Rocket Dollar Review: Self-Directed IRA Investing Made EasyRetirement
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When it comes to figuring out where to put your investment portfolio, you’ve got a lot of choices.
There are the set-it-and-forget-it robo advisors at Betterment and Blooom, the low-cost nearly hands-off index funds at Fidelity and Vanguard, then you can most certainly sit with an investment advisor and have them set up a well-diversified portfolio for you.
No matter who you choose, you’d still be investing in the same type of asset funds: stocks, bonds, mutual funds, and/or ETFs.
What a lot of newer investors aren’t aware of is that there is a way to diversify a portfolio with alternative investments (assets other than stocks, bonds, and mutual funds).
Normally reserved for the ultra-rich due to the time and money it takes to put together the paperwork and accounts, Rocket Dollar created a way for people like you and me to be able to invest in assets other than the common stock-bond-mutual fund mix through a self-directed IRA (SDIRA for short).
If you are an investor who is comfortable trading in alternative assets like precious metals and crowdfunded ventures, you’d be hard-pressed to find a platform that will let you invest in these things with a tax-advantaged account like an IRA or 401(k) and do the paperwork for you.
What is Rocket Dollar?
Founded in 2018 by Henry Yoshida, Thomas Young, and Rick Dude, Rocket Dollar is headquartered in Austin, Texas, and is an online third-party administrator investment platform.
They offer customers self-directed tax-sheltered retirement accounts without having to go through the hassle of paperwork and tracking down multiple lawyers.
What’s the difference between a Self-Directed IRA and a Regular IRA?
The main difference between a Self-Directed IRA and a regular IRA is the type of assets you can invest in.
With a regular IRA, when you use a brokerage like Fidelity, Vanguard, or Betterment, whether it be a Traditional IRA, Roth IRA (or even a 401(k) with your employer), you’d only be able to invest in assets such as stocks, bonds, mutual funds, ETFs, and money market products.
With a Self-Directed IRA (Traditional, Roth, or 401(k)), in addition to the regular common assets listed above, you could invest in many other types of assets (which is listed more fully below) like real estate and competition animals.
The biggest difference with a Self-Directed IRA is that the account needs a custodian who can help manage the non-typical assets that the owner/manager would invest in because of liability and complexity of the investments.
Advanced investors turn to the Self-Directed IRA because it can offer higher returns and portfolio diversity.
While Rocket Dollar isn’t the first platform to offer self-directed retirement accounts, they are the first to innovate the technology to bring this type of service mainstream and allow more investors access to alternative investments.
An account with Rocket Dollar can give you the flexibility to invest in anything allowed by the IRS.
Here are some alternative assets you would be allowed to invest in:
- Many types of real estate (including foreclosures)
- Equipment leasing
- Non-publicly traded businesses and business loans
- Crowdfunded ventures
- Mineral rights (oil & gas)
- Tax Liens
- Conventional stocks, bonds, mutual funds, etc.
- Competition animals
- Certain coin and precious metals
What you cannot invest in:
- Life insurance
- Collectibles (stamps, cars, art, etc.)
- Alcoholic beverages
- Some precious metals
- Coins and metals not on the approved list
Rocket Dollar offers 5 types of tax-advantaged, Self-Directed IRA accounts:
- Traditional IRA – Most popular and available to anyone ready to open an account
- Roth IRA – Available to anyone ready to open an account
- Inherited IRA – For people who want to roll over an inherited IRA
- Solo 401(k) – For small business owners without employees
- SEP IRA – For small business owners who have employees
- For Colorado, California, and Texas, there are specific state rules that apply when choosing to invest with Rocket Dollar.
How Does Rocket Dollar Work?
When you open an account, Rocket Dollar will create all the accounts needed for you to have a Self-Directed IRA or 401(k).
As the 3rd party administrator, Rocket Dollar “runs all the vital support functions, prepares all the paperwork needed, and streamlines the process, so you don’t have to.”
Traditional IRA, Roth IRA, Inherited IRA
When you open a Self-Directed Traditional IRA, Roth IRA, or Inherited IRA, Rocket Dollar will open your IRA account and a Limited Liability Company (LLC) that will be named with your first initial and last name.
This LLC will allow you to have “checkbook control” over the account, thus giving you greater flexibility over your money.
Structurally, the LLC owns the IRA, and you are the money manager of the account with access to funds by checkbook, debit card, or wire transfer. The LLC will be opened in Colorado under Delaware corporate law.
Here’s what the structure looks like:
With a Self-Directed IRA LLC, you get the tax benefits of an IRA, the legal protections of an LLC, and the flexibility to invest in alternative assets as allowed by the IRS.
Checkbook Self-Directed IRA vs. Custodian Controlled IRA
Rocket Dollar’s platform is efficient because they set you up with a Checkbook IRA (another name for Self-Directed IRA with an LLC).
The alternative to this is the Self-Directed IRA with custodial control (without an LLC).
The two types of accounts work the same way, but before you can invest in an asset with a custodial account, approval is needed, which usually takes a few days. At this time, California residents can opt to use the non-LLC option with Rocket Dollar.
Solo 401(k) and SEP IRA
If you qualify for a Simplified Employee Pension Plan (SEP) IRA or Solo 401(k), a trust would be opened (instead of an LLC), as well as a trust bank account and of course the account itself.
For Self-Directed SEP IRAs, only small businesses that have employees qualify for this type of account.
Once your account is opened, the paperwork is in order, and the account is funded (usually within 3-4 weeks), you can start investing in any of the assets allowed by the IRS.
Here is what the structure for a Self-Directed Solo 401(k) looks like:
How to Sign Up for Rocket Dollar?
Signing up is simple and free, just click on the “sign up” button and enter your email address and password.
From there, you’ll be asked questions that will direct you to the product applicable to you (Solo 401(k) or Traditional/Roth IRA). Then you’ll enter your personal information required of any brokerage account (legal name, address, SSN, etc.). From there you will pick your product, choose how you’ll fund the account, then purchase a service tier (Core or Gold), then the waiting begins!
How Long Does it Take?
From signup to full funding usually takes 3-4 weeks (unless you purchase the Gold plan). It takes time to set up all the paperwork to create a Self-Directed IRA LLC, but Rocket Dollar does it all for you. So just sit back, relax and keep an eye on your email for any paperwork that needs your attention.
For Traditional and Roth IRAs, Rocket Dollar will set up the new IRA and LLC with an operating agreement, articles of incorporation, and Tax ID, as well as the IRA bank account.
For Solo and SEP 401(k) accounts, a trust is opened (as opposed to an LLC), a trust bank account, and then the 401(k) itself. This also could take about 3-4 weeks, so be on the lookout for any paperwork you may need to sign during the process after initial sign up.
If you opt for the higher service tier, Rocket Dollar Gold, you get expedited service and your account will be opened and funded within 15 days.
There is no minimum opening deposit imposed on customers and no minimum balance. However, you must choose a service tier to open and maintain your account, the two choices are Core and Gold.
Core: $15/month, $360 one-time set up fee.
This is the lower-tiered service where you’ll have access to only a portion of their services, such as email support, online document storage, and access to investment management tools.
Gold: $30/month, $600 one-time set up fee, 12-month commitment
This tier gives you access to all of Rocket Dollar’s services like priority support, a custom-named LLC, expedited service which will have your account opened and funded within 15 days, and tax filing for 1099-R and Form 5500.
Rocket Dollar does not charge any other fees outside of the one-time setup fee and the monthly service fee. However, you may still incur fluctuating costs that occur within the LLC and IRA, as well as the cost of investing. Here are some examples:
- Bank Fees – You may incur bank fees for wire transfers, bounced/returned checks, ACH transfers, and international investment activity.
- LLC & IRA Fees – You may incur additional LLC fees if you don’t reside or invest in Colorado in cases like these, and depending on the state you live in, you may have to file as a foreign entity or apply for a new LLC. You may also incur fees within the IRA itself depending on what you are investing in, for example, expense ratios or any service fees associated with the investments themselves.
- General investing fees – You should also expect to incur fees from different types of investments. For example, if you plan on buying real estate, you will need to pay for closing costs and other fees associated with purchasing real estate.
Self-Directed Checkbook IRA
Rocket Dollar offers Self-Directed IRAs with LLCs with flexible checkbook control for the following types of tax-advantaged retirement accounts:
- Traditional IRA
- Roth IRA
- Inherited IRA
Solo 401(k) & SEP IRA
If you own a business with employees (SEP IRA), or without employees (Solo 401(k)), Rocket Dollar offers both types of accounts so you can take advantage of alternative asset investing.
Customer Service by Phone and Email
There are a lot of moving parts that go into opening and maintaining a self-directed retirement account, and while Rocket Dollar can’t offer investment advice, they are with you every step of the way, even if you’re not ready to open an account yet.
They are more than willing to give you all the tools you need before signing up for an account so you can make the best decision (talk to lawyers, research companies, etc.).
Customer service is available by phone at 1-855-762-5383 8am-5pm CT, or by email at firstname.lastname@example.org.
Access to Multiple Alternative Assets through a Self-Directed Account
With a self-directed retirement account at Rocket Dollar, you will be able to invest in multiple different types of assets allowed by the IRS. This could be advantageous if you’re a savvy investor who would like to diversify your portfolio into a non-common asset class but doesn’t want to deal with the hassle and paperwork involved with opening a Self-Directed IRA on your own.
Dashboard Tracking Within the Online App
Track your portfolio and all your assets in your dashboard account online.
There is no mobile app for Rocket Dollar at this time.
Access to a wide array of alternative investments
Self-directed flexibility to be able to purchase assets at will
Tax-advantaged retirement accounts with the legal protection of an LLC
Low fees for the industry
Enthusiastic and helpful customer service
Easy, hassle-free set up for SDIRA accounts
Not for the first-time investor or those with less than $10,000 to invest
It can take up to 4 weeks for an account to be open and fully funded
No mobile app
The one-time setup fee, while low for the industry, can be steep for new investors
There’s a legal grey area to cannabis investing – which is the fastest-growing domestic market
Risks – Investing in alternative assets comes with special risks that new investors need to understand
Who is Rocket Dollar Best For?
While Rocket Dollar brings the Checkbook IRA mainstream and available to anyone without having to do all the paperwork and legwork on their own, it is made for investors who are willing to be hands-on and ready to do lots of homework.
There is no minimum opening deposit imposed on customers to open an account and no minimum balance. However, to get the most out of Rocket Dollar’s services and the investment vehicles available, it is recommended that you have at least $5000-$10,000 minimum to start investing.
Rocket Dollar is also for the investor who understands the risks, both legal and monetary when investing in different alternative assets. Customers need to be aware of things like IRA rules on prohibited transactions, hidden fees, and fraud that can occur during transactions, so it’s very important to do research before purchasing anything.
For example, the default Colorado LLC that is created for a Self-Directed IRA needs to be modified if an investor wishes to purchase rental assets in another state.
With that said, Rocket Dollar seems like it would be for the advanced investor with enough capital to afford the one-time fee and the time to do research on investments.
However, that’s not to say, the average or new investor couldn’t start out with an account and build up their portfolio with Rocket Dollar. You could still invest in the common stock, bond, or mutual fund mix, just be sure you have enough money for the steep start-up cost and monthly fee.
When you’re looking for a place to invest your money, regular brokerage companies like Fidelity or E*TRADE are fine to invest your money, but they only offer a “vanilla” list of things to invest in: stocks, bonds, mutual funds, and ETFs.
If you’re ready to do some homework and expand into other types of assets like real estate, crowdfunded ventures, or private businesses, check out how Rocket Dollar can help you diversify your portfolio.
They are changing the way people do business when it comes to alternative investments and self-directed retirement accounts.
Logan is a practicing CPA, Certified Student Loan Professional, and founder of Money Done Right, which he launched in July 2017. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.