Self Directed IRA Custodians Compared
I was talking with friends of mine over dinner at their house and the husband, Jim, asked me about my investments. He’s a quiet sort of a fellow and I was happy to have something to talk with him about while Molly was in the kitchen getting the pie I’d brought. I told him that things were going better — not great, but better. Anything is better than 2009, right? He asked me if I knew anything about self directed IRA custodians. It’s something he’d read about and wanted to know more about and since he knew I kept up a blog and a hobby-level interest in retirement investing. I promised him a blog post. That was more than a month ago, so Jim, better late than never!
There are not that many self directed IRA custodians out there. The rules that govern opening and maintaining a firm like this are, as you would hope, stringent. Equity Trust is probably the name from the list that you recognize. The Equity Trust Company offers a nice package. A simple annual fee and no extra fees on transactions. To make it worth while though, you have to conduct several transactions, otherwise you might find the annual fee a little hard to swallow. If you want a name you can trust and you like to move your money, pick Equity Trust.
Pensco is another large firm for self directed IRA accounts. Again, you are paying a bit more for dealing with a large firm, but you can decide based on your own saving and investing habits which firm is right for you. I picked the funny picture for this post to illustrate that in a way, all these guys are the same. The question is which one rings the bell for you?
Before I go on, I just want to stop and back up. For some of you a quick IRA 101 is in order! What is an IRA? What’s a simple IRA and how is that different? An IRA is one way to save money for retirement. tax deferred money, that is. IRA stands for Individual Retirement Account and Uncle Sam created them in the 70s when pensions began to crumble. A simple IRA is all about throwing in the cash and forgetting about it. If this describes you, then do not bother to continue with the custodian review! A self directed IRA is for the investor who wants to be a part of the process. That is not for everyone.
Lincoln Trust is another big firm. Their fees appear to be cheaper than either Equity Trust Company or Pensco, but make sure you double check. My research was fairly surface since I didn’t open accounts with these firms! A smaller annual fee and small transactions fees make this an attractive option in the field. I did see reports that the transactions are slow to execute, so that could be a deal breaker for some of you.
The last one I want to mention is Entrust Administration. What appealed to me is that they have offices all over the country. There is something reassuring, well for my generation anyway, about being able to talk face to face with the person handling your money. My Dad always said you learn a lot with a handshake. The fees seemed on the high end, but again — it is all a juggling act. You pay more to have a face to face experience with your custodian.
There are more than just these four firms out there. And there are firms that offer a wider range of investment opportunities, including real estate! I wanted to focus on the traditional aspects of self directed IRA custodians. It’s a good way to dip your toe into these waters. Funding your future using your own wiles can be a satisfying process. There is always the caution that you be prudent with these funds since it is quite literally your future that your are handling.
