I recently learned of self-directed IRAs.
Here is how it works:
- I open a self-directed IRA account with a company that acts as a custodian of my account (here is a short list of such companies).
- I transfer or deposit funds to my self-directed IRA account.
- I direct the custodian to make purchases from my account.
One of the advantages of a self-directed IRA is the variety of investments that can be made. The following can be purchased from a self-directed IRA account:
- Real-estate. Actual homes, condos, or commercial real estate. My relatives and I cannot, however, use any of the real estate that is purchased from the IRA.
- Foreign real estate.
- Ownership in a business. If I was interested in buying into a business I could do it with funds from my self-directed IRA.
- Precious metals (gold, silver, and platinum). This is what piqued my interest in self-directed IRAs. I cannot take delivery of the metals. The metals must be stored by some other party. If I purchase coins they can only be US metal coins. One idea I had was to purchase bullion bars from the Perth Mint.
The custodian charges an initial fee (around $50) to setup the account and an annual fee (around $250 - $300) to maintain the account. Seems like it would take a fairly large (above $200K) IRA to justify the annual fee. The custodian usually charges a fee for every transaction (around $50) - definitely don't want to be making a lot of moves in this account.
Does anyone have experience with self-directed IRAs?
What are other advantages/disadvantages to self-directed IRAs?