Integrating a Stock Portfolio with Your Self-Directed IRA
Investors who establish a self-directed IRA LLC are primarily focused on the ability to invest in non-traditional assets such as real estate, trust deeds, and the like. But what if you want to invest in conventional financial products like stocks, bonds, and mutual funds as well?
Even if your investing focus is something like rental properties, it can be beneficial to have access to the stock market for diversification.
We regularly get calls or emails from clients wondering how they can put some of the capital in their self-directed IRA into stocks, and thought it would be a good topic to cover here on the blog.
What is your Goal with Stock Investing?
There are two means you can use to balance a stock portfolio with your non-traditional investments. You can hold stocks inside your IRA LLC/Trust, or you can choose to hold stocks in a separate IRA. The option that will best suit your needs will depend largely on two factors:
- The amount of capital you are wanting to place in conventional assets
- The risk exposure that may be associated with your non-traditional assets
If your goal with equities investing is simply to keep a relatively small amount of earnings active instead of in cash, then it will be simplest to open a brokerage trading account inside your IRA LLC/Trust.
If you will be putting a significant amount into standard financial investments, it may make sense to maintain a separate IRA for that purpose. This is especially true if the assets you invest into in the self-directed IRA create liability risk, such as rental properties.
In some cases, it may make sense to use both approaches, with a small brokerage account inside the IRA LLC to keep capital productive, and a separate IRA to isolate a larger stock portfolio from liability risk.
Holding Stocks Inside your IRA LLC
Holding stocks within your checkbook IRA LLC is as simple as opening a LLC style account with a brokerage. The account will be a commercial trading account in the name of the LLC, using the LLC tax ID.
But there is a catch… Only one brokerage will work with you.
The major brokerages like Charles Schwab, E*Trade, Fidelity, and Vanguard will not currently open accounts for an IRA-owned LLC – believing they may in some indirect way be viewed as a “fiduciary” to the IRA. Until TD Ameritrade was acquired by Charles Schwab in the spring of 2022, they were the last major brokerage willing to open accounts for checkbook IRA LLCs. They no longer offer such accounts.
When TD Ameritrade stopped offering accounts to IRA LLCs, we contacted all US brokerages that offer business accounts for LLC and Trust entities. Tasty Trades is the only viable option we were able to identify. They are a specialty brokerage focusing more on active and professional traders.
You can reach out to Tasty Trades at www.tastytrade.com
Safeguard Advisors has no relationship with Tasty Trades. We do not receive any kind of referral fee, and cannot directly assist you with your account establishment. Just reach out to Tasty Trades and ask for an entity account for a LLC or Trust, depending on the type of plan you have.
The key advantage of holding a trading account inside the checkbook IRA entity is flexibility and simplicity. You can move money between your LLC/Trust held checking account and brokerage account at will. This is not any kind of IRA rollover that requires special reporting. You are just reallocating funds held within your plan entity.
The potential disadvantage of holding significant amounts of cash or stocks within the IRA LLC, however, would be liability exposure. If your non-traditional investments include assets such as trust deeds, cryptocurrency, or shares of privately held entities, there is likely very little risk. If, however, your IRA LLC holds direct title to a rental property, then there could be the risk of a lawsuit against the LLC. A good insurance policy will always be your first line of defense, but it would be foolish to have a large amount of cash or stocks within the LLC that could be used to satisfy a judgment against the LLC.
Isolating Stocks in a Separate IRA
In cases where you have significant non-risk assets such as cash or stocks, and are also using the IRA LLC/Trust to pursue risk-exposed assets such as real estate, it may be better to keep the two components of your overall portfolio separate. Keep the self-directed IRA focused on real estate, and maintain a separate IRA with a brokerage firm to manage your conventional assets.
With this approach, you are creating asset segregation, and protecting the non-risk assets from liability that may be associated with the risk assets.
You can also work with any brokerage you like for that separate IRA.
The disadvantage is that it becomes more cumbersome to move capital between the two asset classes.
If you accumulate excess cash in the IRA LLC and want to move it to your brokerage IRA, you will have to execute an IRA-to-IRA transfer via your self-directed IRA custodian. You must not send cash directly from your entity checking account directly to another IRA, as that breaks the reporting chain on the money and can result in tax penalties.
The process to move cash from a brokerage IRA to the Checkbook IRA is similar. You will need to request a transfer from the brokerage back to your self-directed IRA custodian.
Because of the paperwork and time involved, this type of portfolio reallocation is generally not something you want to do more than once or twice a year.
Both, Please!
Nobody said you cannot have the best of both worlds, with flexibility and asset segregation. We have many clients who maintain a small brokerage account within their IRA LLC that they use to keep a moderate amount of capital in. Once or twice a year they will send excess cash to a separate IRA.
If you choose to do this, be sure to leave sufficient cash in your IRA LLC/Trust to handle normal operations and any contingencies that may be associated with the types of investments your plan is holding.
The bottom line is that you can keep things relatively simple, while at the same time maximizing the productivity and security of your hard-earned retirement savings.
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Quick answers to common questions
We’ll take you through a simple, step by step process designed to put your investment future into your own hands…immediately. Everything is handled on a turn-key basis. You take 100% control of your Retirement funds legally and without a taxable distribution.
YES! In 1974, Congress passed the Employee Retirement Income Security Act (ERISA) making IRA, 401(k) and other retirement plans possible. Only two types of investments are excluded under ERISA and IRS Codes: Life Insurance Contracts and Collectibles (art, jewelry, etc.). Everything else is fair game. IRS CodeSec. 401 IRC 408(a) (3)
It’s actually pretty simple. Early on, regulators let the securities industry take the lead in educating the public about retirement accounts. Naturally, brokers and banks promoted stocks, bonds, and mutual funds—giving the impression that those were the only allowed investments. That was never true... and still isn’t. You can probably guess why they kept the rest under wraps.
It is possible to use funds from most types of retirement accounts:
- Traditional IRA
- Roth IRA
- SEP IRA
- SIMPLE IRA
- Keogh
- 401(k)
- 403(b)
- Profit Sharing Plans
- Qualified Annuities
- Money Purchase Plans
- and many more.
It must be noted that most employer sponsored plans such as a 401(k) will not allow you to roll youraccount into a new Self-Directed IRA plan while you are still employed. However, some employers will allow you to roll a portion of your funds. The only way to be completely sure whether your funds are eligible for a rollover is by contacting your current 401(k) provider.
A Solo 401(k) requires a sponsoring employer in the format of an owner-only business. If you have a for-profit business activity – whether as your main income or as a side venture – and have no full-time employees other than potentially your spouse, your business may qualify. The business may be a sole-proprietorship, LLC, corporation or other entity type.
A self-directed retirement plan is a type of IRA or 401(k) that gives you greater control over how your retirement funds are invested. Unlike traditional accounts held at banks or brokerage firms that limit you to stocks, bonds, and mutual funds, self-directed plans allow you to invest in a wide range of alternative assets including real estate, private businesses, precious metals, cryptocurrency, and more.
These plans still follow the same IRS rules and maintain the same tax-deferred or tax-free benefits as conventional retirement accounts. The difference is simply in how and where you choose to invest.
No. Moving to a self-directed IRA or Solo 401(k) does not trigger any taxes, as long as your funds are eligible for rollover.
Self-directed retirement plans maintain the same tax-advantaged status as traditional plans offered by banks or brokerage firms. The key difference is flexibility—our plans are designed to give you greater control and allow for a wider range of alternative investments beyond stocks, bonds, and mutual funds.
A prohibited transaction is any action between your retirement plan and a disqualified person that violates IRS rules and can lead to serious tax consequences. Under IRS Code 4975(c)(1), prohibited transactions include:
- Selling or leasing property between your plan and a disqualified person Example: Your IRA cannot purchase a property you already own.
- Lending money or extending credit between the plan and a disqualified person Example: You cannot personally guarantee a loan your IRA uses to buy real estate.
- Providing goods or services between your plan and a disqualified person Example: You can’t use your personal furniture to furnish a rental property owned by your IRA.
- Using plan income or assets for the benefit of a disqualified person Example: Your IRA cannot buy a vacation home that you or your family use.
- Self-dealing by a fiduciary (using plan assets for their own benefit) Example: Your CPA shouldn't loan your IRA money if they’re advising the plan.
- Receiving personal benefit from a deal involving your IRA's assets Example: You can’t pay yourself from profits your IRA earns on a rental.
If a transaction doesn’t clearly fall within the allowed guidelines, the IRS or Department of Labor may review the situation to determine if it qualifies as a prohibited transaction.
Disqualified persons are individuals or entities that are prohibited from engaging in certain transactions with your IRA or 401(k). Doing so could trigger a prohibited transaction, which may result in taxes and penalties.
Here’s who is considered a disqualified person:
- You (the account holder)
- Your spouse
- Your parents, grandparents, and other ancestors
- Your children, grandchildren, and their spouses
- Any advisor or fiduciary to the plan
- Any business or entity owned 50% or more by you or another disqualified person, or where you have decision-making authority
These rules exist to prevent self-dealing and ensure your retirement plan remains in compliance with IRS regulations.
(Reference: IRC 4975)
Understanding and following these rules can be tricky, but it’s very doable. The best way to stay compliant is to work with professionals who specialize in self-directed retirement plans. They can help you navigate IRS guidelines and avoid prohibited transactions.
If an IRA holder is found to have engaged in a prohibited transaction with IRA funds, it will result in a distribution of the IRA. The taxes and penalties are severe and are applicable to all of the IRA’s assets on the first day of the year in which the prohibited transaction occurred.
Yes. While self-directed retirement plans allow for a wide range of investments, there are a few important restrictions.
You cannot invest in collectibles or life insurance contracts, and you must avoid prohibited transactions—activities that benefit you personally rather than the retirement plan. These include things like buying or selling property to yourself or family members, using plan assets for personal gain, or self-dealing in any way.
Violating these rules could cause your entire IRA to lose its tax-advantaged status. To protect your account, it’s essential to work with professionals who understand IRS regulations and can help you stay compliant.
This is a common misconception. In many cases, professionals may simply be unfamiliar with self-directed retirement plans, as they fall outside their usual scope of work. CPAs and tax preparers are trained to file taxes, not necessarily to advise on alternative retirement strategies. Financial advisors and brokers often work for firms that focus on traditional investments like stocks and mutual funds—and may not benefit from or support alternative options like real estate or private lending.
Self-directed retirement investing is legal under IRS rules—but like any specialized area, it requires working with professionals who understand how it works.
The IRS has rules in place to make sure your IRA is used only for the exclusive benefit of the retirement account—not for personal gain or to help family members. These rules can get complicated because there are many ways a conflict of interest can occur, even unintentionally.
For example, if your IRA buys a house and rents it to your mother, you might be reluctant to evict her if she stops paying rent. That emotional connection creates a conflict between what’s best for your IRA and your personal relationships, something the IRS aims to prevent.
These rules help ensure your retirement account stays compliant and protected. (See IRC 408)
Yes. Most tax-deferred retirement accounts—such as Traditional IRAs, old 401(k)s, 403(b)s, and TSPs—can be rolled over into a self-directed IRA or Solo 401(k), depending on your eligibility. Roth IRAs cannot be rolled into these accounts.
You can contribute directly from earned income, subject to annual IRS contribution limits. The method and amount depend on the type of plan you have (e.g., Solo 401(k) vs. IRA).
To take a distribution, you'll request funds through your custodian or plan administrator. Distributions may be taxable depending on your account type and age. Early withdrawals may be subject to penalties.
For 2025, the Solo 401(k) max contribution limit is $81,250 if age 60-63, $77,500 if age 50-59 or 69+, and $70,000 if under 50. Traditional and Roth IRAs have a limit of $7,000 ($8,000 if age 50+). Limits are subject to IRS adjustments.
Yes. IRA contributions are typically due by your personal tax filing deadline (e.g., April 15). Solo 401(k) contributions follow your business tax filing deadline, including extensions.
IRS reporting requirements vary depending on the type of self-directed retirement plan you have. Here’s a quick breakdown of what you need to know
Please note: Our team can help you understand what’s required for your specific account, but we don’t provide tax or legal advice. We always recommend working with a qualified tax professional to ensure full IRS compliance.
Self-Directed IRA (Traditional or Roth)
- Form 5498 – Filed by your custodian each year to report contributions, rollovers, and the fair market value (FMV) of your account.
- Form 1099-R – Issued if you take a distribution or move funds out of your IRA.
- Annual Valuation – You'll need to provide updated FMV for any alternative assets held in the account, such as real estate or private placements.
Solo 401(k)
- Form 5500-EZ – Required if your plan assets exceed $250,000 as of year-end. Must be filed annually by the plan participant.
- Form 1099-R – Required if you take a distribution or roll funds out of the plan.
- Contribution Tracking – Keep records of employee and employer contributions. These are not filed with the IRS but may be needed for tax reporting or audits.
SEP IRA
- Form 5498 – Filed by your custodian to report contributions and FMV.
- Form 1099-R – Filed by your custodian. Issued for any distributions.
- Employer Contributions – Must be reported on your business tax return (and on employee W-2s, if applicable).
Health Savings Account (HSA)
- Form 5498-SA – Filed by your HSA custodian to report contributions.
- Form 1099-SA – Filed by your HAS custodian. Issued for any distributions.
- Form 8889 – Must be included with your personal tax return to report contributions, distributions, and how funds were used.
