Checkbook IRA

Benefits of a Checkbook IRA

A checkbook IRA is a powerful investing tool that gives the account owner complete signing authority (checkbook control) over their account. These accounts are ideal if you need fast access to your funds to make new investments. They also make it easier to invest in multiple assets and to pay bills for your IRA investments.

A checkbook IRA can acquire the same types of alternative investments that traditional self-directed IRAs can and must follow the same rules regarding prohibited transactions.

FOUR STEPS TO SET UP A CHECKBOOK IRA

  • Open and fund a self-directed IRA
  • Form a single-member LLC with your IRA as the sole member
  • Appoint yourself as the manager of the LLC, and open a bank account in the LLC’s name
  • Fund the new LLC with cash from your IRA
  • Once your LLC has cash in a bank account, you can start investing

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Investor Tips

While these investing accounts can be flexible, there may be some risks. There is an increased potential of performing a prohibited transaction. Additionally, there may be tax-filing requirements depending upon the laws in your state. Investors pursuing this option should check with a legal advisor to make sure the LLC is set-up correctly.

Be cautious of companies that offer a checkbook IRA LLC setup package. These can cost more than using a local attorney or CPA to set up your LLC and a company like Advanta IRA to administer it.