The self-directed IRA (Individual Retirement Account) was established in 1974 so that any working American could contribute into an IRA from their wages, deferring the tax on those contributions until the age of 70½. Held by a custodian, the savings could be invested and grow until retirement.
Originally these custodians were large banks and brokerage houses who only had limited types of investments available. By the 1990s, the addition of Trust Companies as custodians made more diversified investment possible.
In 1996, James Swanson won a legal case that made IRAs truly self-directed. His IRA formed its own company with himself as unpaid manager. The basic rule of having an IRA is that you don’t benefit until retirement and the tax is deferred, so all the profits from his company went back into the IRA.
Today, self-directed IRAs have been gaining in popularity and the trend is towards investment in real estate. This Forbes article has some insights into IRA real estate investment. There are benefits and risks to be considered and the responsibility falls on you to understand the rules. You, not the IRA, are solely responsible for the tax consequences.
Investing in real estate through Small Change makes it easy. We do all the due diligence and you can invest your retirement dollars in something you can understand. Your IRA has the potential to create lasting wealth for you and your family.