Top Ten "Dos" and "Don'ts" of Investing in a Self-Directed Retirement Account

What you can do

  1. Do consider including alternative assets in your retirement portfolio for investment diversification.
  2. Do consult with a knowledgeable advisor when in doubt. We have a directory of educated professionals who can assist you.
  3. Do educate yourself. Read all the free educational material we have available.
  4. Do determine how you can accelerate earnings on real estate through leverage.
  5. Do consider using IRA funds when you, a relative, or friend starts a new business.
  6. Do consider your Roth IRA for those investments with the greatest upside potential.
  7. Do maximize your contributions to 401(k)s that are matched by your employer and contribute to Roth IRAs each year, if eligible.
  8. Do, if you are a professional, consider learning more about self-directed IRAs as a means to stay at the forefront and to become the sought after expert in your area.
  9. Do tell your friends about the possibilities of self-directed IRAs because it's important for investors to know their options.
  10. Do consider getting your children started on saving for retirement and education while they are young by establishing a Roth IRA or Coverdell Education Savings Account.

What you should do

  1. Don't create a prohibited transaction by having your IRA transact with yourself personally, your spouse, descendants, or ascendants (e.g., avoid self-dealing).
  2. Don't engage in a transaction with your IRA and a third party's IRA on a "quid pro quo" or reciprocal basis in an attempt to circumvent an otherwise prohibited transaction.
  3. Don't make personal (including disqualified relations) use of any asset your IRA owns.
  4. Don't engage in any transaction that results in any personal gain (e.g., a guarantee of employment) for you or your disqualified persons (other than the benefit that the IRA receives).
  5. Don't provide more than ministerial services (e.g., decision-making) to your IRA or IRA-owned entity (e.g., no "sweat equity").
  6. Don't personally guarantee a loan that your IRA obtains.
  7. Don't take any personal compensation for any services provided to your IRA or as a result of a transaction that your IRA participates in.
  8. Don't co-invest personally with your IRA in any asset that you use as a loan collateral.
  9. Don't take constructive receipt of any income from assets owned by your IRA, and do not pay (personally) the expenses of assets held by your IRA.
  10. Don't transact with an entity you control; one a disqualified person controls; or an entity that is controlled by a combined total of 50% or more by you and a disqualified person(s).