If you’ve decided to invest in your retirement using the self-directed IRA account, it means you’re ready to explore the world of alternative assets and ways to retire that the average investor probably won’t even consider exploring. Hats off to you for doing that!
Now that you’ve made that choice. It’s time to decide which self-directed IRA company is the right one for you. Fortunately, we here at Sophisticated Investor have taken the liberty of vetting and combing through no fewer than 35 self-directed IRA companies.
In going through that research and vetting process, we’ve come up with a key list of things to look for when choosing the right self-directed IRA provider.
Things to Look for When Choosing a Self-Directed IRA Company
One of the first things we considered when self-directed IRA options for you is what other review sites and ratings sites had to say about those very same companies. Our reviews includes ratings from the Better Business Bureau, Google, and other sites such as Yelp, BirdEye and Trustlink where those reviews came up in searches. If word-of-mouth is the strongest form of advertising, the online reputations of these companies must be considered before you make your decision.
Another major factor in making the right choice is of course fee structure. Any financial institution managing investments on behalf of individuals is going to make its profit by charging fees. Some of the fees self-directed IRA companies charge are pretty standard. Most will charge you at least $150 to close an account should you decide to leave. Most will charge you five dollars for a reprint of basic documents and most will charge you a minimum of $30 for wire transferring money out of your account. There are however many differences. Some charge you fees based on a percentage of your account value, while others charge fixed fee amounts for everything you would possibly do within an account.
Even when it is finally time to take the plunge, investors also need to consider the specific asset classes, types of investments and account types that will be best suited for their individual needs. Once again, while some of these options are pretty standard such as the option to open a Traditional or Roth IRA account, others are unique to the specific self-directed provider. Not all self-directed IRA providers facilitate investing in digital currency for example.
To close out these reviews, we considered how involved self-directed IRA companies are in making their customers happy when it comes to the customer support they provide. Often times the fees self-directed IRA companies charge and the customer review ratings that they receive across the web are a direct reflection of the capacity and the compassion they have for treating customers right from a support standpoint.
All of these factors need to be considered when choosing the right self-directed IRA company for you. Once you have read through this overview, you can feel free to take a look at equally in-depth reviews of each provider.
Ratings and Customer Reviews
Of all the customer reviews and ratings websites we combed through for IRA companies, Google business profiles and Better Business Bureau profiles were instrumental in helping us aggregate information. Based on all of the reviews we read and profiles we ran through, Kingdom Trust Company came out as one of the top IRA websites. There’s a reason the company manages over $12 billion in assets.
The company maintains a fantastic track record when it comes to customer support and reviews. It also acts as a custodian for any number of alternative investment opportunities including precious metals, real estate and digital currencies. Three alternative investing categories nearly everyone is interested in these days.
In general when ranking self-directed IRA companies according to customer reviews and ratings, we considered the number of third-party websites that featured ratings, the actual ratings the company got and what the customer reviews had to say. Rest assured we’ve looked through it all and there are many viable candidates for your investing opportunities depending on what your needs are.
When it comes to fees, the starting price is vary. Most IRA companies charge at least an introductory account opening fee of $50 and then a minimum of $195 for annual maintenance. What’s more important to consider however are the different models companies use to administer those fees. Some companies charge their fees on a quarterly basis, others charge annually. Others still choose to charge fees based on percentages and account values. Charging per asset or per transaction is also very common.
Below is a chart including each self-directed IRA company in our comprehensive review categorized by fee type:
One side note we should mention is with regard to American IRA. Rather than charging fees per asset or per quarter or annually, the company offers two different accounts that provide investors with a set number of transactions each year. The basic version allows fewer transactions of course and the premium version offers more. It’s a unique way to charge fees that no other self-directed provider offers.
Another thing to keep in mind is that some of the above companies allow investors to choose whether to pay based on account value or number of assets. Some offer a combination of both. It’s really important to consider how many different kinds of investments you want to choose from in an account and how often you plan on depositing and withdrawing into your IRA account when deciding which company’s fee structure is best for you.
Account Types and Investing Options
Even if a given fee structure saves you more than any other IRA provider can offer, you still have to consider the account types or investing options you want before picking the company that you are going to work with. Many self-directed IRA providers offer a solo 401(k) plan is a viable option for your retirement, but many other competitors don’t.
In the same vein, a few self-directed IRA providers will help you explore investing in digital currencies like Bitcoin as part of your retirement, but many don’t. Chances are if you’re looking into a self-directed IRA plan, you may also be looking to open up a registered education fund for children, or perhaps invest in real estate and rent it out to through a timeshare setup or AirBnB. Again though, some self-directed IRA providers offer this while most do not.
Just like our customer reviews, we didn’t just judge customer support based on whether or not a given self-directed IRA provider offers a live chat window on their website. While many do, the main point of customer support is for an investor to have the ability to ask questions, get answers and ultimately feel like they’re dealing with people who know what they’re talking about.
Again, Kingdom Trust Company comes out on top because of its overall rating. We also like Broad Financial and Camaplan IRA.
Fidelity Investments and Charles Schwab
We should also mention that Fidelity Investments and Charles Schwab are the lone publicly traded companies offering retirement investing that we reviewed here at Sophisticated Investor.
Clearly both companies have the ability to offer customer support on a larger scale than most self-directed IRA companies, which are usually significantly smaller in size. As such, we would say the customer support offerings for both are fantastic but you shouldn’t necessarily compare them to self-directed IRA companies. Why? Because Fidelity Investments and Charles Schwab offer more traditional fee structures related to stocks, mutual funds and bonds. While investors can certainly use these companies to invest in their long-term retirement, neither one really specializes in alternative investments. You can also forget about investing in digital currencies with either one.
Consider Fidelity investments and Charles Schwab legacy options that have been around for decades and have a proven place in the American investing world. Both service providers can certainly be a part of your portfolio, but alternative asset investing means choosing a lesser-known brand name that specializes in self-directed accounts.
Self-Directed IRA: Frequently Asked Questions
Below are some of the most frequently asked questions investors have when choosing a self-directed IRA company. This is by no means a complete list, but checking out the answers will give you further insight into how and why you should think critically about the provider you choose to work with.
What is a Self-Directed IRA?
A self-directed IRA is a retirement account that allows the investor to choose a mix of investments that most traditional brokers won’t offer. Being self-directed also means not having to pay an advisor to manage your account. You make the decisions on your own. People typically use self-directed IRA accounts to invest in things like real estate, promissory notes, private lending and mortgage deals, and even more exotic investments like cryptocurrency.
In general a self-directed IRA account is for the investor who feels confident in making their own investment decisions and wants to go beyond stocks, bonds and traditional securities.
How Do I Choose the Best Self-Directed IRA Company for Me?
Given there are so many self-directed IRA companies to choose from, choosing the right one for you comes down to not only assessing features, advantages, benefits, reviews and fees, but also to asking yourself some key questions about your life stage and your retirement goals? Here are some key things to consider:
- How much money do you want to have when you retire?
- When do you want to retire?
- What type of things do you hope to do when you retire? How much do those things cost?
- How old are you and what is your annual income?
- Consider what kind of alternative assets you already know about. Is your strength digital currency? Real estate? Stocks and bonds? Private lending deals?
- Outside of a self-directed IRA account, what other investments do you have that will help you with your retirement?
- Are you married or single?
As always, choosing the right IRA account for your needs is a big decision. If you’re having trouble answering the above questions, consider speaking to a professional investment advisor or somebody that you trust about the different types of accounts and investments that can help you get to where you want to go.
Where Can I Cash a Check from My IRA Account?
A check from an IRA account, regardless of the type of account or whether it’s self-directed or not, can be cashed at most major banks or credit unions. Payday advance companies will also cash IRA checks but they will take a commission fee and sometimes that can be hefty. As a side note, consider that there are income tax implications when you withdraw from an IRA account. Consult an accountant before you make that decision.
What Kind of Accounts Can Be Included in a Self-Directed IRA?
Most self-directed IRA companies offer a Traditional IRA and Roth IRA as basic options to consider for your retirement. A Traditional IRA gives investors income tax write off during contributing years. Contributions are sheltered from income tax until withdrawal or retirement. Most people earning an average salary throughout their career will choose this option.
Those that expect to have a high net worth upon retirement on the other hand might be better off with a Roth IRA. A Roth IRA does not allow investors to write off contributions against income tax during contributing years, but the investor also doesn’t have to pay income tax upon withdrawal or retirement. A wealthier retiree would choose a Roth IRA over a Traditional IRA.
How Do I Open a Roth IRA?
Most self-directed IRA investment companies will allow investors to start the account opening process online, and a few offer to do the entire thing for you, sometimes for an added fee.
How Do I Switch Roth IRA Companies?
Switching IRA companies is easy regardless of the kind of IRA account you choose to use. What you do have to consider is tax implications and the implications of account fees. Pretty much every self-directed IRA company in America charges a fee to close out an account. They will want to make money off of you when you leave. You may not just pay for an account closure, you may also have to sell investments which means incurring more transaction fees. Most IRA companies that are taking over your account will help you transfer out assets with minimal fees. They may even offer to pay some of the fees you’re incurring at your existing IRA company for leaving.
What is the Downside of a Roth IRA?
The downside of using a Roth IRA account is the fact that you don’t get to write off contributions against income during contributing years. There are also many restrictions as to who can and can’t open a Roth IRA depending on income and whether or not you have a spouse.
How Can I Avoid Paying Taxes on my IRA Withdrawal?
As we’ve discussed, using a Roth IRA account is one way to avoid paying taxes upon withdrawal. That’s because an investor using such an account isn’t benefiting from tax breaks during contributing years. Using an LLC to invest in an IRA account is another way to try to save on taxes. The IRS frowns upon this but many IRA providers offer this service. It allows some of your contributions to be taxed under corporate tax laws and allows for more flexibility with regard to withdrawing on a regular basis.
What is a Checkbook IRA?
A checkbook-style IRA account allows the investor to use their IRA account more like a debit account. It allows for the investor to write checks to a company name as a way of contributing. It basically gives the investor more flexibility. Again, the IRS doesn’t like this, but it is perfectly legal to use an LLC for retirement investing purposes.