IRAs: Final reasons to use an IRA

But does it actually make sense to use your IRA? 4. Admin and fees

There are a couple of other administrative considerations.

First, tracking: investments, especially if you do them on your own, is likely easier in the IRA as the custodian should have good tracking setup.

Second, tax tracking: similarly, dealing with the tax implications from investments outside of IRAs requires constant monitoring as the tax implications happen continuously (as things happen to the companies or they exit) – but you just have to worry about taxes at distribution time in the IRA.

On the other hand, “fair market value” statements each year from the assets in your self-directed IRA have to be corralled each year. It’s actually your responsibility to collect those, and that can take some time and attention.

Thirdly, documentation complexity: IRA custodians are not generally famous for the speed and simplicity of their document flows. Actually filling out the forms to make an investment can take much longer in an IRA than just doing it directly. (Even with VentureSouth’s admin team helping!)

Lastly, of course, IRA custodians aren’t charities – they charge fees. Those can be based on cash in the account, or on transactions, or both. If you are making a large number of small investments (which is the generally recommended practice for angel investing) those transaction fees can add up.