Questions to Ask Before You Buy a Self-Directed IRA

Rocket Dollar provides customers unparalleled access to a wide range of alternative investments, from real estate to private equity to cryptocurrencies through Self-Directed IRAs or Solo 401(k)s. We recently sat down with Mark Peck, director of business development, and Brendan Walsh, business analyst, to discuss the ins-and-outs of opening a Rocket Dollar account and the ease with which account holders can make tax-advantaged investments and gain 21st-century diversification with their retirement portfolios.

These six questions come up quite often in discussions about how Rocket Dollar works and how investments are made through Rocket Dollar accounts.

Question: Can I invest in private startups using my self-directed account?

Answer (Mark Peck): All retirement accounts play by the same rules. The real question is whether your IRA custodian allows certain alternative investments. Usually, it’s only Self-Directed IRAs or Solo 401(k)s that allow you to invest directly in startups, real estate and a variety of non-traded securities. Self-directed retirement accounts allow investors to use their tax-advantaged dollars to make alternative investments that provide diversification away from stocks, bonds and interest rate fluctuations that can negatively impact their investment portfolios. You generally can’t do that through company-sponsored 401(k)s since their custodians don’t offer these types of investments. What’s really great about that diversification is that it allows investors to allocate tax-advantaged dollars to specific asset classes, geographical locations or investments they feel strongly about, which can provide greater yield and return profiles.

Q: Can I buy a house with my self-directed account and use it for vacation?

A (Mark Peck): Unfortunately, no. IRS guidelines require you to keep “arms-length” from any investment made with your Self-Directed IRA or Solo 401(k). You can purchase an income property with your Rocket Dollar account, but you can’t rent it out to any disqualified party, which includes yourself and your immediate family. If you do acquire a second house or rental property using tax-advantaged income, it can’t be for personal use or gain – so no vacations there. The property has to have no affiliation with your personal holdings. As long as you meet those key criteria, there are no other limits. A good rule of thumb for beginning investors using tax-advantaged income is to avoid doing deals with family members until you gain experience regarding IRS rules and regulations about disqualified persons. Lastly, if you do purchase an income property through your Solo 401(k) or Self-Directed IRA, you must hire a contractor or third party to perform all maintenance, repairs, and upgrades – it isn’t a do-it-yourself, sweat-equity opportunity.

Q: How do I fund a self-directed account?

A (Brendan Walsh): Self-Directed IRAs follow the same rules as regular IRAs. Many people have old IRAs or 401(k)s from previous employers, and these assets are great vehicles to roll into a Self-Directed IRA. Rocket Dollar will assists you with that process.

Q: Can you help me better understand how a self-directed account works?

A(Brendan Walsh): Rocket Dollar allows you to take the qualified tax-advantaged retirement dollars you’ve amassed elsewhere – or make fresh contributions – and roll them into a bank account over which you have full control. You can write a check, swipe a debit card or send out an ACH payment. You use the funds just as you would any other account to buy into alternative investments, but you keep all the tax advantages. We provide you with all the tools you’ll need to set up your account, and in as little as 10 minutes you can begin crafting the perfect retirement portfolio using your tax-advantaged dollars. There are really great investment opportunities in startups, private equity, and real estate, to name a few. These markets continue to expand as investors become frustrated with stock market fluctuations, and these alternative investment classes also provide the same tax benefits that retirement investors have long enjoyed when purchasing stocks, bonds or mutual funds using their company-sponsored IRAs or 401(k)s.

Q: How will your team support me once I’ve created an account?

A (Mark Peck): The tools we offer are what differentiates Rocket Dollar from its competitors. Rocket Dollar provides customers with an all-digital experience, and we ensure that your tax-advantaged dollars ultimately land in a checking account over which you have full control. You can sign investment documents and disperse funds from your account without any custodial review or approval. We’ll help you set up your account, and we also ensure your dollars flow through the account properly so that you always meet IRS requirements and stay tax-advantaged. All of these processes happen electronically for simplicity. We’ll also provide support along the way, including access to customer service through email or telephone, as well as a comprehensive knowledge center that you can use to answer common questions about investing through a Self-Directed IRA or Solo (401(k).

Q: Do you any hidden fees or transaction fees? What are your overall fees?

A (Brendan Walsh): When we founded Rocket Dollar we created a flat subscription-based pricing model because that’s what today’s consumers are familiar with. Rocket Dollar Core accounts cost just $360 at signup and $15 a month, while Rocket Dollar Gold accounts are $600 at signup and $30 a month. We found many customers desired priority service and expedited funding, so we created a premier-tier account to better meet their investment needs. The nominal monthly fee is used to maintain account and ensure our tax-advantaged investors always remain IRS compliant. There are no obscure or hidden fees or additional costs, and many of our customers have let us know they enjoy this simple pricing model.

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