How do Self-Directed IRA’s work?

Once you join your employer’s pension plan or set up your own, the funds must remain in the plan until you turn 59 1/2. Funds deposited to the plan are not subject to tax, and if invested, the proceeds of the investments are not subject to taxes until they are withdrawn.  Under current law, a specified percentage of these funds must be withdrawn each year when the account holder turns 70 1/2. If the funds are placed into a Roth IRA, they are not subject to taxes upon withdrawl, and are not subject to mandatory withdrawal.

The fact that over 97% of the total amount of pension funds are invested in stocks is evidence that not many investors are aware that IRS codes actually allow pension plan funds to be invested in almost anything. IRS only prohibits fund investments in collectibles, life insurance, and Chapter S corporations. (See IRS Publication 590).