Although the names “standard IRA” and an “IRA LLC” may be mistaken for synonyms, the dissimilarity between the two is important. In fact, after many years of holding an individual retirement account, you will be able to actually measure the difference by the amount of the money you are able to put away for retirement.

Knowledge Is Power, But Only If You First Ask the Right Questions

Knowing about this difference is not common knowledge, since financial literacy is not taught in any of our public schools. But, I digress. It is knowledge that is acquired by studying the IRA as a financial instrument and speaking to financial experts who offer objective and honest advice. This type of knowledge is indeed powerful because it will considerably affect your IRA.

The process of knowing about the difference between one type of IRA and another, in particular between using a traditional IRA and a standard self-directed IRA, is not something that most people ever investigate, and why would they? Typically, those seeking to set up an IRA are willing to quickly outsource their decision-making power to a sales person rather than take the time to really get a good explanation of how investing or IRAs really work. This is unfortunate, but it is a known aspect within the financial community.  So-called Financial “experts” are on every street corner (like Starbucks franchises in Seattle, they are everywhere); they are a dime a dozen. These “experts” generally only offer you the edicts their company espouses from on high, which in the end is a limited, subjective viewpoint of the IRA world. It is nothing more than a covert agenda. This may be news to you and perhaps we aren’t the first to break it to you, but in most cases financial consultants are not objective, they are salesmen. In the end, it is not that they want to steer you in the wrong direction, but unless they steer you toward their corral of investments, they won’t make a commission.

What Is a Standard IRA?

A standard IRA has three ways of limiting your potential to accumulate the funds you need for retirement.

First, you are allocated a custodian, who regulates your account by granting you permission for every investment you decide to make. Though the irony is they don’t have the man power nor the expertise to evaluate your investment. So don’t be deceived into thinking they are offering you any additional value. They certainly can’t tell or shouldn’t tell you whether an investment is going to be a winner or a loser. When investing in the real world of nonfiction, timing is a real factor to pulling off a good investment. Wading through the custodian red tape is rife with delays, fees and (in some cases) political in-fighting within the company.  This may mean that you will not be able to take advantage of time sensitive investments, nor will you be able to enter into markets where liquidity of funds is the decisive factor.  Unfortunately, this can be true even when it comes to participating in transactions that are ideal for you and your retirement.

Second, you are only allowed to choose from a limited selection of asset classes. Ostensibly, this is so your funds grow in a slow and safe way. For this reason, you may not even consider the value of returns for your investment dollars in alternative investment classes.

Just a quick side note, you might ask your broker what the assets you are purchasing are secured by or what happens if the value of the asset goes to zero? Or, my personal favorite question is, “will the market continue to go higher over time?” Anyone that has been to a financial seminar has probably heard this umpteen times, but was anyone around back in 2001, 2006, 2008? Financial advisors who are still offering this type of advice, specifically that the stock market always goes up, should be re-evaluated.

This even goes for alternative asset investing with your IRA. You would not believe the number of people being duped by those, even those who show up on prominent financial talk shows, who are investing IRA monies in real estate deals just because the investment is, quote-unquote, “secured” by real estate. If the real estate deal is a bad deal or it is a lemon, then it is a lemon whether it is secured by real estate or not. Folks there is no such thing as the perfect investment opportunity. Every investment has risk. Again, every investment has risk!

Third, you are charged numerous fees for every aspect of managing your account. This reduces the funds directly that you are trying to set aside for retirement.

What Is an IRA LLC?

By contrast, with an IRA LLC you will experience three ways of expanding your potential to accumulate the funds you need for retirement.

First, the custodian will offer minimal interference and allow you to invest in a wider world of financial opportunities.

Second, you will be able to choose from a wider range of investment classes, without the custodian trying to arrange for a commission. This means you can earn from real estate investments, the stock market, the precious metals market, or the foreign currencies market to name just a few. Because you have checkbook control of an IRA LLC, you can pick and choose your investments based on your field of investment expertise to create the future that you desire.

Third, the fees that you are charged for opening and running your IRA LLC are nominal since you handle more of the administration of the IRA and you can put the money spent on fees toward growing or continuing to grow your retirement funds.

In conclusion, if you opt for an IRA LLC, you are choosing to be fully responsible for your retirement nest egg, and this may be a decision that makes all the difference to the lifestyle you enjoy after you are no longer actively working for a living.