Leveraging Idle Cash in an SDIRA

Excess or idle cash can accumulate in a self-directed IRA (SDIRA), such as when you monetize an investment and are waiting to make another. While having liquidity in an SDIRA is good, too much uninvested cash may inadvertently be capping your earning potential. A brokerage account within your SDIRA can open the door for maximizing your investing power with options in the public market.

While being a day trader might not be a priority, having more investment options may help you achieve your retirement goals. 


How It Works

A brokerage account, like other IRA-owned assets, must be registered in the custodian’s name for the benefit of the IRA account owner (STRATA Trust Company, Custodian FBO John Doe IRA) and reflect the custodian’s tax ID rather than the investor’s social security number. Not all brokerage firms permit this, so please check with your broker prior to instructing STRATA to establish an account to trade securities.

3 Step Setup

1. Open 
If you don’t have a STRATA IRA, open your account today in just a few minutes. Once your account is established, then the online brokerage account would need to be opened as well. For all STRATA account holders, TradeStation® offers a simple solution to connect your SDIRA to public offerings. 
2. Fund 
If using idle cash, then this step is already complete. If you would like to add cash to your IRA, funding typically takes 1-2 business days.
3. Direct 
Instruct STRATA to move funds from your STRATA IRA to your new online brokerage account and start trading! You can find direction instructions for TradeStation and other online brokerage firms here


Are Brokerage Options Right For You?

While SDIRAs are typically used for alternative investments, including a brokerage account provides access to thousands of mutual funds, ETFs, and other investment vehicles. Determining the appropriate vehicle depends on a number of factors, including the risk of the investment, the liquidity of the investment, and your time horizon – i.e., how long before cash is needed.1

If you are in between investments or receiving a regular income into your IRA and looking for a way to invest idle cash without a long-term commitment, a brokerage account might be the solution.  You may also want to seek the help of a financial professional to determine which investments work best for your portfolio and if adding an online brokerage option to your SDIRA makes sense for your situation.

1STRATA Trust Company, 2022 Self-Directed IRA Investor Survey Report.

Tags: alternative investments, IRA, IRA investments, SDIRA, self-directed ira, tax strategy