Heeding the Recent SEC Guidance on Self-Directed IRAs

Estimated reading time: 3 minutes(Last Updated On: November 30, 2018)

It’s estimated that approximately 2% of all IRA assets are held in self-directed IRAs. While that percentage might sound small, it means that roughly $100 million worth of IRA savings are in self-directed accounts.

The aggregate size of these investments is attracting a lot of attention, and awareness of self-directed IRAs. It is likely to grow in general as individual investors continue to seek alternatives to the stock market and other traditional investment classes.

Unfortunately, this also attracts unwanted attention as well. In late 2011 the Securities and Exchange Commission issued an “Investor Alert” related to self-directed IRAs. This investor alert summarized a number of recent SEC and state securities enforcement actions that involved individuals who used their self-directed IRAs to invest in fraudulent investment schemes. Here is some advice to help you heed the recent SEC guidance.

Make Sure You Understand All Investment Terms

Because self-directed IRAs allow for a wider range of investment opportunities compared to IRAs that are held with traditional custodians, you’ll be able to consider more specialized and less well-known investment types. These alternative investments often do not come with the same legally-required informational disclosures or legal protections, and the information that is made available to investors might not be audited. It’s important to make sure you understand all the terms, conditions and risks for any investment you’re considering within your self-directed IRA.

Get a Second Opinion

Unfortunately, some investors will search for a custodian or investment advisor who gives them the answer they want, even in the face of expert opinion to the contrary. If you come across an attractive opportunity – either a potential investment or with respect to a particular self-directed IRA account structure – it’s prudent to take a look at what other investment professionals are saying about that type of investment.

Don’t Drop Your Guard

While a self-directed IRA can offer you additional flexibility and investment opportunities, you still need to use common sense. You should continue to ask the same types of questions for any prospective investment within a self-directed IRA as you would if you made that investment in your brokerage or some other account. Use the same type of common sense approach to the investments within your self-directed IRA as you would in your non-retirement accounts. For example, you should be skeptical anytime you are presented with an investment offer for high “guaranteed” returns.

Avoid Unsolicited Offers

Because many individuals are not altogether familiar with self-directed IRAs, some unscrupulous promoters sometimes send unsolicited offers to participate in a particular investment scheme by transferring their existing IRA funds into a newly formed self-directed IRA. Be particularly wary of any unsolicited offers you receive regarding new self-directed IRAs.

Instead, if you’re interested in adding a self-directed IRA to your retirement planning, look out for a custodian like Quest Trust Company, Inc. who has a great deal of experience in providing those services. We are guided by a relentless need to supply the American public with the proper FREE education on what is truly possible with all retirement and qualified plans. To learn more about total retirement solutions visit us at: http://www.questira.com/