Retirement Industry Glossary

An investment in any asset class excluding stocks, bonds, and cash; such as real estate, private capital, natural resources, precious metals, and digital currency to name a few.

A financial instrument issued and backed by an insurance company that provides guaranteed monthly income payments for the life of the contract.

IRA accounts held at these financial institutions are used to invest in publicly traded assets such as stocks, bonds, and mutual funds.

Example: Charles Schwab and Fidelity.

Depending on the IRA account type, individuals can deposit pre-tax or after-tax dollars annually to reap the tax-sheltered benefits. Annual contribution limits are set by the IRS.

Per the IRS exemptions, fees charged for services rendered by the IRA custodian that are deemed necessary for the proper establishment and operation of the IRA does not have to be paid by the IRA account.

Example: The Annual IRA Account Administrative Fee is for administrative services provided by the custodian throughout the year and can be paid out of pocket.

A withdrawal of funds from a retirement account.

An examination of financial records to analyze and mitigate risk from a business or investment decision before entering into a proposed transaction with another party.

When an individual withdraws from an IRA or retirement plan before reaching age 59½ they are deemed “early” or “premature” distributions. Individuals must pay an additional 10% early withdrawal tax unless an exception applies.

Tax-advantaged retirement savings account for individuals (not joint) to build tax-deferred or tax-free savings depending on the type of account.

Withdrawing investment assets from a retirement account.

Example: Precious metal assets were distributed from the IRA account to the personal possession of the IRA account owner.

The transfer of investment assets from one IRA account to another.

Example: A rental property owned by a SD-IRA is transferred to another SD-IRA with a different IRA custodian.

Per the IRS, expenses incurred by the investment must be paid with funds from the IRA account and cannot be paid out of pocket.

Example: A depository will charge fees for the storage of precious metals. These fees are directly related to the investment and therefore must be paid by the IRA account.

An IRA custodian, like Preferred Trust Company, is a highly regulated bank, credit union, or non-depository bank that is permitted to custody assets in an IRA.

A Limited Liability Company (LLC) is established to be specifically owned by a Self Directed IRA to provide the IRA owner with “checkbook control”. This removes the IRA custodian from the investment process, providing the IRA owner with more control but with greater responsibility for maintaining the compliance of the account.

When an individual moves qualified funds from one IRA account to another. This is not a taxable event, is not a contribution, and there is no limit on the amount and number of transfers that can be executed in a year.

Example: The process of moving qualified funds from a brokerage firm IRA to a Self-Directed IRA at Preferred Trust Company is a transfer.

A company that provides investments for individuals to participate in.

Example: The precious metals dealer that facilitates the purchase of precious metals in an IRA.

In the case of default, the lender can only seize the collateral specified in the loan agreement, even if its value does not cover the entire debt.

Example: A SD-IRA owns digital currency, Trust Deeds, and a rental property. The rental property was financed with a non-recourse loan that goes into default. The only recourse the lender can take is the rental property, the other assets in the SD-IRA are protected.

Personal funds that are held in an account that is not a tax-sheltered, qualified retirement plan.

A company whose shares can be bought and sold by the public via stocks, bonds and mutual funds. Publicly traded assets cannot be held in a Self-Directed IRA, per IRS regulations.

Funds that are held inside a tax-sheltered, qualified retirement plan such as an IRA.

A retirement account that provides taxpayers with tax-shelter benefits, such as tax-deferred or tax-free savings depending on the account type.

With a tax-deferred retirement account, individuals are required to distribute a minimum amount from the account annually, beginning the year they turn 73.

The transfer of qualified funds from a previous employers retirement plan (i.e., 401k, 403b, etc.) to a new employers retirement plan or to an IRA account.

When money/assets originally held in a tax-deferred retirement plan (i.e., Traditional IRA) are moved to a Roth IRA to grow tax-free. A conversion will incur tax consequences for the tax-year in which the transaction occurred.

An Individual Retirement Account that enables retirement savers with the ability to grow tax-deferred or tax-free returns in alternative investments.

In a tax-deferred retirement plan (i.e., Traditional IRA), taxpayers delay paying taxes on investment returns/gains until the funds or assets have been distributed from the account.

In a tax-free retirement plan (Roth IRA), accumulated investment returns/gains are distributed from the account with no tax implications.

Incurs when an IRA engages in investment activities that generates what the IRS has deemed as ordinary income instead of passive income.

A tax derived from debt financing used to obtain the asset that applies to gains from the asset received by an IRA.

Example: An IRA account utilizes a non-recourse loan to finance the purchase of a rental property.

The alternative investment must be “titled” with the vesting name of the SD-IRA or else the investment will lose it’s qualified (tax-sheltered) status.

The name of the IRA account (i.e., Preferred Trust Company, LLC FBO (For the Benefit Of) Jane Doe, IRA) is important for properly titling investments and assets. (Please see Titling an Investment)