This Fox article discusses the high transactional costs of self directed IRAs for active investors, and mentions self directed IRA-LLCs as an alternative. However, in states like California, LLCs come with a $800 annual minimum tax, which cannot be avoided simply by filing in another state. A better alternative for some is a self directed 401k. Don't be too quick to assume you don't qualify for a self directed 401k. Ask us.
David and Michelle Haisley from Fort Wayne, Indiana, weren’t happy with the performance of their retirement funds, so they made another investment -- a foreclosed home for ,000.
The Risks of Tapping Your Retirement Fund for an Alternative Use
Despite some of the overly broad language in this article, the real lesson is that retirement funds should not be invested in highly speculative investments or to fund your own business. However, by all means consider "non-traditional" or "alternative" investments that are risk and return competitive with "traditional" investments. Such investments, e.g., real estate, are only non-traditional in retirement funds. That's because brokerage houses have long controlled the retirement fund industry. Real estate based investments, while not a traditional retirement fund investment, are certainly one of the most traditional and conservative investments because they are backed with something that doesn't evaporate: land and buildings.