checkbook ira

If you are not getting the performance you want through a traditional or Roth IRA, you can take more control of your retirement savings by setting up a Checkbook IRA. Also referred to as a Self-Directed IRA, a Checkbook IRA allows you to make alternative investment choices that are not available through other types of retirement accounts.

Types of alternative investments

  • Precious metals including gold and silver
  • Commodities like lumber or soy beans
  • Businesses like a restaurant, construction company or ski resort
  • Real estate such as rental property, office buildings or single family homes
  • Mortgages
  • Tax liens
  • Private loans

Investments you can not make

These, and other alternative investments are permissible under Internal Revenue Code 408, but there are also certain transactions that are prohibited. You can not purchase any kind or collectible like fine art or antiques and you can not make a transaction that would be to the benefit of any “disqualified person.” For example, you are not allowed to buy 1,000 acres of farmland from your brother and use it as an investment in your Checkbook IRA.

Who is a “disqualified person?”

Anyone who is closely related to you or has some connection to your Checkbook IRA is considered a disqualified person under the Internal Revenue Code. Your mother, father, sister, brother, children and grandchildren are disqualified. In addition, your investment advisor, account custodian and others who may provide you IRA services, are also excluded from selling you anything to be put in your retirement account.

Setting up a precious metals Self-Directed IRA

Investors who are interested in using gold and silver as part of their retirement strategy are the perfect candidates for setting up a Self-Directed IRA. Anyone who has earned-income can set up such a plan. You can also transfer or rollover an existing IRA or other type of retirement account to fund your Self-Directed IRA.

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Getting started

Once you decide that you want to include precious metals as part of your retirement savings plan, it is easy to establish a new account. Your Self-Directed IRA services will be administered through a trust company. Following are the steps that you will need to complete.

Step 1 – Funding your IRA

To get started, you will need to put funds into your new account. You can use contributions, transfers and/or rollovers to fund your new account.

Step 2 – Choosing a designated precious metals dealer

The company you select to buy your gold and silver from is very important. Choose a designated gold and silver dealer that is experienced, reputable, and who is willing to educate and advise you on precious metal investments.

Step 3 – Storing your precious metals

You have two options on how you want to handle the precious metals in your IRA. First, you can create a Self Directed IRA LLC that allows you to be responsible for secure local storage outside your residence for the precious metals. The second, and more convenient option, is to select an approved precious metals depository which provides a secure storage facility for your precious metals.

Step 4 – Purchasing and paying for precious metals

Depending on how your IRA is set up, your trust company will either send the funds to your Self Directed IRA LLC or send them directly to your designated precious metals dealer.

Step 5 – The final step

Once your purchase is complete, the precious metals belong to your IRA. If you choose to form a Self Directed IRA LLC, you can either take responsibility for secure local storage or you can choose to set up a depository account and your precious metals will be shipped directly to that depository.