Advantages of a Self Directed IRA LLC

An IRA, or Individual Retirement Arrangement, allows individuals to save some of the money they earn every year without having to pay taxes. Taxes are applied to your savings either once you begin withdrawing your funds at the age of retirement, after 59 1/2 or at the age of 70 1/2 when Requirement Minimum Distributions (RMDs) are triggered. IRAs can be set up at a brokerage or bank. If you choose to self direct your IRA account, then you will be able to rent newly purchased properties and direct the rental income into your account. Note: You can’t transfer rental, investment or personal properties that you already own into your account.

Benefits of a Self Directed IRA LLC

A self directed IRA LLC, or Limited Liability Company, has more advantages than a standard, conventional IRA. This structure allows you to have ‘checkbook control’, meaning that you will be allowed to make just about any non-traditional investment you want (see note below). A standard IRA set up requires you to consult with the custodian before making any decisions regarding the investments you would like to make in your account. This can cost you the valuable asset of time. However, with an IRA owned LLC account, you can invest your funds and purchase an asset by simply writing a check for the investment you are interested in acquiring.  Since you are handling part of the administrative process, you will also spend less on custodian fees. Check out our video below to learn more…

Another benefit of a self-directed IRA LLC is you typically only have to pay a set up fee and a nominal annual fee to the custodian in order to keep your account in good standing with them. A self directed IRA LLC can provide more savings than a regular IRA because you will be able to make all the decisions and investments, without paying the custodian or dealing with a custodian for every transaction. This means less money spent on fees, which in turn means more money is able to remain within your retirement account allowing it to work for you.

An IRA LLC allows an investor to invest in foreign real estate with an IRA, mortgages, commercial properties and foreclosures. For example, you are could try your hand at foreign real estate investing and purchase an investment property with your IRA, if you so choose. However, before we get to far ahead of ourselves, you should be made aware that you can’t vacation at your investment property even if you pay your IRA rent. Kind of does not see fair, huh?

Besides real estate, you may also invest in stocks, make loans to non-disqualified parties and purchase tax liens with your IRA. Additionally, you are also allowed to buy foreign currency, bonds, precious metals or mutual funds. You are truly only limited by the IRA prohibited transactions, so to preserve your hard earned money, make sure that you know the IRA rules put out by the IRS and speak to a knowledge IRA specialist. Also, if you are looking to purchase foreign real estate, as mentioned previously, then get to know the rules for purchasing real estate in whatever country you are looking to make an investment since every country plays by a differing set of rules.

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SEC Warns That Not All Self-Directed IRA Investments Are Good For Your Retirement

The SEC (Securities and Exchange Commission) recently issued an official warning about the so-called ‘dangers’ of investments that some self directed IRA holders can fall into if they’re not careful. In a nutshell, the SEC warns, especially IRA holders, seeking alternative IRA investments to be cautious of investments that may just be plain-old Ponzi schemes.

Here’s a quote from the report:

“In particular, fraud promoters who want to engage in Ponzi schemes or other fraudulent conduct may exploit self directed IRAs because they permit investors to hold unregistered securities and the custodians or trustees of these accounts likely have not investigated the securities or the background of the promoter.”

The SEC’s Investor Alert also stated there is an increase in the number of cases of fraud where the funding came from plans that were self directed.

The facts are that roughly 2-3% of all IRAs are self directed and less than 1% of those accounts are thought to have been associated in alleged scams or Ponzi-like activity. Hardly much to write home about, would you agree?. In fact, on its face, there is much more good than bad, but as you already know if you read this blog, good news rarely gets reported. There are a wide variety of solid investment opportunities available to people with self directed IRAs. Yet, the self directed IRA has once again garnered the most media attention due to some schemes, most notably the Bernie Madoff ponzi scheme.

It is good to be warned by our government and others, but no one should be left with the impression that everyone who has a self directed account is somehow participating in a scheme or maybe involved in a risky or prohibited IRA transaction or that everyone who is offering participation in an alternative investment is doing so in order prey on people’s retirement accounts and drag them into a ponzi scheme.

In the court of public opinion with all the negative media reporting about people that may have lost part or all of their retirement, it maybe somewhat impossible for the uniformed reader or listener to differentiate between the legitimacy of a self directed IRA and the motives of investment promoters. But, I can assure you they are different things altogether. So, our purpose in writing this post is to make some distinctions and educate you about what you ought consider and what to stay away from when it comes to anyone trying to offer you an investment for your IRA account.

No one here is trying to defend anyone and when anyone loses money due to a bad investment it is not a good thing, especially when someone who loses their hard-earned money in an investment. As a side-note, it is a stark reminder that when investing, it is not prudent to put all of your eggs in one basket in the event that an investment that looks promising in the beginning turns south on you in the end.

Remember everyone is innocent until they are proven guilty. However, before hearing all the facts what the media tends to do is sensationalize a story, spin or editorialize it rather than report it, villainize easy targets, pick winners and the losers, unofficially try the case as judge and jury for their version of the story in order to inappropriately inject confusion, fear and influence the public’s perception.

For example, perhaps the investment promoters just made bad investments or perhaps what started off with good intentions did not wind up as they intended due to unknown or changing market factors that occurred over the course of the investment; and what I mean by that is investments, which have a longer lifecycle have to generally endure additional market forces in order to remain profitable.

However, let’s level with each other. Whenever you put your money into an investment whether you invest with your IRA or your personal money you are ALWAYS putting your money at some level of risk. There is not a known investment that does not come with its own set of unique risks. If anyone claims otherwise, then you need to stay far from those promoters and wait for another opportunity. In fact, those that usually make more money than others know this and they are usually better at measuring risk beforehand and migrating risks and as they happen.

The fact that we are hearing about this now may also be since over the past several years there has been a general increase in the use of self directed IRAs to make investments due to the lack of liquidity in the real estate investment market

How To Snuff Out A Bad Investment Promoter Targeting IRAs?

Let’s get quickly back to the reason the SEC issued their warning in the first place. Remember here is what they said and I paraphrase: The likely reason investment promoters are now targeting self directed IRAs is because there are literally trillions of dollars in them right now, making these funds easily accessible and plentiful. We also agree with them, but keep in mind anyone with money these days can be the target or fall unawares into a bad investment.

You should be aware that there might be investment promoters out there dressed up as wolves in sheep’s clothing. There are a number of ways fraudulent promoters might attempt to sucker you into their deal. Here are just a few of the things they might say to tickle your ears so that you may be tempted to go with their program.

Sharpen your hearing and attune your ears to these things so you can avoid these bottom-feeders and continue investing using self directed IRAs without fear.

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Differences Between A Self Directed IRA And A Truly Self Directed One

As someone who regularly structures truly self directed IRAs for clients, I find that there are a lot of misconceptions about IRAs in general and truly self directed IRAs in particular. Consequently, I thought it might be a good idea to generally discuss some of the misconceptions related to IRAs based on some recent feedback we have received.

Is An IRA An Investment?

An IRA, or an Individual Retirement Arrangement, is a financial instrument that allows you to create a tax-deferred shelter. It is not an investment in and of itself. It is just a investment vehicle you can use to hold your investment portfolio and build your retirement funds.

Who Manages An IRA?

All types of IRAs will require an administrator, who is referred to as a custodian. However, if you have a truly self directed IRA, you are in charge of your own investments. You will not have to deal with the constant intervention of the custodian for each and every transaction within the account. Learn the benefits of having a truly self directed IRA.

What Kind of IRAs Are There?

There are three basic varieties of IRAs:

• A standard IRA, which does not allow for alternative assets such as individual real estate investments, residential or commercial properties or tax liens.

• A self directed IRA, which has many of the features associated with a standard IRA, but also allows for a broader range of investments, including individual real estate investments and precious metals like gold and silver bullion.

• A truly self directed IRA, which gives you complete checkbook control and allows you to invest in a broad range of investments like, real estate, oil and gas, and investing in private businesses. Although, you don’t need to rely on your custodian to make investments, you are still required to report what assets exist within your account at least once a year. The purpose of this is to ensure that you stay within the rules of the IRA as stipulated by the IRS.

There is sometimes confusion between a self directed IRA and a truly self directed IRA. One way to distinguish between them is to understand whether the IRA set up allow you to write a check for or wire your funds from your bank account to buy an investment is truly self directed IRA. In other words, this particular type of IRA gives you checkbook control of your investments. This particular type of IRA is also known by other names like checkbook control IRA, checkbook IRA, or self directed IRA LLC.

Does Having an IRA LLC Allow Me To Be My Own Custodian?

Although, you will be set up to have full checkbook writing privileges within your IRA LLC, this does not make you a custodian for the account. The custodian is required and they are allowed to establish your IRA account and administers the account in compliance with the IRS code.

With A Self Directed IRA, A Custodian Is Not To Be Confused With A Financial Advisor?

Although in a standard self directed IRA account (meaning one you are not truly self directed), the custodian can buy assets and wire funds at the specific direction of the IRA holder and even take title to a property for the benefit of you the IRA holder, however, the custodian is not akin to a financial advisor and nor are they allowed to advise you or speculate, which assets will provide the best returns for your account. They are to remain objective 3rd parties to your self managed investment portfolio. They can; however, work with you to help you ensure, although this is not 100% guaranteed, that you are not making a prohibitive transaction and breaking the IRA rules within your account. They can’t foresee and they don’t have the responsibility, or the manpower I might add to evaluate whether you are making a good investment or one that will be profitable. This highlights again the simplicity of the truly self directed account. With this type of account, there is not any confusion as to who is calling the shots in the IRA — that person is you.

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A Shameless Checkbook IRA Smear Campaign Outed

Every year, the IRS lists the top dozen taxation schemes in what is know as: ‘The Dirty Dozen.’ These are the most common tax scams that people fall for, reminding us to be cautious when preparing our taxes or choosing who prepares our tax returns for us. Generally, this list is published to ensure we don’t fall for common schemes like identity theft or phishing.

However, a recent press release on a well-known website recently stated:

“You can go to and in the IRS search box type in dirty dozen.The top 12 tax shams the IRS is targeting this year will be displayed. Note that the IRA LLC combination is on the top 12 list.”

Whoever wrote this propaganda hit piece obviously did not even bother to read the Dirty Dozen list. So, what is the agenda? We will get to that in a moment, as there is still more we need to touch on.

But, as you can see for yourself, the IRA LLC with checkbook control is clearly NOT listed on the IRS website as the press release claims:,,id=254383,00.html

In fact, the checkbook IRA will most likely never appear on the list, because it’s been already been vetted in tax court in the 1990s by the IRS in the case of Swanson V. The Commissioner. In the case, the checkbook IRA and its validity came under very harsh scrutiny, but, in the end, it stood in the tax courts against the unlimited budget and weight of governmental scrutiny. In fact, the IRS lost the Swanson case and had to pay the defendant’s court costs. It is not often that the IRS loses in tax court, and it is much less likely that they have to pay the opposing parties’ court costs, even when they lose.

In another quote from the release, it states that a person can purchase whatever they want in a checkbook IRA. Here is the exact shameful quote:  Do you really think the IRS is going to let you spend your IRA money any way you want before retirement age without any taxes or penalties?

This again is just a plain falsehood. There are very detailed rules to follow when investing with an IRA, and there are some prohibited investments you definitely need to be aware of if you choose to invest on your own. You should know what the rules are in advance of making an alternative investment with your retirement. However, truth be told, investing with a checkbook IRA does not mean you are automatically or intentionally violating the rules, or that it gives you carte blanche to do whatever you want with your retirement funds, but more on that in a moment.

The question you are probably asking yourself by now is, ‘Why would anyone want to smear the good name of the checkbook IRA? What do the disseminators of such misinformation get out of it by misinforming the public?’ Well, for a long time, traditional financial planners (captive sellers of securities, note the added emphasis on sellers) have done their best to misinform the general public, and have decided to muddy the waters about the capabilities of the checkbook IRA because this type of structure allows individuals to invest outside of their limited investment pool. So, what is the bottom-line? Financial planners fear that if you go truly self directed, then they will be left with a smaller client pool or a future client that they can earn a commission off of. Can you say, ‘Show me the money?!’ We have made mention of this before in another recent blog post, but most financial planners (not all, of course), generally speaking, aren’t truly planners at all, but they are for the most part commissioned sales people!

In their limited thinking, for every person that has a checkbook IRA, there is one less person that they can do business with. However, this is somewhat of an illusion. After all, if their products were worth diversifying into in the first place, you could, in most cases, allocate a portion of your IRA funds and buy their securities. They don’t like competition, though, and many would rather misinform you and limit you to their bucket of options. Oh wait, I thought most institutions were about diversity. Well, they are, so long as you buy from their so-called diversified products that they sell.

The confusion is not limited to financial planners either. Some IRA custodians also add to the online misinformation campaign, more than likely because one of their shackled clients, who is being fee-d to death or wants to invest in something other than their narrowly defined planned document, which does not allow a certain investment or perhaps they have read our site. Whatever the case, once the voices of their clients get loud enough, they put out through their standard operating procedure a statement like, “The checkbook IRA is a prohibited transaction.” In our opinion that is like saying an IRA is a prohibited transaction. Why would they do that? After all, what is in it for them? Well, let’s just suffice it to say again that it also boils down to a profit motive. When you have a checkbook IRA, you still have to report to a custodian, but with this structure, since you are authorized to handle more of the account administration, it significantly reduces the amount of fees custodians are traditionally able to collect over the lifetime of your account.

Blatant misinformational tactics like those mentioned above are unfortunately just part of this business. They are used to blind people to the potential of the proper use of the checkbook IRA entity, and it will only do harm to the industry in the long run.

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3 Investment Considerations In A Volatile Economy

It’s no secret that right now the economy is at a huge turning point. Some aren’t sure if the policies of the government and the central banks of countries around the world have been beneficial to the global economy as a whole or if the effects of mass liquidity and stimulation in the stock and real estate markets are just another artificial bubble.

The fortunate news is that at times like this, there are ways out of the problem with healthy investments in hedges and powerful down market investments. Some of these are simple and obvious investments to make while others might be a bit less known to the average investor. By perhaps reallocating your investment portfolio with more strength in these areas, you may realize a profit or less of a loss than you might normally have to deal with if you aren’t adequately diversified.

Here are some of the best things to buy in a difficult economy:

Gold and Silver Bullion

The effect that the market as a whole has on gold and silver prices is astounding. In general, investors see gold and silver as a hedge for their money long term when all other options look dangerous and tricky. For this reason, investors maybe wise to jump into these precious metals when investments such as the stock market or the dollar do not have such a rosy future.

The collective need to invest in these and other precious metals typically causes their cost to skyrocket during a down economy, which means you have the opportunity to profit. Many gold and financial experts are predicting that gold and silver have not reached their height just yet. If so, then they are still opportunity and at the worst their value will never be zero because of their stability. At least so says the commercials, right?

Reverse Index Funds

Everyone knows you can buy up the SPY or the QQQQ and own a share of the stock market as a whole, but not a lot of people realize just how powerful bear funds are as well, especially if troubling times are ahead. Bear funds offer the exact opposite of what normal index funds provide. They go up when the market as a whole goes down.

They do this by shorting a diversified basket of stocks and occasionally other investments such as oil futures or certain sectors of the market. Just make sure you hang on to them for a while and watch for the next market collapse as they tend to happen quite fast with opportunities for profit!

Foreign Currencies such as NZD, CHF or AUD

When it comes to a stable banking system that is independent of the debt and collateral damage of the global banks, Sweden and New Zealand are probably the most stable banks you can find. Because they loan and borrow very little and tend to have enough in their own banks to provide for their country, the risk on these currencies is relatively low.

The same applies to the Australian dollar. At the time of this writing most economic indicators show Australia is a very stable economy separated from the rest of the world with a huge supply of gold, they have been known to be quite stable even in periods of economic turmoil. Look for currencies like this during times of uncertainty.

Our goal with this post is to make you aware of the aforementioned items. Always remember that investment comes with risk. Perhaps, something mentioned in this post and others will be the catalyst to doing further research on your own with the help of an unbiased financial advisor.

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Identifying The Steps To Rollover A 401K To Real Estate

You can think of 401(k) plans and individual retirement accounts (IRAs) as long term saving accounts for your retirement years. However, unlike traditional savings accounts in a bank, these types of retirement plans offer you two big advantages. One advantage is that you can grow your money with the unique tax benefits provided them so long as you conform to regulations established by the Internal Revenue Service.

A common misconception is that you cannot make real estate investments with your IRA. This myth arose because many financial service companies do not permit this asset class. The primary reason they do not allow real estate investments is because they are not in the real estate business and would rather make financial transactions from their desk. Their reluctance has nothing to do with whether or not the IRS forbids this sort of investment.

However, in its standard form you cannot make real estate investments directly inside your 401(k) plan. So if you want to invest in real estate for purposes of increasing your retirement funds, you will have to rollover your 401k funds to a type of IRA that allows you to invest in real estate.

There are two kinds of IRAs that allow you to do this. The first is the standard self directed IRA and the second is the truly self directed IRA. The difference between the two is quite substantial. The standard self directed IRA is similar to the traditional IRA with the exception that it will allow you to invest in real estate. Conversely, the truly self directed IRA is much more flexible because you are given complete checkbook control to invest in real estate without custodial interference.

Here, then, are the 4 steps to rolling over your retirement funds so that you can start investing in real estate for your retirement years:

1. Talk to your retirement plan administrator and ask how you can move your 401(k) funds into a self directed IRA because the law does not permit you to buy real estate from your 401(k) plan.

2. Although you can borrow half of the value of your 401(k) account up to a total of $50,000, but since when can you purchase a piece of real estate for under 50,000. I am sure there is property out there you can purchase for that amount, but what if you have to fix it up. Where are you going to get the money? In addition, you cannot borrow money against an IRA. For this reason, you should only do a rollover to buy real estate if you will have enough funds in your IRA to fund your first real estate ventures.

3. Open either a standard self directed IRA or a truly self directed IRA. Personally, I would suggest that you get a truly self directed IRA because it will permit you to create an LLC and open up your own IRA business bank account. When you find a real estate deal you like, you will not have to wait for a custodian to approve your transaction, but instead you will be able to write a check or wire funds to pay for the investment. Plus, the LLC adds another layer of asset protection to your retirement funds that you are investing.

4. Now that you have a self directed IRA, you should rollover your funds from your 401(k) account. You are now able to shelter your initial proceeds from your real estate investments in this tax-deferred account.  If you are looking for a tax-free option, then you should consider the Roth to make investments, but that will be covered in a future blog post.

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Should You Consider Adding Gold To Your IRA Investment Porfolio?

In February of this year, CNN reported that a dozen states were considering using gold as an alternative legal currency. The first state to implement the use of gold and silver as legal currency was Utah and the trend is now picking up momentum across many states.

This trend has become so obvious that even Steve Forbes of the famous Forbes magazine now predicts that the US will be back on the gold standard within five years. This despite the fact that Ben Bernanke, the chairman of the Federal Reserve, continues to insist that the US will remain on a fiat currency and that a return to the goal standard is not feasible. Today many congressmen and state legislators who are considering a return to the gold standards as much more than a mere pipe dream.

How Does This News Affect You?

What does this emerging trend favoring the possible return to a gold standard mean to you as you plan for retirement?

In my opinion, gold may prove to be one of the best retirement assets you could invest in. Along with the traditional assets associated with an IRA, such as stocks, bonds and annuities, you may want to consider adding gold investments into your portfolio.

After all, gold is an asset that does not rely on how well an institution performs in the market. Charles DeGaulle, the former French president, is well-known for pointing out that gold does not have a nationality and that is it is accepted across the world as an asset of high-value.

How, then, do you add precious metals into your retirement account?

The first thing you have to do is choose an IRA structure that will allow you to add gold investments to your portfolio. A self directed IRA will give you this flexibility because you will have the capability to invest in physical gold.

In order to get started, you need to find a trust company that will set up an IRA for you.

How To Buy Gold

To buy gold, you will need to conform to the Internal Revenue Code for precious metals. Fourfold purity standard is .999. One exception is the American Eagle gold coin where the purity standards is .916 net fine.
You’re free to decide whether you want to purchase bullion coins or bullion bars. If you choose to purchase bullion bars, they must be made by refiners who have been exchange approved.

Here is a short list of approved gold bullion coins available from one troy ounce to 1/10 troy ounce:

• The U.S. Eagle
• The U.S. Buffalo
• The Canadian Maple Leaf
• The Australian Kangaroo
• The Austrian Philharmonic

This raises an interesting question, what about the proof American Eagle? Here’s my take on it: while these are allowable under a self directed IRA there are many disparities and interpretations on their Numismatic value. For this reason, you maybe be better off sticking to the short list provided.

Final Thoughts

In conclusion, as the monetary value of fiat currency falls, the value of gold will likely rise. It is highly probable that gold will play a significant role as a valuable asset in the future. It may make all the difference to your retirement to factor in gold investments into your portfolio.

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Gold Prices Tumble: Should Investors Be Worried?

Emails have been coming into the office today from people who are considering purchasing gold now that it is at a 4 1/2 month low. Also, the Twitter world if full of speculation as to what is next for the precious metals markets.

Investing in gold has always been one of the prudent choices amongst investors. Traditionally, gold has been on a steady rise, but global concerns in Europe have made gold tumble to a four-month low. The year started off with gold consistently rising and seeing prices hit a yearly high of around $1,800 per ounce. The current market price has dropped by 13% since its high and prices are now hovering around $1,560 per ounce. This may make some investors worried of the gold market’s current state and some very eager to buy in.


Historical data from shows that gold has been on a steady rise since December of 2000. However, the price of gold was sporadic in 2008 when prices went from to $1,002.50 on March 14, 2020 to $723.70 on October 31, 2020. This was over a 25% drop in a short time, but the market rose to today’s low of $1,560. This means, those who bought into gold a few years ago have almost doubled their money. This can benefit those who have the little extra money to risk on gold because history shows that it generally rises eventually. So why the sudden dip in gold prices?


Although historical data is in favor of buying gold, there is always a chance that things will change. Currently, the stock market has seen substantial gains throughout the year and those who invested in stocks are doing much better than gold buyers. The fear of losing money in the gold market can be offset by purchasing stocks. However, the European concerns can also cause a drop in stocks as their debt rises.

The market, at the current time is fluctuating drastically. Gold prices have risen fast over the first four months of the year and now yet seem to be declining at an even higher rate. This might be the result of stocks rising and more investors returning to them, providing a decline in gold prices. The fears and concerns among gold investors is warranted and time will only tell if their investments will surge back like they have in the past. Are you bullish or bearish about Gold after today’s news?

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Self Directed IRA Prohibited Transactions Rules

There tends to be a lot of confusion when it comes to the types of investments that are allowed in a self directed IRA. The truth be known, the IRS doesn’t really care much about what you invest in, however, so long as you stay away from their prohibited transactions list. They state exactly what isn’t allowed in Internal Revenue Code Sections 408 & 4975. These are known as prohibited transactions and the purpose of these rules is to ensure that IRAs are used for their intended purpose, which is to save up for retirement.

A self-directed IRA has been allowed to invest in so-called alternative investments such as real estate, precious metals, tax liens and one can even do so without permission from a custodian. However, one has to make sure to use the services of a professional that is very familiar with the prohibited transaction and disqualified persons guidelines set by the IRS. You don’t want to make any mistakes here as the penalties imposed can be quite severe and are definitely not worth putting the retirement you have worked so hard for at risk.

There is no point in trying to memorize all the prohibited transactions or go it alone. Although many of the rules are straightforward, there are a number of them that may not be so clear cut, especially when you are working to structure an alternative investment transaction. Also, the rules can change from time to time so you will want to bookmark this blog in order to keep you up to date with anything new that may emerge. The best plan of action is to seek a professional and confirm that what you want to invest in does not violate any of the IRA rules.

Here are some common-sense guidelines that are worth knowing so you don’t go into self directed investing totally unarmed:

  1. Make sure you only use retirement funds in the transaction unless you have the appropriate entities in place.
  2. The transaction should not involve any disqualified persons (check with a professional on the specifics).
  3. All income or gains need to return back to the self directed IRA.
  4. Only funds from the IRA itself can be used to pay for costs or expenses related to the IRA investment.
  5. No disqualified person can provide services to, or receive compensation from a self directed IRA, directly or indirectly.
  6. Precious metals being bought with IRA funds need to be held in a US bank.

Note this is just an overview. This list is not exhaustive. Check some of our other posts to learn more.

While self directed IRA investments are designed to provide freedom and flexibility, they are most definitely governed by a strict set of rules. Make sure you play by them to avoid any negative complications.

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IRA Contribution Limits 2012 Compared For Qualified Retirement Plans

There are different IRA types, which are created to encourage all working people to make savings for their retirement. They are plans intended for the ordinary working class of people. Contributions are usually made from salaries. The rules for contribution and eligibility usually change every year. What are the differences between IRA types? Below are various types in different categories under which they fall.

Roth IRAs

  • The maximum contribution limit is $5000.
  • No taxes on dividends or capital gains.
  • All contributions aren’t tax deductible.
  • Individuals of 50+ in age can contribute an additional $1000.

Traditional IRAs

  • Maximum contribution limit of $5000.
  • Freedom to contribute an additional $1000 if you are 50+.
  • Gains are taxable on withdrawal.
  • No taxes on dividends or capital gains.
  • Contributions are tax deductible Simple IRAs.
  • A maximum contribution limit of $11,500.
  • An additional $2500 contribution if you are 50+.
  • Employers are required to make contributions.
  • Works similarly with 401k.
  • Employers make matching contributions of up to 3%.
  • Non-elective contributions should be 2% of an employee’s salary.


Maximum contribution limits for small business owners or self employed people should be 25% of the employee’s salary or simply $50,000 whichever is smaller

  • It has low administrative costs.
  • Contributions are deductible.
  • Has the highest contribution limits.
  • No additional contributions at the age of 50+.

For employees, SEP IRA allows them to make non SEP contributions. You can make contributions up to your maximum IRA limit. Contributions in this case are tax deductible.

IRA Contribution Limits for 2012

If you have a dream to invest for your retirement, then you need to know what IRA contributions limits are like. This ensures you know exactly what amount of money to set aside for this.

In case you are under the age of 50, there are specific IRA contributions limits for 2012 for contributors falling within your age bracket. The maximum you can contribute below 50 years is $5000. Setting aside this amount in time is the smartest way to approach the contribution task.

Individuals of 50 years and above can make a contribution of $6000. Also, anyone who is 50 years and above is allowed to make an additional payment of $1000 on top of the $5000. It can start anywhere after hitting 50, till they retire. It is a wise move making that extra $1000 of saving each year, because it is primarily free from any tax.

It is an excellent opportunity for you to maximize as a contributor, as the IRA contribution limits for 2012 are favorable. All you need to do is choose the plan that suits you and make maximum contributions that will be of benefit to you in the future.

Roth IRA Contribution Limit

The Roth IRA contribution limit is exactly the same as that of traditional IRA. It is simply $5000 to individuals of 50 years and below and $6000 to individuals of 50 years and above.

There are annual income limits for you to contribute to Roth IRA. It also depends on your status i.e. if you are single, married, separated or simply the head of the household. In this case your modified adjusted gross income (MACI) must range from $110,000 to $125,000. If your MACI exceeds $125,000, then you cannot make contributions anymore.

In case you are married and filing jointly or a qualifying widow, you can make a contribution when your MACI ranges from $173,000 to 183,000. If it exceeds $183,000, you cannot make any contributions any longer.

If you are married and filing separately and living with your partner, your MACI should range from $0 to $10000 to make a Roth IRA contribution.

401k Rollover Options

In case you are employed and considering a 401k rollover option, you have the freedom. You can literary rollover an IRA from any given account to the other at any time. This, however, depends on the circumstances. If it is a corporate layoff or if you are changing jobs the terms of rollover will be different. This simply means each type of job has different terms that one should ensure they are aware of before making any steps relating to this.

In case you fall between the age of 59 and 70; you have an option for lump sum distribution. Your 401k plan provider should write you a check reflecting the value of your account less 20%. The 20% is a withholding tax, and the IRS mandates it. The deducted percentage is counted against any income tax payable. Still, you can opt not to do anything and leave your savings with your former employer, provided the amount is greater than $5000. Amounts less that this gets distributed to you irrespective of your age.

For that individual below 59 the options will be taking a lump sum distribution. A 20% withholding tax is charged, and the IRS mandates it. An additional 10% withdrawal penalty is charged. The 20% is withheld, but the penalty is not. This means only the 20% charge gets counted against the income tax payable. You can opt to leave your contributions with your former employer untouched. The sum should be above $5000. Amounts less than this get distributed to you too regardless of age, but they are always less the 20% withholding tax.

If you are 70 years of age or older, your 401k service provider simply writes you a check reflecting the exact value of your contributions account, less a withholding tax of 20%. This deducted tax percentage is held against the income tax payable. Alternatively, you can decide to leave it with the employer 401k plan but commence taking the set minimum distribution. You can leave the sum with your former employer too, provided it is above $5000. In case you opt for this, a 50% of the set minimum distribution is taxed. Amounts falling below $5000 get distributed to you irrespective of your age.

You need to consider all IRA contribution limits for 2012 to ensure you plan your future well. Know these limits to make a responsible contribution that is sure to secure your future. It is important to seek information from quality IRA sites like this one to ensure you make the right choices regarding your contributions. Get tips too on the best things you can do with your IRA account with all the information you are in better position to determine what suits you best. It is also advisable to all get information relating to the same from reliable sources to avoid the major blunders that people make.

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