Are you looking to use your retirement dollars to invest in real estate, cryptocurrency, or startups? If so, a self-directed Solo 401(k) or a self-directed IRA may be a good tool for you. Self-directed retirement accounts allow individuals to invest in assets beyond the traditional stocks, bonds, and funds offered by mainstream brokerages.Rocket Dollar is a low(ish)-cost investment platform that helps regular people take advantage of self-directed IRAs. If you’re self-employed, or you have a sizable IRA or rollover IRA account, you may want to consider self-directed options such as the accounts available through Rocket Dollar.Here’s what you need to know about the company and its offerings.
Started in 2018, Rocket Dollar is a newcomer to the world of investment platforms. It positions itself as a low-cost and easy-to-use platform for self-directed investors.
Tactically, opening an account through Rocket Dollar is pretty simple. You sign up online, sign a few papers, and fund your investments. Once you fund your investments, you can cut a check and start buying any legal investment.It’s all fairly straightforward at first glance. But when you peel back the curtains, you see just how much work Rocket Dollar is doing (and how easy it is to screw things up).When you open an account through Rocket Dollar, you’ll also open an LLC (limited liability company). This company will be owned by your account. Any money used to invest or received from investments hits the LLC’s checkbook. You cannot commingle personal funds and investment funds.Having the LLC in charge of your account’s investments makes it easier to stay compliant with all laws surrounding self-directed investments. However, it is important to note that you still have to be careful when buying and selling assets. Rocket Dollar emphasizes that it is illegal to “self-deal” or buy or sell assets that you or your business owned.Also, Rocket Dollar will help file the form 5500 for you if it’s required as part of your ongoing services with them.
Each account carries a $360 setup fee, plus a $15/month maintenance fee. Depending on your balance, this can be an incredible deal. Any other fees you incur (such as investment fees) are on top of these fees charged by Rocket Dollar.Rocket Dollar also has RocketDollar Gold, which allows an expedited funding option with a $600 fee and is $30/month. This is really for people who need to close a deal very quickly and want support.These fees are more expensive than the free solo 401k plans offered by the major brokerage firms. However, by going this route, you get the ability to control and invest in so much more.See how their fees compare to Alto IRA here.
When you invest via a self-directed IRA, you can invest in almost anything. However, Rocket Dollar has several online investment partners that make it easy to invest in crowdfunded real estate, gold, precious metals, cryptocurrencies, startups, and other “alternative” investments.While I had heard of a few of Rocket Dollar’s partners, most were companies that required a little research.Rocket Dollar’s investing partners are not a particular strength. That’s not to say that its partners offer bad investments. Rather, investors must do their own diligent searches before putting a single dollar into an investment partner.
Rocket Dollar makes it cheap and easy to use retirement dollars to invest in alternatives. For the right person this is a “must-consider” investment platform. But whom is the right person?Generally, I think that most people should stay away from using retirement dollars to fund alternatives investing until that person has established a track record of successful investing.For example, a person who owns several rental properties has proven that she understands how to buy a rental property. That makes that person a better candidate for this type of account. Likewise, an art dealer who wants to become an art investor may have an advantage when buying and selling collectible art.In some cases, investing in alternative asset classes can be very lucrative and fulfilling. However, in other cases, you may lose all your money. Alternative investors need to be able to handle both ends of the spectrum.