very commonapproach.
And the other thing I'll say isRoth IRAs are the most popular
account and that's not typicalfor IRAs in general.
If you ask a Schwab or aFidelity.
Traditional IRAs dominate justbecause most people have saved
(11:34):
traditional dollars in 401Kplans over the years.
But Roth IRAs are more popularwith us.
A lot of people convert or seemto like to self-direct Roths
because they're more in controlof your own destiny with a
self-directed account right andyou're liking that tax-free
growth and that tax-freedistribution later on in
retirement.
Speaker 1 (11:51):
See, and I misunderstood the question, I
didn't know.
Like, when I go to a restaurant, I always ask the waiter what
do you like on the menu, likewhat's your favorite, instead of
what should I do?
So those are the like what'syour favorite.
That would be the Roth IRA whatyou should do and what's the
favorite out.
There could be two differentthings, but that's what we're
(12:11):
really good at here.
We've got a helpline thatduring business hours.
They're right.
On top of that, you can alwayscall.
Speaker 2 (12:19):
Book a call too.
Schedule that, if you want.
Speaker 1 (12:21):
Yeah, we've got that's.
What's unique about our trustcompany is you're actually
talking to human beings, not AIin the United States to boot.
So you're really getting andour team is so fun.
They're so amazing.
The culture at our company isreally.
It's like a little dot com ofyoung people that just get it.
It's so fun.
Okay, well, it sounds likeyou're batting cleanup.
(12:41):
I'm going to like take firststab and then you clean that.
Give me question five cryingout loud.
Speaker 2 (12:47):
Okay, when should I use a checkbook?
Ira or IRA LLC?
Ooh Well, maybe even what isthat?
You take that however you want,yeah yeah, player's choice on
this.
Speaker 1 (12:59):
Yeah, I like that.
I'm going to define it and thengive one idea, because there
are several instances.
So I know, matt, this is a goodone for you to back clean up on
.
So what is a checkbook IRA?
That is essentially, when youuse an LLC limited liability
company and you have your IRAinstead of invest in some other
(13:19):
operation or invest in directlyin a rental property or a
property or directly into crypto.
You say you know what?
I'm going to form an LLC that'sgoing to be owned entirely by
my IRA and invest in that, andwe'll do that.
We do that every day, everyhour of the every day, and so
we're going to move that moneyinto that LLC.
(13:41):
And now you control thecheckbook.
That is not prohibited, so youdon't have to call us and say,
oh, do this, do that.
We're going to put the money inthe LLC.
We're going to give you therule book you got to follow, but
you're going to take that LLCand invest it as quickly as you
want in whatever the hell youwant.
That's allowed, and you kind ofcut us out of it, which is fine.
(14:01):
Your fees don't change.
We want to save you time andsave you money, and you calling
us every time you want to dosomething can be a pain in the
butt.
So these checkbook LLCs arereally what's going on.
It's not a checkbook IRA, it'san LLC owned by your IRA, and
that checkbook LLC is there tohelp you.
So, matt, what would be?
So then I'll flip it.
(14:22):
Now that I've defined it, whatare the most common reasons
people like that?
Speaker 2 (14:27):
Yeah, I mean I think, just like think of the customer
.
We've been talking about thiswith the team here at Directed
IRA yesterday.
It's like buying a propertyneeds to be rehabbed and then
it's going to be rented, right.
There's just a lot oftransactional stuff happening
there signing a contract,closing on it, you know, paying
an inspector, then you own it,and then you're like setting up
(14:49):
utilities, you're gettinginsurance, you're paying, you
know, buying a new fridge or adishwasher, you're paying
someone to repair it or rehab it.
I mean it's just when you'redoing it out of your IRA
directly.
It's just a lot of back andforth and so with the LLC you're
in control.
It's kind of like how you doyour real estate deals already
for someone that's like a realestate investor.
It's just your IRA funds andthat specific LLC.
(15:12):
So you know those are theperfect candidates for this,
generally real estate investors.
But even I use an IRA LLC, youknow.
I mean I mean I sit in theoffice here every day, I can
push the buttons and I know allthe process of what you can and
can't do, and we definitely makeit easy here at Directed IRA.
But the LLC is just a lotsmoother, even when you're
dealing with a title company.
(15:33):
It's just, you know, xyzInvestments LLC.
I got the bank accounts aseparate bank account, that's
you know.
Got my sacred retirementaccount funds in it.
I'm not commingling other stuffwith it.
So I think it's a really goodoption for real estate investors
.
Anyone who wants more controlon their investments, like Mark
Mark's done cows.
That's easier to do in an LLCand go to those transactions
(15:56):
than doing it out of your IRA.
A lot of private lenders.
Speaker 1 (16:00):
Yep, private lending.
I was going to say Matt too,some of you that are crypto
investors want to do altcoins.
You want to do something that'snot on the Gemini exchange,
which we support.
It is super easy to use.
But some of you want to use adifferent storage method.
You want to invest in altcoins,so we'll set up an LLC for you
to do that, so your crypto, yourunique crypto, can even be
(16:23):
owned by your IRA.
So that's what a checkbook LLCis all about.
It's just making life easierfor you to invest in what you
want.
Speaker 2 (16:31):
Well, let me just hit the one that I got this morning
on my social media on realestate, which was the question I
heard you cannot do real estateflips with an IRA, and that was
the question.
And the answer to that is youactually can do real estate and
flip a property with your IRA.
The issue is something calledUBIT tax.
(16:51):
See, when an IRA is investingin real estate or any asset,
it's supposed to get investmentincome like capital gain income
when you sell it, let's say,rental income as you own it.
But if you're deemed to be inthe business of buying and
selling real estate, whereyou're like buying a property
every month and flipping it andselling it, that's not investing
in real estate, that looks morelike inventory, and that your
IRA is in the business of realestate.
(17:13):
So if you're a real estateflipper and you're like, well, I
want to start doing this in myIRA, we're going to look at that
and say, well, how many are yougoing to do in your IRA?
If, like, well, I'm going oneevery month, I'm like I got a
problem, you can do it with yourIRA, but now you're going to
(17:35):
pay this tax called UBIT,unrelated business income tax.
That is a 37% tax and that'sgoing to cut into your profits.
You may not want to do that inyour IRA.
So it's not that you can't doit, it's just you need to learn
the rules on it.
Make sure you're not doing toomany where that tax can apply.
But we have a lot of clientsthat'll do two or three flips a
year in their IRA and then theydo two or three next year.
Their spouse could do two orthree in their separate IRA
(17:55):
account, and so we have a lot ofclients that do the kids Roths
and they're flipping a propertyand they're kids Roth even.
And this could be the same forwholesaling a property or other
kind of shorter termtransactions.
So you can do it, just makesure you understand those UBIT
tax rules and how to navigatearound it and make sure you
don't fall into that trap.
Now I will say this even if youfall into that trap, because I
(18:16):
have clients whose IRAs do realestate development there's more
strategies there.
There's the UBIT blockerstructure where you can pay a
corporate tax of 21%.
So there's always a littlething to learn here.
But the flip I'm green-lightingthat.
Just be careful doing too many.
Speaker 1 (18:33):
There we go, I love it.
Number seven I've got a goodone that I get asked all the
time.
People say, well, what's thepenalty or the tax when I
self-direct Because I don't wantto take money out of my IRA to
buy real estate?
I'm like whoa, whoa, whoa, whoa.
Okay, let's back up, slow thetrain.
You know whatever?
Back to train.
(18:54):
We are not taking the money outof the IRA.
There is no tax, there is nopenalty.
You can self-direct a Roth.
You can self-direct an IRA.
And they'll say, well, I need aself-directed IRA.
How is that different than aregular IRA?
It's still an IRA.
It's just you've moved it to acompany that allows you to
(19:16):
invest in what the hell you wantand they don't take a
commission for it and it isself-directed.
So the beauty of this is and Iwant to just emphasize this
everyone when you move thismoney around to self-direct,
there is no penalty, there is notax.
Now, if you want to convert toa Roth, there could be some tax.
You want to invest in anoperational business like a
(19:39):
restaurant?
There might be this UBIT tax.
You've got to work aroundbecause you're competing with
other normal business owners.
You're not investing, but thereis no basic tax to just
self-direct.
Speaker 2 (19:51):
You get to move the money.
Yeah, great question.
I saw that question actually onone of your YouTube videos,
mark, on self-directing andbuying real estate with your IRA
, and someone had this long,lengthy comment.
I usually don't read all thesecomments, but I just got bored.
What can I say?
And it was this long, lengthycomment.
It's a penalty to do it.
Why would you buy real estatewith your IRA and take the money
(20:11):
out?
And it was like you missed thepoint, lady.
You missed the point, come on,karen.
So, um, all right, well, letthis here's a good one that goes
along with that.
Maybe we'll come back to herelast couple yeah, yeah Is can I
use my existing retirementaccount to fund my self-directed
IRA?
And that's what most people aredoing.
(20:31):
So if you're like, well, I havethis old 401k or I have this
TSP or this 403b or I have abrokerage IRA or an IRA at my
credit union that has a CD, canI use that to self-direct?
Yeah, but you need to get to aself-directed IRA custodian what
we do at Directed IRA, becauseall those providers before and
(20:52):
those accounts they're going tolet you buy the menu of stocks,
bonds, mutual funds, etfs.
But you're like, well, no, Iwant to self-direct, but I want
to use those dollars.
That's what we're talking abouthere.
You open the self-directed IRAaccount and then we can move
those dollars not taxable, nopenalty.
It's not an early distribution.
Let's say you have an IRA atyour local bank or credit union.
(21:15):
That's still an IRA, a directedIRA.
It's like you went from CharlesSchwab to Merrill Lynch.
You've just moved the providerof the account and so not
taxable, no penalty.
And we can definitely dotransfers and rollovers of those
funds which are not taxableover to the self-directed
account.
And that's what our team does.
We have a whole funding team,by the way, that helps do those
transfers and process thosethings with the old retirement
(21:39):
account provider or yourexisting custodian of your IRA.
Speaker 1 (21:42):
I love it.
I love it.
Great question Okay, I've gotnumber nine.
And then you get to round itout with number 10.
Okay, number nine.
I don't know if it's as much ofa question it always comes in a
weird way, but it's amisconception.
They'll say, well, I'm too oldto self-direct, or how old do
you have to be to self-direct?
And I'm like whoa, whoa, whoa,you could be 80 years old and
(22:05):
still investing your IRA and ifyou even convert it to a Roth,
at that point you don't have todo these required minimum
distributions.
You may have a parent or agrandma or be coming up on that
on yourself where you're like,well, I've got to take money out
of my IRA.
Well, let's convert it to aRoth.
You might be in a low tax ratethis year and let's not worry
about that anymore.
(22:25):
And the beauty is, you cancontinue to self-direct.
And we talk about our cryptograndma.
I didn't plan on bringing thisup, but at a couple of our
events she's now family.
She literally is related tosome of us in our organization.
She's just wonderful.
But she has come to our eventsand she's 86 years old now and
(22:48):
she has a self-directed Roth IRAand she's trading crypto.
She's also heavily involved inthe market, and when I want to
know what's going on in themarket, I call her.
I mean like she's up at thecrack of dawn.
It is so funny.
But you're never too old toinvest in what you know.
And then you're never too young.
We have clients that have afive-year year old with a
(23:11):
self-directed Roth, and thatself-directed Roth is in some of
their LLCs that are doing realestate.
So as long as your kids haveearned income, they can open an
account.
So you're never too old.
If you're thinking the kids aretoo young, or I'm too old or my
grandma's too old, oh no, no,no.
I'd rather you set up anaccount for your grandma, fund
it for her and help invest it,and you're the beneficiary when
(23:35):
she passes away.
Now you've got a tax-free ATMbecause you don't have to wait
until you're 59 1⁄2 with aninherited Roth.
Those things are golden, soyou're never too old.
Speaker 2 (23:46):
Just a couple notes on that, if you don't mind, I
think.
Remember Roth IRAs, as Mark'sgiven the example on the crypto
grandma who used the Roth IRAshe doesn't have RMD, she
doesn't need to worry about it,right?
And generally traditional IRAs.
When you reach age 73, you haveto start pulling money out of
that.
So you might need to keep thatin mind.
Don't go buy, you know, use allof your traditional IRA funds
(24:08):
and go buy raw land or someasset or a private fund that
doesn't have distributions orincome coming off of it.
So cause you will have that RMDissue.
But again, it's Roth accounts.
Knock yourself out, keepinvesting that and you can do
that at any age, even thetraditional accounts.
We have clients in theirseventies and eighties still
with self-directed traditionalaccounts, but they have income
on them or they have other IRAsthey can use to satisfy their
(24:29):
RMD.
Okay, drumroll.
Speaker 1 (24:32):
Drumroll Number 10.
Speaker 2 (24:33):
All right, number 10.
This is one I get a lot and Iknow people don't love the
answer, but I think it's themost important thing when you
start self-directing, which iswhat should I invest in with my
self-directed IRA?
You've talked about what I canand what I can't but what should
I invest in with myself-directed IRA?
Speaker 1 (24:54):
And I like the way you phrased it.
It wasn't what is the mostpopular, it's what should you
invest in Exactly?
Speaker 2 (24:58):
Because that answer is different depending on who
you are, and if we look at thelargest accounts here, the
accounts have 2 million plus atdirected IRA.
I'm just telling you.
They are all doing differentthings.
There is not a consistent theme.
If they're doing real estate,they're doing different real
estate strategies.
They're even in differentmarkets.
If they're investing in privatefunds or private companies,
they're different private fundsand different private companies.
(25:19):
And so all the different thingsyou can invest in, we see
clients that have success doingwhat they know, what they've
developed some expertise in,what they've got good at from
when they started investing towherever they're at now as
they've learned and grown andbuilt that account over time.
So the only thing I would say ishave patience, find the things
that you like and you know thatyou have conviction and believe
(25:42):
in are going to be valuableeither from an income or growth
standpoint over time, and thenfocus your investing on those
things.
Don't try to do everything.
Don't try to be a wizard atevery asset class, from crypto
to oil and gas, to real estate,to private companies, to
startups, to venture capital, toprivate equity.
Don't get trapped into that.
You'll be a jack of all tradesand master of none, and that is
(26:05):
one thing I will say that I donot see those accounts doing.
They are not doing a lot ofdifferent things.
They are focused in a fewdifferent things that they do
really well at.
Speaker 1 (26:13):
So that would be my best advice, and what we like to
say is invest in what you knowTo help you guys, because think
outside the box and, for exampleI'm just going to say it
because I was talking to someoneyesterday about this that
they're helping plumbers of allpeople.
The service industry that'salive and well, the training and
(26:39):
the schooling for these tradeservices.
They're booming because a lotof people just aren't going in
that direction.
Well, ai cannot do plumbing forpeople, so I mean whatever.
So I was having thisconversation with a client
that's really focusing on thatindustry and selling marketing
services and management servicesand this, and that, well, let's
say you're a plumber and you'vebeen funding your solo 401k or
you have an old IRA or yourspouse does, or whatever, but
(26:59):
you're in the plumbing industry.
Well, you may want to invest ina startup in plumbing products.
You may want to invest inanother plumbing business.
Now you can't work in thatother business.
Your IRA may purchase, but youmay have technical knowledge or
industry knowledge that you canhelp launch something with your
(27:20):
IRA and get in some otherverticals.
Or you might invest in a truckthat could help a plumbing
company that is in your market,and so there's a lot of options
here.
So just know your industry andknow where the opportunities are
, and 98% of the time, your IRAcould play a role.
Speaker 2 (27:43):
Yeah, and the other thing you'll see too with some
of these, particularly people inthe trades plumbers,
electricians and stuff thatwe've seen in clients is they
actually are like oh, I work ona lot of remodels, I know what's
a good deal and what's a baddeal.
I know good investors that seemto make money on their deals
and don't, and they startinvesting in those deals
themselves or having their IRAinvest in just their network and
the people that they meet doingtheir job and being good at
(28:05):
what they do, having know whoare the people you can trust,
that seem to operate well, andso I think we start seeing that
a little bit as well.
I've given the example of thedentists.
We had a number of dentistscome in all at once to invest
their IRAs into this mouthguardprivate company.
We have there's groups calledmeta angels that are doctors
(28:26):
that invest in healthcarecompanies, and many of them use
their IRAs.
There's tech coast angels,another angel group.
They invest in tech startupsand they're mostly technology
executives or people that workin the technical space or
developers, and so they'reinvesting in what they know.
Now you don't have to do that.
I mean, like I'm a retirementaccount guy, I mostly invest in
real estate because it's beentried and true for me and I've
(28:48):
happened to make some goodconnections of people that seem
to perform well and that I cantrust, where I've been able to
get good returns, and so justfind your lane and have some
patience with that.
Know, there's some educationthere on learning the asset
classes, but we just think theself-directed IRAs are something
that more people need to bedoing.
It's not for everybody, butit's for a hell of a lot more
(29:09):
people that are currently doingit right now, and so hopefully
you found this helpful.
Make sure you're subscribed tothe podcast too.
By the way.
There's a lot of other priorepisodes where we've dug deep
into each of these little topicswe discussed here in these most
common questions.
We have webinars every month,we have events and all these
other resources to help you asyou're learning how to
(29:31):
self-direct your IRA and takingcontrol of your retirement.
Speaker 1 (29:34):
And thank you everyone for listening.
A quick disclaimer and reminderthis presentation does not
constitute an attorney or CPAclient relationship and it is
always in your best interest toconsult competent legal and tax
professionals when conductingyour own personal transactions.
Speaker 2 (29:51):
We also want to make sure you know this is not
investment advice or financialadvice.
We're just trying to give youeducation, ideas and strategies
you can take to yourprofessionals or conduct your
own research on.
We'll see you next time.
Welcome everybody to another episode of the Directed
IRA podcast.
Excited to be here with youtoday.
My name is Mark Kohler.
I'm here with my incrediblepartner, the CEO of Directed IRA
, a trust company himself.
Matt.
There are some common questionsout there.
People keep asking and we areso excited about that because
questions mean inquiries andpeople catching the vision of
(00:30):
things.
But we got some answers forthem, I think, today.
Speaker 2 (00:34):
Yeah, we want to hit the most common questions.
We hear about self-directing.
A lot of these come up over andover again on the phones with
our team here.
Mark and I have done the 10,000consults as lawyers, answering
these questions, because formost people, self-directing your
IRA is a new thing.
They've never done it before.
Most of our customers come hereand they're like they've been
investing in the stock market,buying ETFs or target date funds
(00:55):
or mutual funds, and they'relike hold on, I can buy these
assets in my IRA and you need tolearn a few things.
You need to learn more thanlike typing in a few keystrokes
and hitting buy on a computer.
So it's not rocket science, butwe want to hit some of the
common questions for any of youwho are interested in this.
Maybe some of you just gotstarted and you're like I'm not
sure I understand everything onthere.
(01:16):
We want to hit some of thosecommon questions for you today.
Speaker 1 (01:18):
Yeah, I think we'll do kind of a speed dating round
three minutes each, see if wecan do even less than that.
And with every one of thesequestions there's a full podcast
or more.
A copy of Matt's book is a must.
Please go over to Amazon andlook at the self-directed IRA
handbook and I think it's justan incredible resource for
(01:41):
anybody self-directing.
You've got to have that book.
And, matt, it was funny.
I was just talking to one ofour video editors yesterday
Preston, in fact, I'll call himout and he was like oh my gosh,
I was editing your video andwhen you said self-directed IRA,
I was like, oh, that means Ican buy any stock I want.
And he's like I was blown away.
And this is an editor of ourvideos that was actually
(02:04):
listening to that show.
And it was really fun to seethe lights go off, even for our
outside video teams to startcatching the vision of this.
Speaker 2 (02:15):
Yeah, yeah, and I think it's something that's like
for us.
It's like staring at you know,we're like looking at this every
day, but for most people theyjust have never even heard about
this.
And even me, going back 2006,the first time I heard about an
IRA buying real estate, I waslike I don't think you can do
that.
I looked it up, talked to Mark,I was like turns out it's a
(02:35):
thing.
So we know where everyone'scoming from on this and don't
feel like you've got to mastereverything.
That's why we're here, our teamat Directed IRA.
If you need a lawyer at KQSLawyers, we're here to help make
it easy.
We've got a ton of educationalcontent.
But let's hit some of thecommon questions and I'll just
hit the first one out of thegate, if you don't mind, Mark
(03:00):
which is what can I invest in?
I mean, that's like.
The first question is so starttalking about, yeah, you could
buy real estate or a privatecompany.
They start thinking, oh, like apublicly traded REIT or a
publicly traded real estatecompany, no, no, no, I'm talking
about like the duplex down thestreet, the single family rental
, the little real estatesyndication, buying a $5 billion
building.
You put $100K in.
(03:21):
I mean, those are the types ofdeals your IRA can actually
invest in.
They can invest in other bigprivate assets, but they can buy
these, even these unique littleassets.
You can buy those, invest inthem with your IRA.
So know that those are like thecommon assets I would say real
estate, whether it's a rental, aflip, lending on it, a private
fund, precious metals, cryptothese are the types of assets
(03:44):
you can buy.
They're most common, but reallyanything's fair game.
We'll hit some restrictionshere in a second, but that's the
things you can invest in withyour self-directed IRA.
Speaker 1 (03:52):
I love it All right, okay, give me number two, let's
do it.
Speaker 2 (03:55):
All right.
Number two what can't I investin with my IRA?
Speaker 1 (04:00):
Boy, you gave me the trickier one.
I don't know if I can talkabout it that long because the
list is so short.
The one thing you cannot investin is You've been a lawyer
billing by the hour for 20 years.
Let's get very explicit.
I'll kind of give a little list.
One is you can't invest yourIRA into something that is not
(04:24):
allowed under law, like, forexample, under federal law.
Your IRA, because it's afederal, monitored or I guess
you'd say federally regulatedtax strategy or tool, cannot
invest in a cannabis operation.
Now, it's allowed at the statelevel in a number of states, but
(04:47):
it's not allowed at the federallevel.
So your IRA cannot invest insomething that is not allowed
under law obviously drug dealingor prostitution or something
really bad, but that would eveninclude cannabis because it's
not federally allowed.
Number two it cannot invest inS-corpor corporations.
Many of you may be a smallbusiness owner with an S corp
and you're like, oh, I'm goingto invest in so-and-so's S corp
(05:09):
or even my own.
I cannot do that with my IRA.
The third thing and I thinkwe'll probably have a question
on this regarding prohibitedparties is your IRA cannot
invest in something a prohibitedparty to you owns, like it
cannot buy stock you already own.
It cannot buy real estate youalready own.
It cannot invest in somethingyour mom owns or your dad owns
(05:34):
that they already own.
Now you can go invest together.
We'll probably get to that, butI think that's really the list
of something that's illegalanyway under federal law S
corporations or invest in or buysomething that you already own.
That would be not allowed,anything, you'd add, matt.
Speaker 2 (05:52):
Yeah, the only thing would be collectible items.
The tax code used to actuallywith retirement accounts, you
could buy collectibles with yourIRA, right, you could buy art
even.
You could buy a coin collection.
You could buy a coin collection, you could buy a wine
collection, you know.
But those turned into thebottle collections and Congress
was like, nah, we're not goingto let people buy these
(06:12):
collectible items.
They're kind of quasiinvestments with some personal
benefit or attachment that somepeople have to those things.
So they restricted collectibleslater on.
So now there are certain thingsthat are approved that could be
seen as a collectible, likecertain precious metals gold,
silver, platinum, palladium.
You can buy those Notcollectible value type precious
(06:33):
metals, but like gold bullion orcertain government issued coins
, like American Eagles, forexample, you can buy those and
actually physically own thosespecific precious metals.
So there are some exceptions,but take collectibles off.
And then life insurance is aweird one too.
401ks can do life insurance butIRAs can't.
But I think the big one, whichwould be the next question I had
(06:54):
, was what Mark was talkingabout, which is like well, what
is the main restriction or rulesI need to know when I'm doing
this with my IRA, and that isthe perfect transaction rule.
Speaker 1 (07:05):
So if that's question number three, that is a big one
.
Like what do I need to know?
Okay, we have a whole podcastwith 400 episodes.
No, that's a good one.
How would you answer that?
Like what do I?
Speaker 2 (07:17):
need to know in general, yeah, I think for most
people, this rule doesn't matter.
It's just the ones that aretrying to do something cute or
they've got some tricky dealsthey're trying to execute.
So what Mark said earlier is ifyou already own an asset, you
can't sell it to your IRA.
So the IRS says something.
Or let's just say, congresscreated something called the
prohibited transaction rulesthat says, hey, these IRAs are
(07:39):
special tax beneficial accounts.
The government doesn't collectas much money on them as they
can on other accounts.
So we're going to only let yourIRA invest with third parties.
It can't go buy an asset fromyou personally.
It can't go buy an asset fromyour spouse, your parents, your
kids.
There's these people calleddisqualified persons.
So if you're like, well, Iwanted to use my IRA to buy
(08:01):
property for myself or sell somestock or some options I
personally own over my IRA, justknow that's not going to work.
Can your IRA buy real estate?
Can it buy stock?
Can it buy options?
Yes, it just can't buy ones youalready own or anyone who's
considered a disqualified person.
So if you're like well, man, Iwas going to buy real estate.
I wasn't going to buy alreadyowned real estate, I'm going to
keep that, but I'm going to buynew real estate with my IRA.
(08:22):
That's totally fine.
So that's that.
Prohibited transactional.
There's more to that, as Marksaid.
We've got a lot of theirpodcasts on it.
But as a general rule, as longas you're just buying from third
parties or making investmentstrying to find the best deal,
not necessarily trying to moveassets you personally own or
close family members, you'regoing to be fine on that rule.
I like it All right.
Number four I'm ready, allright.
(08:45):
What account type should I setup?
Ooh, ooh.
Speaker 1 (08:49):
Well, that depends on , first, what type of account
you may already have.
So if you already have an IRAat Fidelity or Schwab or
somewhere, then you're going towant to open a self-directed IRA
and move that.
You kind of have to move itfrom IRA to IRA.
So if it's a traditional IRA,you would open a traditional IRA
(09:11):
at our company, the trustcompany, and then if you had a
Roth IRA at Fidelity, you'd opena Roth IRA where it's going.
Now, once you get it therelet's say you move a traditional
IRA you can convert it to aRoth.
Let's say you have an old 401kfrom a job five years ago and
it's just sitting there.
You don't know what's even init.
(09:32):
You finally call them andyou're like, oh my gosh, I got
50 grand in there.
I'd love to self-direct that.
I got a deal I'd like to dowith my brother or my sister, or
I've got this private companythat I'd like to invest in.
You can roll it.
That would be a rollover in asense, where you take it from
the old 401k and you'd open anIRA for it to go into.
Now, for the small businessowners out there, you already
(09:53):
have a solo 401k and you're like, oh, I'm just going to roll it
directly from the 401k into mysolo 401k.
So there's a variety ofaccounts that you might set up,
but the general rule is I wantto set up an account that's
going to receive the same typeof funds.
You could open a health savingsaccount.
Matt knows I'd love toself-direct my health savings
(10:13):
account.
You could open a Coverdelleducation account and start
building that.
So the world is your oysterhere.
There's not one particularaccount.
That's the right one.
It's what's best for you.
Speaker 2 (10:29):
Yeah, and we have many account owners here that
have a Roth IRA.
They have an HSA, they have atraditional IRA.
They might have multipleaccount types that they are
self-directing.
The one that we get quite a bitis well, I have a traditional
IRA but I want to do aself-directed Roth IRA.
Can I do that?
Well, yes, but you've got toconvert it to a Roth IRA.
So we have a Roth conversionapp where we open up the
traditional IRA to receive thetransfer of traditional IRA
(10:52):
dollars and then we immediatelyconvert it over to Roth dollars.
Now remember, when you converttraditional dollars to Roth,
you've got to pay tax on theamount converted.
So if that was a $100,000amount you moved over and
converted to Roth, you're goingto get a 1099 for 100 grand.
That's going to go on your taxreturn, your 1040.
And if you're in a 30% taxbracket, you're sending the IRS
(11:12):
30 grand plus whatever state,depending on the state you're in
.
So now the upside, of course,is that's growing and coming out
tax-free later.
But that's a very commonapproach.
And the other thing I'll say isRoth IRAs are the most popular
account and that's not typicalfor IRAs in general.
If you ask a Schwab or aFidelity.
Traditional IRAs dominate justbecause most people have saved
(11:34):
traditional dollars in 401Kplans over the years.
But Roth IRAs are more popularwith us.
A lot of people convert or seemto like to self-direct Roths
because they're more in controlof your own destiny with a
self-directed account right andyou're liking that tax-free
growth and that tax-freedistribution later on in
retirement.
Speaker 1 (11:51):
See, and I misunderstood the question, I
didn't know.
Like, when I go to a restaurant, I always ask the waiter what
do you like on the menu, likewhat's your favorite, instead of
what should I do?
So those are the like what'syour favorite.
That would be the Roth IRA whatyou should do and what's the
favorite out.
There could be two differentthings, but that's what we're
(12:11):
really good at here.
We've got a helpline thatduring business hours.
They're right.
On top of that, you can alwayscall.
Speaker 2 (12:19):
Book a call too.
Schedule that, if you want.
Speaker 1 (12:21):
Yeah, we've got that's.
What's unique about our trustcompany is you're actually
talking to human beings, not AIin the United States to boot.
So you're really getting andour team is so fun.
They're so amazing.
The culture at our company isreally.
It's like a little dot com ofyoung people that just get it.
It's so fun.
Okay, well, it sounds likeyou're batting cleanup.
(12:41):
I'm going to like take firststab and then you clean that.
Give me question five cryingout loud.
Speaker 2 (12:47):
Okay, when should I use a checkbook?
Ira or IRA LLC?
Ooh Well, maybe even what isthat?
You take that however you want,yeah yeah, player's choice on
this.
Speaker 1 (12:59):
Yeah, I like that.
I'm going to define it and thengive one idea, because there
are several instances.
So I know, matt, this is a goodone for you to back clean up on
.
So what is a checkbook IRA?
That is essentially, when youuse an LLC limited liability
company and you have your IRAinstead of invest in some other
(13:19):
operation or invest in directlyin a rental property or a
property or directly into crypto.
You say you know what?
I'm going to form an LLC that'sgoing to be owned entirely by
my IRA and invest in that, andwe'll do that.
We do that every day, everyhour of the every day, and so
we're going to move that moneyinto that LLC.
(13:41):
And now you control thecheckbook.
That is not prohibited, so youdon't have to call us and say,
oh, do this, do that.
We're going to put the money inthe LLC.
We're going to give you therule book you got to follow, but
you're going to take that LLCand invest it as quickly as you
want in whatever the hell youwant.
That's allowed, and you kind ofcut us out of it, which is fine.
(14:01):
Your fees don't change.
We want to save you time andsave you money, and you calling
us every time you want to dosomething can be a pain in the
butt.
So these checkbook LLCs arereally what's going on.
It's not a checkbook IRA, it'san LLC owned by your IRA, and
that checkbook LLC is there tohelp you.
So, matt, what would be?
So then I'll flip it.
(14:22):
Now that I've defined it, whatare the most common reasons
people like that?
Speaker 2 (14:27):
Yeah, I mean I think, just like think of the customer
.
We've been talking about thiswith the team here at Directed
IRA yesterday.
It's like buying a propertyneeds to be rehabbed and then
it's going to be rented, right.
There's just a lot oftransactional stuff happening
there signing a contract,closing on it, you know, paying
an inspector, then you own it,and then you're like setting up
(14:49):
utilities, you're gettinginsurance, you're paying, you
know, buying a new fridge or adishwasher, you're paying
someone to repair it or rehab it.
I mean it's just when you'redoing it out of your IRA
directly.
It's just a lot of back andforth and so with the LLC you're
in control.
It's kind of like how you doyour real estate deals already
for someone that's like a realestate investor.
It's just your IRA funds andthat specific LLC.
(15:12):
So you know those are theperfect candidates for this,
generally real estate investors.
But even I use an IRA LLC, youknow.
I mean I mean I sit in theoffice here every day, I can
push the buttons and I know allthe process of what you can and
can't do, and we definitely makeit easy here at Directed IRA.
But the LLC is just a lotsmoother, even when you're
dealing with a title company.
(15:33):
It's just, you know, xyzInvestments LLC.
I got the bank accounts aseparate bank account, that's
you know.
Got my sacred retirementaccount funds in it.
I'm not commingling other stuffwith it.
So I think it's a really goodoption for real estate investors
.
Anyone who wants more controlon their investments, like Mark
Mark's done cows.
That's easier to do in an LLCand go to those transactions
(15:56):
than doing it out of your IRA.
A lot of private lenders.
Speaker 1 (16:00):
Yep, private lending.
I was going to say Matt too,some of you that are crypto
investors want to do altcoins.
You want to do something that'snot on the Gemini exchange,
which we support.
It is super easy to use.
But some of you want to use adifferent storage method.
You want to invest in altcoins,so we'll set up an LLC for you
to do that, so your crypto, yourunique crypto, can even be
(16:23):
owned by your IRA.
So that's what a checkbook LLCis all about.
It's just making life easierfor you to invest in what you
want.
Speaker 2 (16:31):
Well, let me just hit the one that I got this morning
on my social media on realestate, which was the question I
heard you cannot do real estateflips with an IRA, and that was
the question.
And the answer to that is youactually can do real estate and
flip a property with your IRA.
The issue is something calledUBIT tax.
(16:51):
See, when an IRA is investingin real estate or any asset,
it's supposed to get investmentincome like capital gain income
when you sell it, let's say,rental income as you own it.
But if you're deemed to be inthe business of buying and
selling real estate, whereyou're like buying a property
every month and flipping it andselling it, that's not investing
in real estate, that looks morelike inventory, and that your
IRA is in the business of realestate.
(17:13):
So if you're a real estateflipper and you're like, well, I
want to start doing this in myIRA, we're going to look at that
and say, well, how many are yougoing to do in your IRA?
If, like, well, I'm going oneevery month, I'm like I got a
problem, you can do it with yourIRA, but now you're going to
(17:35):
pay this tax called UBIT,unrelated business income tax.
That is a 37% tax and that'sgoing to cut into your profits.
You may not want to do that inyour IRA.
So it's not that you can't doit, it's just you need to learn
the rules on it.
Make sure you're not doing toomany where that tax can apply.
But we have a lot of clientsthat'll do two or three flips a
year in their IRA and then theydo two or three next year.
Their spouse could do two orthree in their separate IRA
(17:55):
account, and so we have a lot ofclients that do the kids Roths
and they're flipping a propertyand they're kids Roth even.
And this could be the same forwholesaling a property or other
kind of shorter termtransactions.
So you can do it, just makesure you understand those UBIT
tax rules and how to navigatearound it and make sure you
don't fall into that trap.
Now I will say this even if youfall into that trap, because I
(18:16):
have clients whose IRAs do realestate development there's more
strategies there.
There's the UBIT blockerstructure where you can pay a
corporate tax of 21%.
So there's always a littlething to learn here.
But the flip I'm green-lightingthat.
Just be careful doing too many.
Speaker 1 (18:33):
There we go, I love it.
Number seven I've got a goodone that I get asked all the
time.
People say, well, what's thepenalty or the tax when I
self-direct Because I don't wantto take money out of my IRA to
buy real estate?
I'm like whoa, whoa, whoa, whoa.
Okay, let's back up, slow thetrain.
You know whatever?
Back to train.
(18:54):
We are not taking the money outof the IRA.
There is no tax, there is nopenalty.
You can self-direct a Roth.
You can self-direct an IRA.
And they'll say, well, I need aself-directed IRA.
How is that different than aregular IRA?
It's still an IRA.
It's just you've moved it to acompany that allows you to
(19:16):
invest in what the hell you wantand they don't take a
commission for it and it isself-directed.
So the beauty of this is and Iwant to just emphasize this
everyone when you move thismoney around to self-direct,
there is no penalty, there is notax.
Now, if you want to convert toa Roth, there could be some tax.
You want to invest in anoperational business like a
(19:39):
restaurant?
There might be this UBIT tax.
You've got to work aroundbecause you're competing with
other normal business owners.
You're not investing, but thereis no basic tax to just
self-direct.
Speaker 2 (19:51):
You get to move the money.
Yeah, great question.
I saw that question actually onone of your YouTube videos,
mark, on self-directing andbuying real estate with your IRA
, and someone had this long,lengthy comment.
I usually don't read all thesecomments, but I just got bored.
What can I say?
And it was this long, lengthycomment.
It's a penalty to do it.
Why would you buy real estatewith your IRA and take the money
(20:11):
out?
And it was like you missed thepoint, lady.
You missed the point, come on,karen.
So, um, all right, well, letthis here's a good one that goes
along with that.
Maybe we'll come back to herelast couple yeah, yeah Is can I
use my existing retirementaccount to fund my self-directed
IRA?
And that's what most people aredoing.
(20:31):
So if you're like, well, I havethis old 401k or I have this
TSP or this 403b or I have abrokerage IRA or an IRA at my
credit union that has a CD, canI use that to self-direct?
Yeah, but you need to get to aself-directed IRA custodian what
we do at Directed IRA, becauseall those providers before and
(20:52):
those accounts they're going tolet you buy the menu of stocks,
bonds, mutual funds, etfs.
But you're like, well, no, Iwant to self-direct, but I want
to use those dollars.
That's what we're talking abouthere.
You open the self-directed IRAaccount and then we can move
those dollars not taxable, nopenalty.
It's not an early distribution.
Let's say you have an IRA atyour local bank or credit union.
(21:15):
That's still an IRA, a directedIRA.
It's like you went from CharlesSchwab to Merrill Lynch.
You've just moved the providerof the account and so not
taxable, no penalty.
And we can definitely dotransfers and rollovers of those
funds which are not taxableover to the self-directed
account.
And that's what our team does.
We have a whole funding team,by the way, that helps do those
transfers and process thosethings with the old retirement
(21:39):
account provider or yourexisting custodian of your IRA.
Speaker 1 (21:42):
I love it.
I love it.
Great question Okay, I've gotnumber nine.
And then you get to round itout with number 10.
Okay, number nine.
I don't know if it's as much ofa question it always comes in a
weird way, but it's amisconception.
They'll say, well, I'm too oldto self-direct, or how old do
you have to be to self-direct?
And I'm like whoa, whoa, whoa,you could be 80 years old and
(22:05):
still investing your IRA and ifyou even convert it to a Roth,
at that point you don't have todo these required minimum
distributions.
You may have a parent or agrandma or be coming up on that
on yourself where you're like,well, I've got to take money out
of my IRA.
Well, let's convert it to aRoth.
You might be in a low tax ratethis year and let's not worry
about that anymore.
(22:25):
And the beauty is, you cancontinue to self-direct.
And we talk about our cryptograndma.
I didn't plan on bringing thisup, but at a couple of our
events she's now family.
She literally is related tosome of us in our organization.
She's just wonderful.
But she has come to our eventsand she's 86 years old now and
(22:48):
she has a self-directed Roth IRAand she's trading crypto.
She's also heavily involved inthe market, and when I want to
know what's going on in themarket, I call her.
I mean like she's up at thecrack of dawn.
It is so funny.
But you're never too old toinvest in what you know.
And then you're never too young.
We have clients that have afive-year year old with a
(23:11):
self-directed Roth, and thatself-directed Roth is in some of
their LLCs that are doing realestate.
So as long as your kids haveearned income, they can open an
account.
So you're never too old.
If you're thinking the kids aretoo young, or I'm too old or my
grandma's too old, oh no, no,no.
I'd rather you set up anaccount for your grandma, fund
it for her and help invest it,and you're the beneficiary when
(23:35):
she passes away.
Now you've got a tax-free ATMbecause you don't have to wait
until you're 59 1⁄2 with aninherited Roth.
Those things are golden, soyou're never too old.
Speaker 2 (23:46):
Just a couple notes on that, if you don't mind, I
think.
Remember Roth IRAs, as Mark'sgiven the example on the crypto
grandma who used the Roth IRAshe doesn't have RMD, she
doesn't need to worry about it,right?
And generally traditional IRAs.
When you reach age 73, you haveto start pulling money out of
that.
So you might need to keep thatin mind.
Don't go buy, you know, use allof your traditional IRA funds
(24:08):
and go buy raw land or someasset or a private fund that
doesn't have distributions orincome coming off of it.
So cause you will have that RMDissue.
But again, it's Roth accounts.
Knock yourself out, keepinvesting that and you can do
that at any age, even thetraditional accounts.
We have clients in theirseventies and eighties still
with self-directed traditionalaccounts, but they have income
on them or they have other IRAsthey can use to satisfy their
(24:29):
RMD.
Okay, drumroll.
Speaker 1 (24:32):
Drumroll Number 10.
Speaker 2 (24:33):
All right, number 10.
This is one I get a lot and Iknow people don't love the
answer, but I think it's themost important thing when you
start self-directing, which iswhat should I invest in with my
self-directed IRA?
You've talked about what I canand what I can't but what should
I invest in with myself-directed IRA?
Speaker 1 (24:54):
And I like the way you phrased it.
It wasn't what is the mostpopular, it's what should you
invest in Exactly?
Speaker 2 (24:58):
Because that answer is different depending on who
you are, and if we look at thelargest accounts here, the
accounts have 2 million plus atdirected IRA.
I'm just telling you.
They are all doing differentthings.
There is not a consistent theme.
If they're doing real estate,they're doing different real
estate strategies.
They're even in differentmarkets.
If they're investing in privatefunds or private companies,
they're different private fundsand different private companies.
(25:19):
And so all the different thingsyou can invest in, we see
clients that have success doingwhat they know, what they've
developed some expertise in,what they've got good at from
when they started investing towherever they're at now as
they've learned and grown andbuilt that account over time.
So the only thing I would say ishave patience, find the things
that you like and you know thatyou have conviction and believe
(25:42):
in are going to be valuableeither from an income or growth
standpoint over time, and thenfocus your investing on those
things.
Don't try to do everything.
Don't try to be a wizard atevery asset class, from crypto
to oil and gas, to real estate,to private companies, to
startups, to venture capital, toprivate equity.
Don't get trapped into that.
You'll be a jack of all tradesand master of none, and that is
(26:05):
one thing I will say that I donot see those accounts doing.
They are not doing a lot ofdifferent things.
They are focused in a fewdifferent things that they do
really well at.
Speaker 1 (26:13):
So that would be my best advice, and what we like to
say is invest in what you knowTo help you guys, because think
outside the box and, for exampleI'm just going to say it
because I was talking to someoneyesterday about this that
they're helping plumbers of allpeople.
The service industry that'salive and well, the training and
(26:39):
the schooling for these tradeservices.
They're booming because a lotof people just aren't going in
that direction.
Well, ai cannot do plumbing forpeople, so I mean whatever.
So I was having thisconversation with a client
that's really focusing on thatindustry and selling marketing
services and management servicesand this, and that, well, let's
say you're a plumber and you'vebeen funding your solo 401k or
you have an old IRA or yourspouse does, or whatever, but
(26:59):
you're in the plumbing industry.
Well, you may want to invest ina startup in plumbing products.
You may want to invest inanother plumbing business.
Now you can't work in thatother business.
Your IRA may purchase, but youmay have technical knowledge or
industry knowledge that you canhelp launch something with your
(27:20):
IRA and get in some otherverticals.
Or you might invest in a truckthat could help a plumbing
company that is in your market,and so there's a lot of options
here.
So just know your industry andknow where the opportunities are
, and 98% of the time, your IRAcould play a role.
Speaker 2 (27:43):
Yeah, and the other thing you'll see too with some
of these, particularly people inthe trades plumbers,
electricians and stuff thatwe've seen in clients is they
actually are like oh, I work ona lot of remodels, I know what's
a good deal and what's a baddeal.
I know good investors that seemto make money on their deals
and don't, and they startinvesting in those deals
themselves or having their IRAinvest in just their network and
the people that they meet doingtheir job and being good at
(28:05):
what they do, having know whoare the people you can trust,
that seem to operate well, andso I think we start seeing that
a little bit as well.
I've given the example of thedentists.
We had a number of dentistscome in all at once to invest
their IRAs into this mouthguardprivate company.
We have there's groups calledmeta angels that are doctors
(28:26):
that invest in healthcarecompanies, and many of them use
their IRAs.
There's tech coast angels,another angel group.
They invest in tech startupsand they're mostly technology
executives or people that workin the technical space or
developers, and so they'reinvesting in what they know.
Now you don't have to do that.
I mean, like I'm a retirementaccount guy, I mostly invest in
real estate because it's beentried and true for me and I've
(28:48):
happened to make some goodconnections of people that seem
to perform well and that I cantrust, where I've been able to
get good returns, and so justfind your lane and have some
patience with that.
Know, there's some educationthere on learning the asset
classes, but we just think theself-directed IRAs are something
that more people need to bedoing.
It's not for everybody, butit's for a hell of a lot more
(29:09):
people that are currently doingit right now, and so hopefully
you found this helpful.
Make sure you're subscribed tothe podcast too.
By the way.
There's a lot of other priorepisodes where we've dug deep
into each of these little topicswe discussed here in these most
common questions.
We have webinars every month,we have events and all these
other resources to help you asyou're learning how to
(29:31):
self-direct your IRA and takingcontrol of your retirement.
Speaker 1 (29:34):
And thank you everyone for listening.
A quick disclaimer and reminderthis presentation does not
constitute an attorney or CPAclient relationship and it is
always in your best interest toconsult competent legal and tax
professionals when conductingyour own personal transactions.
Speaker 2 (29:51):
We also want to make sure you know this is not
investment advice or financialadvice.
We're just trying to give youeducation, ideas and strategies
you can take to yourprofessionals or conduct your
own research on.
We'll see you next time.
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