Fact or Fiction: 5 Self-Directed IRA Myths

Fact or Fiction: 5 Self-Directed IRA Myths Debunked


Written by John Rothans

Nov 11, 2020

Too cumbersome, too overwhelming, too complicated. There are a lot of myths out there about self-directed IRAs. U.S. Money Reserve is here to debunk them. Don’t let misinformation stop you from enjoying the richest golden years you can.

Myth 1: You can’t contribute to more than one retirement account at a time.

There’s no limit to the number of IRAs and 401(k)s you can have open—and contribute to—at the same time. However, you’ll be limited by the IRS in terms of how much you can contribute to each account in a given year.

  • Total contributions to all traditional and Roth IRAs cannot exceed:
    $6,000 if you’re under age 50
  • $7,000 if you’re 50 or older
  • your taxable compensation for the year if the compensation was less than either $6,000 or $7,000, depending on your age

If you’re married, you can’t necessarily share your IRA with a spouse, but you can contribute to an IRA for a nonworking or lower-earning spouse. According to Investopedia, “The use of a spousal IRA strategy allows couples who are married filing jointly to contribute $12,000 to IRAs per year—or $14,000 if they are age 40 or older.”

Among the benefits of having several IRAs are diversification of tax breaks and diversification of assets.

Certified financial advisor Mike Pasieka notes that both IRAs and employer-sponsored 401(k)s are “important building blocks in building your retirement savings. Supplementing your workplace retirement account is a great way to boost your retirement savings and put even more of your money to work in tax-advantaged accounts.”

Myth 2: Coins can’t go into an IRA.

Coins can go into a self-directed IRA. But not just any coin will do. Here’s the breakdown of the coins that are allowed in a self-directed IRA, a type of retirement account designed for alternative assets.

Gold Coins

Silver Coins

Platinum Coins

  • American Eagle Bullion Coins
  • American Eagle Proof Coins
  • Australian Koala Coins
  • Canadian Maple Leaf Coins

You might be thinking, “I already have these coins at home! Can I put them in an IRA?”

No, you cannot. You cannot put gold and silver you already own into an IRA. You must use cash in your IRA to buy precious metals through a custodian. Once the coins have been purchased, they must be stored in an IRS-approved depository. You can’t keep IRA gold and silver in your home or in a security deposit box. Storing IRA precious metals at home can be considered a distribution and incur IRS penalties. Read more about these details in 6 Essential Gold IRA Guidelines to Know.

Myth 3: Self-directed IRAs are complicated and uncommon.

Self-directed IRAs are easy to set up, and they’re pretty common.

The big difference between a self-directed IRA, in the form of a traditional or Roth IRA, and a regular IRA is the type of assets you can hold. A regular IRA doesn’t let you hold alternative assets, like gold, silver, platinum, and palladium. A self-directed IRA does let you keep alternative assets, including precious metals, in your account.

The other difference is that you’ll need to enlist a trustee or custodian to open a self-directed IRA, whereas you can do it yourself if you’re establishing a regular IRA. However, finding an IRS-approved trustee or custodian is simple (U.S. Money Reserve can lend a hand). That company will support you every step of the way.

John O. McManus, the owner of a self-directed IRA and founder of an estate planning firm, says a self-directed IRA provides the potential for higher yields and less volatility than other asset types.

At the end of 2015, more than 485,500 self-directed IRAs in the U.S. held nearly $49.8 billion in assets, according to a 2016 report from the U.S. Government Accounting Office.

Myth 4: You need a ton of money to open an IRA.

You need no money at all to open an IRA unless it’s required by the company where you set up the account. That’s because the IRS doesn’t mandate a minimum amount to open one of these accounts. Of course, you’ll want to add money or assets to your IRA over time to build up the savings you need for retirement.

You can also transfer or roll over money to an IRA that you have in an existing retirement account, like a 401(k). According to Vanguard, there is no maximum limit on how much you can roll over, though some financial institutions can require a minimum amount. Timing, taxes, and distribution rules vary depending on the type of retirement accounts you’re transferring between, so you may want to consult your financial advisor first.

Myth 5: IRAs are risky.

Like any other asset type, IRAs can carry risks. But overall, they can be very effective.

“IRAs are a powerful tool for retirement savers to get lucrative tax breaks to help them reach their long-term financial goals,” according to CNNMoney. Because you’re in control, you can manage your IRA in such a way that you can diversify away from the risk exposure of different asset classes.

Americans put a lot of stock—literally and figuratively—in IRAs.

U.S. assets in IRAs totaled $10.8 trillion at the end of the second quarter of 2020, according to the Investment Company Institute. That represented one third of all U.S. retirement assets ($31.9 trillion) as of June 30, 2020.

Do these IRA facts have you thinking about rolling some of your retirement funds into a self-directed IRA? You and your spouse can roll over or transfer a portion of your retirement dollars into an IRA, as long as it isn’t past the tax deadline. Call U.S. Money Reserve now for a free consultation with an IRA Account Executive.


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