Are You Ready for Total Control?
There's no question that self-directed pension investing is one of the hottest and most powerful ways to increase your wealth. But the question then becomes: are you ready for that kind of responsibility?
Certainly the fact that you have "checkbook" control of your pension through an IRA LLC is tempting. Now, if a smokin' hot investment deal comes along you simply write a check from the LLC to secure your pension's participation - you don't have to wait for money to come from your pension custodian, or even for the transaction to be pre-approved.
But your pension is also that thing you're counting on to see you through the far side of your life. So making mistakes here could cost you, big-time, financially. At some point you've got to ask yourself: Am I an experienced enough investor to play with my own pension? If your answer is "maybe," or "no," then you might want to reconsider self-directing your plan until you've got some more experience under your belt. After all - there's nothing stopping you from investing with non-pension money, too!
There is also a growing concern about self-directed investing amongst pension custodians, IRA regulators, and the attorneys and CPAs who are hired to try and get folks out of trouble when they accidentally enter into prohibited transactions. Remember, if you do something wrong with your pension fund it can be completely disqualified by the IRS, and that is a scary thought.
So, to quote Tom Anderson, the founder of Pensco Trust Company (a pension administrator who specializes in self-directed pension plans and non-traditional investments), "If you are considering 'checkbook control,' make sure you can drive the car. If you not ready for a Ferrari, then consider sticking with your custodian (not as sexy, but maybe more like a Volvo than a Ferrari-it might be more likely to get you where you're going safely)."
