An IRA depositary, such as Pacific Premier Trust, is a highly regulated bank, credit union, or non-custodial bank that is allowed to guard the assets of an IRA. Both the state and federal governments supervise custodians, and there are strict internal policies, procedures and controls. With a self-directed IRA, there is also an external custodian, but this company simply acts as an intermediary between you and the investment. A bank is an option if you want to enjoy the FDIC-guaranteed security of certificates of deposit or money market funds from an IRA.
The basic difference is that a traditional IRA reduces your taxable income in the year you make it and defers any tax payments until you start withdrawing funds years later. Facilitators are at the forefront of the process of creating new accounts for the owner of an IRA to help them follow the rules and implementation. However, in financial services, an SDIRA is simply an IRA in which custodians allow the account owner discretionary control over investing in investment products other than traditional stocks, bonds, and mutual funds. Generally, if the owner of an IRA or other disqualified party makes a prohibited transaction, the IRA account loses its IRA status on the first day of the year the transaction took place.
The depositary of an IRA is a financial institution that holds investments in an account for safekeeping and ensures that all government and IRS regulations are met at all times. However, in general, banks don't score particularly high in IRAs because most don't offer many investment options other than the above-mentioned vehicles. It's important to note that some states don't allow administrators to manage IRA accounts on behalf of the custodian in this way. However, in the financial services industry, a self-directed IRA usually means an IRA in which the custodian allows him to invest outside the more traditional world of stocks, bonds, mutual funds and exchange-traded funds (ETFs).
Marketable securities, such as mutual funds or stocks, require no effort to choose a custodian; however, IRAs that have alternative investments, such as private notes, precious metals or real estate, need a self-directed IRA custodian. A self-directed IRA is an IRA in which you choose funding methods and instruments and allows you to expand investment options. The Securities and Exchange Commission (SEC) published a bulletin for investors warning investors of the possible risks associated with investing through self-managed IRAs. However, IRAs already have tax advantages, so the tax advantages of annuities are not necessary within an IRA and you can pay high fees for having one.
If you're a self-directed IRA investor, look for non-traditional investment opportunities, including real estate or private companies.