Overview
A Self-Directed IRA LLC is a retirement savings strategy used for those who do not qualify for, or prefer an alternative to, a Solo 401(k), but would like to benefit from the ability to self-direct their retirement funds in a similar way. One such example would be a business owner who has employees, thus making them ineligible for a Solo 401(k). Another example is an owner whose business does not make sufficient income to take advantage of the Solo 401(k) contribution limits, but would still like to self-direct retirement savings.
Self-Directed
Self-directing means you can contribute to your retirement savings the same way you would with an IRA, except that unlike having an IRA that you open directly with a brokerage where all your funds stay with the broker and you invest through them, a Self-Directed IRA LLC is an entity you can contribute your savings to, and you can choose where to invest those funds, as long as they are allowable investments by the IRS. This means you can direct your retirement funds into real estate investments, or securities not found on brokerages.
Considerations and Limitations
However, a Self-Directed IRA LLC is still limited to the same contribution limits as a typical IRA. For more information about IRAs, please read our article here. You can create your Self-Directed IRA LLC to be a ROTH as well, so that although your contributions are taxed the year you earned, your profits gained from the investments made are tax-free. Some other considerations to this structure include incorporation costs, registered agent fees (if using a third party), filing requirements to keep your LLC in good standing with the Secretary of State in which the LLC is incorporated, and basically the same responsibilities you would have as a business owner. It sounds like a lot, but I assure you, the potential to make advantageous investments in your future far outweighs the cost.
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