Self Directed IRA discussion

[neroden]

OK, it's time to have this discussion. :-(

So, if Tesla goes private and you choose to keep the stock, if you own it outright it's nice and simple. You keep the stock.

If it's wrapped in an IRA or Roth IRA, however.... you have to find a custodian who will allow you to hold private equity. This may require switching to a company which offers "self directed IRAs", which doesn't include the usual brokerages like Fidelity and Schwab. :-(

I'm hoping some of the usual brokerages will make an exception for Tesla due to the unique circumstances. Both Schwab and Fidelity and even Etrade *sometimes* hold private stock, but it's on a case-by-case basis. Even then they charge annual fees.

Can't guarantee it. So I figured I'd better do my research immediately... I started researching.

This is the most useful thing I've found yet:

Ultimate List of Self Directed IRA Custodians and Administrators

And a similar same list:
Self Directed IRA Custodians - Download Free Comprehensive Listing

They're all super expensive! Typically they burn you for $350+ per year and $100 to set up; this is just the average of the ones I've looked at!

They also mostly have terrible reputations for awful customer service -- failing to answer the phone, failing to do paperwork correctly, basic stuff like that. They range from one-man shops to... very small banks.

So far Polycomp is the first one I've found with a half-decent reputation, though I've only looked through about five. Equity Trust has a truly awful reputation (though some say it's OK if you find the right person and email them); Accuplan is even worse. Pensco, Entrust have merely bad reputations; so does Quest IRA. IRA Resources Trust has a bad reputation for customer service too, but they seem to have the lowest fees ($200/year) and seem to have a better reputation for customer service if you don't do any time-sensitive transactions. (Plus I think I can get to their office.) Advanta doesn't have negative reviews but also doesn't have a significant number of reviews at all... Millennium Trust are actually criminals.

I found out that a "checkbook control IRA" means holding an LLC in your IRA, so it's something to avoid for mere holding of private placement stock.

It's also worth knowing that EVERY IRA custodian is either a bank or on the following list.
Approved Nonbank Trustees and Custodians | Internal Revenue Service

-----
Anyway, my initial conclusion is: unfortunately, if the company goes private, it's probably best to cash out stock held in an IRA. Unless Musk offers us some kind of special deal for IRA holders, it's a nightmare, whereas holding the stock after-tax is free of fees.

But if anyone's got better information, add it to this thread.

I'd suggest anyone with stock in a retirement account vote against the deal, and contact Musk to ask him what he is going to do for people with TSLA in their IRAs, 401(k)s, Canadian retirement plans, etc. Otherwise you may face a choice betwen cashing out and getting hit with $400 fees every year just to hold your TSLA stock.

 

[Sparky]

Goods starting point. Here's my experience:
First. I'm not financially savvy. But I do know that when trying to figure out how to do something that is a little unusual with my $ I expect to get a lot of bad info. So, it took time to get straight answers and to find a knowledgeable person in my own retirement investment sphere who knew the answers and how to solve problems. I swear I got so many dumb responses to questions that it was kinda concerning that I have large sums of $ with these folks.
I wanted to invest in a small startup that was doing a private equity offering of "B" series shares in $10k blocks each.
Option A is to write a check to startup after filling out forms detailing essentially, how much money I'm likely to lose. I preferred to not cash out some stock and pay capital gains on $ I may very well never see again.

Option B is to transfer (roll over) some 401k funds to a directed IRA that will allow investment in practically anything, from the next Jeff Bezos, to cousin's Tapas Bar. I'm still employed and most accounts are active, meaning my company is putting $ into 401k along with me putting $ in. Those accounts were not eligible for me to roll into an outside acct. I have more than one 401k and one of them is free from "employer oversight". So, I rolled a portion of this account into a uDirectIRA account. They are one of the companies on @neroden 's list above (thanks for the list!). uDirect is an administrator not a custodian so the shares are in my name.
Yes, it sucks they charge me $350/yr for nothing.

Rolling over my 401k into a uDirect IRA was straightforward.
Initiated account with them.
Got uDirect account # to transfer funds from 401k.
Transferred with just a phone call and one online form.
Contacted uDirect and told them that I wanted to direct a portion of my IRA (99% portion).
Downloaded a "Direction of Investment" form with wire transfer info and $ amount and signed, faxed back to them.
Received "x' $10k units of stock. Still have them. Company is still afloat. No longer think about it much. IPO 2020?

Sorry for the long-winded post. It was good for me to recall these steps since I may be doing it again soon with a lower risk investment. I hope I don't have to go through uDirect etc but I will if that's the only way.

 

[UnknownSoldier]

My Roth IRA holding is relatively small compared to my holding in my brokerage account.

If push comes to shove, I'll liquidate the holdings in my Roth IRA.

I don't really see any other good options here.

Hopefully more light will be shed on this soon as we get more details of the buyout plan.

 

[cpa]

My Roth IRA holding is relatively small compared to my holding in my brokerage account.

If push comes to shove, I'll liquidate the holdings in my Roth IRA.

I don't really see any other good options here.

Hopefully more light will be shed on this soon as we get more details of the buyout plan.

Rather than liquidate your Tesla stock in your Roth, could you just take a distribution in kind? I gotta check the rules, but I think that any Roth distribution is tax-free after five years (principal amount only, not appreciation) if one is <59 1/2. If you are over 59 1/2, no tax is due on the distribution. So, there might be a sliver of hope, as well as a tax basis for a future sale.

Anyway, worth looking into.

 

[cpa]

I have no horse in this race. But, let's peel the onion a little bit:

IRA custodians must calculate the fair market value of each IRA as of each December 31. Easy peasy for traditional holdings. Not so easy for illiquid securities, partnership interests, real estate, etc. The custodians must furnish the appropriate information to beneficiaries by May (I seem to recall).

Some individuals have basis in their IRAs. Older California residents could have basis even though their federal basis is zero. Basis information should be filed every year with your personal income tax returns on form 8606. The FMV of all IRAs is reported on form 8606 too.

Like it or not, when we reach the ripe old age of 70-1/2, we gotta start taking RMDs from our qualified plans--all our plans (not Roth.) The distribution can come from one or any number of our plans. This means that the custodian will have to begin to liquidate assets in the portfolio (or distribute in kind) to fulfill this requirement. Regardless, the taxpayer will have to pay income taxes on these distributions, and the IRS does not take in-kind payment, just the coin of the realm. Believe me, not every taxpayer is proactive and has a master plan to deal with this inevitable situation. People become sick or incapacitated, and their spouse/child is unaware of their situation. Lotsa people are very closed-lipped about their financial affairs, sometimes to their detriment.

Then, there will be the occasional early-retiree with $2.5 million in his IRA who decides at age 42 to begin "substantial, equal, periodic payments" from his IRA. This is an exception to the 10%/2.5% (Calif.) penalty for early distributions. More paperwork for the custodian.

It must be difficult for these sorts of custodians to do their work properly (if as pointed out above) they do it at all. But doing all the administrative work that is required by ERISA costs money, so I can see why their fees are much higher than the bank or Schwab. This is no excuse for sloppy service or other poor business practices.

Personally, I would ask around to get referrals by word-of-mouth. Ask your tax preparers. Ask your lawyers. Someone has to have some knowledge in this arena. Back in the '90s we worked with an outfit out of Denver who was very professional, if pricey. I do not recall the name, and I do not know if they are even still in business.

 

[Sudre]

I talked with my guy at Edward Jones today. The bulk of my shares are in my IRAs with him. I would like to keep the shares mainly to avoid paying any taxes if the shares get liquidated.

I was informed that Edward Jones does not have any IRA solution that would allow me to keep my shares in a private company but there are a few people he would recommend that I could transfer my IRA holdings to.

One thing I think no one is thinking about is Elon may very seriously want to reward his faithful supporters by setting up a Tesla controlled wealth management fund with a company/person that does self directed retirement funds. Basically everyone that wants to hold onto their shares will simply transfer their shares to this fund manager. This fund manager may also take care of the Tesla employee retirement shares too. It would be a unique fund which would be easier to direct than some of the more wild funds with properties and such in them meaning it could be less expensive to manage.
Is this even possible?

 

[neroden]

Rather than liquidate your Tesla stock in your Roth, could you just take a distribution in kind? I gotta check the rules, but I think that any Roth distribution is tax-free after five years (principal amount only, not appreciation) if one is <59 1/2. If you are over 59 1/2, no tax is due on the distribution. So, there might be a sliver of hope, as well as a tax basis for a future sale.

Anyway, worth looking into.

Oh, it's easy if you're over 59 1/2. It's if you're under 59 1/2 that you have a problem.

 

[neroden]

I talked with my guy at Edward Jones today. The bulk of my shares are in my IRAs with him. I would like to keep the shares mainly to avoid paying any taxes if the shares get liquidated.

I was informed that Edward Jones does not have any IRA solution that would allow me to keep my shares in a private company but there are a few people he would recommend that I could transfer my IRA holdings to.

One thing I think no one is thinking about is Elon may very seriously want to reward his faithful supporters by setting up a Tesla controlled wealth management fund with a company/person that does self directed retirement funds. Basically everyone that wants to hold onto their shares will simply transfer their shares to this fund manager. This fund manager may also take care of the Tesla employee retirement shares too. It would be a unique fund which would be easier to direct than some of the more wild funds with properties and such in them meaning it could be less expensive to manage.
Is this even possible?

It would be possible to set up a "Tesla Only IRA" manager, yes. Preferably without fees to the IRA owners. That would probably solve an awful lot of problems for people in the US. (Sadly no similar solution exists for Canadians.)

 

[SpaceAggie]

It would be possible to set up a "Tesla Only IRA" manager, yes. Preferably without fees to the IRA owners. That would probably solve an awful lot of problems for people in the US. (Sadly no similar solution exists for Canadians.)

 

[SpaceAggie]

Just want to post my appreciation for this thread, I'll be watching it carefully. A huge chunk of my TSLA shares are in a rollover IRA and Roth IRA and I've got another ~18 years before I can take any out without large penalties. I'm going to be be really upset if those funds aren't able to convert into the private company. (sorry about the post above, just ignore it...)

 

[Shadoren]

I too am in a similar boat with the Roth IRA. Thank you all for the thread! I am watching closely as well.

 

[Joe F]

Just want to post my appreciation for this thread, I'll be watching it carefully. A huge chunk of my TSLA shares are in a rollover IRA and Roth IRA and I've got another ~18 years before I can take any out without large penalties. I'm going to be be really upset if those funds aren't able to convert into the private company. (sorry about the post above, just ignore it...)

So if you can't remain with TSLA (for the moment, not a clear option) you either sell TSLA at a price of your choosing, or accept the buyout offer. Either way, the cash is still in your IRA and you invest it in something else. There's no penalty unless you withdraw the funds from the IRA.

While the potential growth of Tesla is enormous, there's no such thing as a sure bet.

 

[CatB]

I just spoke with USAA. I have TSLA in 3 different accounts there: one is a 401K rollover, one is a non-deductible IRA, and one is for my non-retirement investments.

They say they can only support stock that trades on a ticker symbol on a public market. Looks like I will also be looking for another brokerage. And thanks to neroden's insights/research (thank you, btw, you and papafox and Curt Renz are the best. ever. There is a special place in heaven (and my heart, and on any bar tab I can invite you to populate) for people like you all who share your experience and expertise with, and put up with, the rest of us), it looks like I'm not likely to be happy about those options.

Oddly, USAA uses NFS LLC's clearing platform, which is owned by Fidelity, but the NFS LLC customer service rep I spoke with couldn't speak for USAA at all.
I'll keep reading this forum to see what other "TSLAP" options mean.

And thanks, neroden for starting this thread, and starting it off with some solid helpful info.

 

[CatB]

Update for those who can't wade through the other threads, according to AIMC, TD Ameritrade may be an option.
Elon Musk vs. Short sellers

 

[Rockster]

Update for those who can't wade through the other threads, according to AIMC, TD Ameritrade may be an option.
Elon Musk vs. Short sellers

I’m with TDA, including IRAs that hold TSLA. I submitted a query to them this afternoon. I’ll post here when I hear back.

 

[CatB]

I’m with TDA, including IRAs that hold TSLA. I submitted a query to them this afternoon. I’ll post here when I hear back.

Thanks, that will be very helpful. In general, are you happy with their service, offerings and fee structure?

Slightly off-topic, but I just read another post suggesting that if we have TSLAP in an IRA, we may not hold also hold it in a non-retirement account - ARGH!!

Since I've been "saving/accumulating" TSLA for the last 5 years as mid-term savings (home improvements planned in the next 3-5 years), I'm going to have to punt on that strategy. Also, I'be been trying to minimize my capital gains exposure by donating the most-appreciated shares to charities, and then using that charity-budget to replace the shares I donate. I wasn't sure if this would work in the TSLAP limited liquidity event approach, but if I have to choose whether I want TSLAP in my IRAs, or my personal investment account, IRAs win. And I'll be bummed. So, I guess I need to figure out if I can/should start transferring shares "in-kind" to the non-deductible IRA so I can at least hold onto more of them - depending on timing I might be able to contribute in this year and 2019, which would ease the pain of liquidating at least a little.

Here's hoping Elon & Co. can figure out a solution that resolves these and all other concerns...

 

[SW2Fiddler]

Update for those who can't wade through the other threads, according to AIMC, TD Ameritrade may be an option.
Elon Musk vs. Short sellers

The post after that one quotes someone at Schwab as not yet ruling it out...

 

[UnknownSoldier]

I think at this point we have to all wait until there is more information.

 

[OnMyWayOut]

I’m with TDA, including IRAs that hold TSLA. I submitted a query to them this afternoon. I’ll post here when I hear back.

Same here, IRA with TDA, here is what I got after a message inquiry. Basically, nothing yet.

From: Message Center Client Services|Date: 08/12/18 1:34 PMMessage available until 08/11/20.
Xxxxx:

Thank you for contacting us today. At this time, there has been no official statements from Tesla on this. As a result, we are not able to speculate on what may occur. If they do make an announcement, we would have further information at that time.

If there is anything else I can do for you, please reply to this e-mail. Your business is appreciated and I want to make sure I address all of your questions and concerns.

Sincerely,

xxxxxxx
TD Ameritrade Client Services
TD Ameritrade, Inc.

 

[scaesare]

It appears, based on my customer service chat, that Interactive Brokers will allow me to retain shares in my self-directed IRA Rollover account once Tesla goes private:

me: DO you know If there are any IBKR imposed limits on self-directed IRA's being able to invest in de-listed stocks, or privately held stocks?

Leilanie V: Yes, there is.

Usually delisted stock cannot be bought or sold until it becomes listed again.

me: If I already have some of that stock at the time it's de-listed, may I retain it?

Leilanie V: If you already own it then it shall remain in your account

until it is know when it can be traded again.


So I sure hope I get thix xfer in soon!