What is a Checkbook IRA?

A checkbook IRA is a retirement plan structure that allows account owners to write checks directly from their retirement funds, providing immediate access to capital to easily and quickly acquire desired investments.

Why use a checkbook IRA?

Checkbook IRAs come in handy when investors are interested in popular assets such as real estate—when many people are competing to purchase the same investment. Having instant access to retirement funds gives you a critical head start when time is of the essence.

Self-directed retirement plan owners enjoy the freedom and control they have in choosing their own investments. Add the additional freedom and control these individuals gain when using checkbook IRAs and you can easily see why this plan structure is favored by many a savvy investor.

As smooth and easy as we’ve just made this sound, remember that freedom is not always free. In this case, along with the freedom of choosing your own investments and having fast access to funds comes great responsibility. From performing due diligence on potential assets to understanding the rules to setting up your checkbook control account—as a self-directed plan owner, you alone are responsible for ensuring all elements of your investments and plan are in compliance with IRS rules and regulations.

However, we know we aren’t scaring you. If you’re interested in self-directing your IRA, you enjoy control. Chances are, responsibility doesn’t intimidate you, either. And, it shouldn’t. Setting up a checkbook IRA may be a bit more complicated than opening a typical self-directed plan, but once you learn the ins-and-outs, you’ll be well on your way to potentially achieving your retirement goals.

How do checkbook IRAs work?

  • Your IRA forms a limited liability company (LLC) and is the only (single) member of that LLC
  • The LLC has the benefit of liability protection, comparable to that of a corporation
  • The IRA owner (you) becomes acting manager of the LLC
  • The LLC opens a bank account in its name and funds are deposited into the account from the IRA
  • As manager, you are able to write checks out of the account to acquire investments

Remember, while there are benefits to having these accounts, there are also risks. The laws governing IRA account owners serving as LLC managers are somewhat unsettled. Advanta IRA highly advises consulting with a legal advisor before pursuing this route in order to comply with rules in structuring the account properly and ensuring you maintain your account in good standing.

Alternative investments permissible in checkbook IRAs

Once you have a self-directed retirement account set up, whether it’s a checkbook control plan or not, below is a list of just a few assets permissible in these plans.

Real estate-related assets:

  • Single and multi-family homes
  • Improved and unimproved land
  • Rentals (condos, townhomes)
  • Rehab-and-flips
  • Commercial property
  • Farm land
  • Timberland
  • Livestock
  • Foreign land
  • Tax liens and deeds
  • Private lending options (mortgages and other loans)

Other alternatives:

  • Oil and gas rights
  • Mineral rights
  • Businesses and/or franchises
  • Futures trading
  • Foreign exchange (forex)
  • Energy options (solar, wind, coal mining, etc.)
  • Sustainable (or socially responsible) investments
  • Private equity and private stock
  • Crowdfunding
  • Precious metals (gold, silver, platinum, palladium)
  • … and much more

The idea behind self-directed IRAs is to find what you know best and invest. You are able to do so at your own discretion and within the limits of your comfort zone. There are so many assets allowed in these accounts it would be impossible to list them all. Have an idea? Call us today and we’ll let you know if you can acquire it with your IRA.

Get started self-directing your IRA today!

If you have questions about this article or wish to learn more, please contact us.

About Jack Callahan

Jack proudly earned his bachelor’s degree in finance and multinational business from Florida State University and his law degree from the University of Florida College of Law. He established Advanta IRA in 2003 and has steadily nurtured and grown the company and the team every year since. Prior to founding Advanta IRA, Jack delivered specialized counsel to real estate investors, small business owners, and real estate professionals on tax, legal and financial matters. As an industry expert, Jack is a frequent speaker on self-directed retirement plans. He is an accredited continuing education instructor for the Florida and Georgia Bar Associations, Florida and Georgia Real Estate Commissions, and The American Institute of Certified Public Accountants.