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For many people, retirement investing means handing over some money out of a paycheck and hoping that the funds they’ve chosen will do well. And when they do want to take more control over that money, they discover that their options can feel limited. So, what can you do if you want to exercise more control? For many investors, simply signing up for a Self-Directed IRA can be enough. This gives them access to all sorts of investment asset classes, including real estate and precious metals. But what if you want even more control over what goes into your retirement account? To explore that end of things, we have to introduce you to the concept of investing through a Single Member IRA LLC.
The Basics: How Does Checkbook IRA Investing Work?
The concept might sound complicated, but the mechanics of it can actually be quite simple. When you invest in a Self-Directed IRA, you can invest in private companies. For many people, that might mean holding private stock in a company that’s not yet listed on a stock exchange. However, for others, it can mean putting money into a Single Member LLC. This is a company that would be held within the Self-Directed IRA.
Why do people do things this way? Because the Single Member LLC would need its own bank account and checkbook, or “checkbook control.” Checkbook control reverts back to the notion of the individual controlling the Self-Directed IRA. With this checkbook control, an investor can directly control what’s held within the Single Member LLC, which in turn is held within the Self-Directed IRA.
The Benefits of Investing with a Checkbook IRA
Having checkbook control within a retirement account is no normal matter. It promotes ease of use, meaning that you can make investments quickly and flexibly. And although there will be higher setup fees to establish the Single Member LLC when compared to a traditional Self-Directed account, you will then have lower maintenance fees over the life of the LLC, because you’ll be choosing your own investments with ease. This also leads to lower administration fees.
The key here is that if you use the right investments and stay within the rules of retirement investing, you can enjoy the potential for tax-free and tax-deferred gains. This gives you not only flexibility, but incentive to put money away for retirement. Since you’re now making your own choices as to what you invest in, you’ll be free to choose assets that are within your wheelhouse, as long as those assets adhere to retirement regulations. In other words, you can make decisions quickly and easily leaning on your own sense of freedom and personal responsibility to dictate what ends up in the account.
It might sound simple, but it’s also important to acknowledge that in order to benefit from this kind of arrangement, you’ll need to know a little about how the rules work.
Making a Single-Member LLC within a Self-Directed IRA Work
The most important thing is to make sure that you do things the right way. And that starts with setting up the account the right way from the beginning. How can you do that? Work with a Self-Directed IRA administration firm who can help you establish the proper paperwork off the bat. And always remember to work with people you trust. When you do, you can access a greater range of investing freedom.