1. Find a good keeper . The main investment companies, such as Fidelity Investments, will not allow alternative investments as an underlying asset in an IRA. But Wolverton states that the vast majority of those working in the self-directed sector of IRA are honest. You can find them by consulting the members of the Pension Industry Association. The owner of the self-directed retirement plan can choose to use a securities broker to help them select listed shares, bonds and mutual funds as investments in the retirement plan.
Securities brokers are regulated by the financial industry regulatory authority and the backgrounds can be checked here. Mohr said to do your research; not all custodians manage all types of resources, so it is important to understand their services and their commissions. Bishop said it is important to find a custodian who is not promoted by someone who sells something. And "if you can not find a caretaker who is willing to make the investment in particular, consider that investment as a red flag," he said.
2. Familiarize yourself with the rules and regulations of the IRS. When considering a self-directed IRA, make sure you understand what types of investments are prohibited so as not to incur harmful tax consequences. Consultation with professional investment consultants can help solve this type of situation.
3. Do your homework for investments . Search for the investment to make sure you fully understand it. Schock from the SEC said he was particularly wary of unsolicited offers, especially when a promoter promises guaranteed returns, since there are no guaranteed returns on investments. You are advised to check with the regulators of government bonds to see if there have been any complaints about the promoter.
Wolverton said investors should be suspicious of unverifiable biographies of managers or promoters. Ask questions about references and experiences and determine if the promoters are registered with the SEC, FINRA or the state authorities. Request to see an offer of a reminder and a prospectus. Look at the financial data.
Tom Anderson, president of the Pension Industry Association, simply said Googling: the name of the person offering the investment can provide basic information, including if there was an arrest .
4. Read all the materials related to the investment. Bishop said that it is essential to carefully review the disclosure agreements that are part of any investment transaction or to ensure that a financial, legal, or tax expert does so. This will help you better understand yield expectations, liquidity problems, loss and environmental liability, as well as the risk of a loss of capital if the investment worsens.
5. Involving a trusted professional. Schock says it is essential to consult an accountant, a lawyer or a financial planner to independently evaluate the investment. Kirchenbauer agrees: "It's worth investing in someone's time to make sure you're not preparing for a real problem," he said.