With the uncertainty in today’s financial markets, have you given consideration to alternative investments?
If you have, you may be interested to know Rocket Dollar is an investment platform designed specifically for alternative investments.
It works with self-directed retirement plans, including IRAs and Solo 401(k) plans. Even if you don’t want to move your entire retirement portfolio over into alternative investments, you can use Rocket Dollar to invest a slice of your portfolio in non-traditional assets for greater diversification.
Rocket Dollar is an investment platform designed specifically for alternative investments such as cryptocurrencies, peer-to-peer (P2P) lending, gold and silver, real estate, and more.
Even if you don’t want to move your entire retirement portfolio over into alternative investments, you can use Rocket Dollar to invest a slice of your portfolio in non-traditional assets for greater diversification.
- No minimum initial investment
- Attractive fee structure for larger portfolios
- Multiple retirement plan options
- High sign-up and monthly fees
- Not open to taxable investment accounts
- No SIPC insurance coverage for your investments
About Rocket Dollar
Rocket Dollar is a newcomer on the investment scene, which has hardly been unusual over the past 10 or 15 years.
Based in Austin, Texas, the platform was launched in 2018. Its main purpose is to give investors a wider selection of investments to hold in their self-directed retirement plans.
What kind of alternative investments can you hold with Rocket Dollar? Think cryptocurrencies, peer-to-peer (P2P) lending, gold and silver, real estate, and even private equity investments. In fact, you can hold any investment in a Rocket Dollar retirement account that isn’t specifically prohibited by the IRS. And unknown to most investors, the IRS doesn’t prohibit many investments from being held in a retirement account.
If you’ve been thinking about adding any of these alternative investments to your retirement portfolio, you should seriously consider opening an account with Rocket Dollar.
Rocket Dollar is an excellent way to spread your investment wings and add non-traditional investments.
How Rocket Dollar works
Rocket Dollar offers self-directed retirement accounts under two broad categories:
This takes in traditional, Roth, rollover, and SEP IRAs. Traditional and Roth IRAs enable you to contribute up to $6,000 per year, or $7,000 if you’re 50 or older. Rollover IRAs are permitted up to the amount being transferred from another qualified plan.
A SEP IRA offers much more generous contribution limits. For example, for 2019, you can contribute up to 25% of your business net income, up to a maximum of ,000.
Any type of IRA account will be self-directed, enabling you to invest in any assets permitted by the IRS.
As the name implies, a solo 401(k) plan is a 401(k) plan for a single individual. You can add employees to the plan, but as soon as you do, it becomes a regular 401(k) plan and can no longer be held with Rocket Dollar.
Perhaps the biggest advantage with a solo 401(k) is the amount of the contribution you can make. And you can make that contribution as both employee and employer of your business.
For example, for 2019, you can contribute up to ,000, or ,000 if you’re 50 or older, as an employee. But as an employer, you can contribute up to 25% of your net income from the business as an employer contribution. The total of the employer and employee contributions cannot exceed $56,000 for the year.
Similar to a self-directed IRA, you can invest in any assets permitted by the IRS. And as a 401(k), you will also have the ability to borrow up to 50% of the value of the plan, up to ,000.
Checkbook control of your retirement savings
When you open your retirement account, you’ll be required to open an LLC bank account for an IRA account, or a trust bank account for a solo 401(k) plan. This will be a checking account, which will give you the ability to make various investments just by writing a check or transferring funds to the desired investment platform.
Rocket Dollar will assist you in the process of opening the bank. That will include providing you with articles of incorporation for the LLC or trust, an employee identification number (EIN), and a related operating agreement.
The checking account will be owned by the trust or LLC, which is owned by your retirement plan. It will provide you with greater investment flexibility since you will be able to invest in platforms that specialize in particular investments, or directly in those assets themselves.
Rocket Dollar features and benefits
Minimum initial investment
One of the best features of Rocket Dollar is that there is no minimum investment required. However, you will naturally need to have money in your account to be able to invest.
Available accounts include:
- Traditional IRAs
- Roth IRAs
- Rollover IRAs
- SEP IRA
- Solo 401(k) plans
Rocket Dollar investments offered
Available investments include:
- Precious metals. Includes bullion coins of gold, silver, palladium, platinum, and certain other approved coins. The coins must be stored at a bank, credit union, trust company, or IRS approved non-bank trustee or custodian. (They cannot be stored in your possession.)
- Cryptocurrencies. You’ll need to set up a digital wallet to hold cryptocurrencies, which must be held in the name of your account LLC or trust.
- Real estate. You can hold individual properties in your IRA account. However, this is a complicated process and will require input from a CPA or tax attorney. Any personal involvement in the investment by you could be considered a prohibited transaction under IRS rules incurring penalties as high as 100%!
- Peer-to-Peer loans. This can include investments in popular P2P lending platforms, like Prosper and Lending Club, but also mortgages and real estate loans, short-term business financing, and student loans.
- Private equity. This is where you loan money to or invest in small businesses and startups. But this is another area, like real estate, where you have to step lightly with prohibited transactions. You cannot have any personal involvement in any business you invest in.
- Traditional investments. If you want to add investments beyond alternatives, such as stocks and bonds, you can do so by creating a unique structure known as an umbrella LLC or trust (which is basically how Rocket Dollar works in the first place).
When you open a Rocket Dollar account, you automatically get a Colorado LLC, which acts as the umbrella LLC. The LLC becomes 100% or a partial owner of the asset.
This is done by setting up a bank account for investments in the name of the LLC, then transferring them to your investment account.
Rocket Dollar partners
Rocket Dollar works with partner firms that can give you access to the various alternative investments. This includes firms that specialize in cryptocurrencies, real estate, investment startups, precious metals, and private equity and debt.
Since many of these alternative investments are highly specialized, you’ll need to work with one of these partner organizations, or a similar firm. That will help you avoid stepping into any possible prohibited transactions that could prove to be very costly mistakes.
The Rocket Dollar mobile app
One of the disadvantages of Rocket Dollar is that the platform does not offer a mobile app. However, given that the company was only launched in 2018, there’s good reason to believe that a mobile app will be available in the not-too-distant future.
Rocket Dollar’s live customer service is available by phone, Monday through Friday, from 9:00 am to 5:00 pm, Central time. After hours, you can either open an electronic ticket or leave a voicemail, and they will respond as soon as possible.
They can also be reached by email at firstname.lastname@example.org.
Any cash balance held in your Rocket Dollar account is covered by FDIC insurance through IRA Resources Trust. The coverages for up to $250,000 in cash held in your account.
Unfortunately, SIPC insurance is not available, due to the fact that the assets you will hold in your Rocket Dollar account are alternative investments, and generally not publicly traded securities.
Rocket Dollar brokerage fees and pricing
Whether you’re opening a self-directed IRA or a self-directed solo 401(k) plan, you’ll pay a sign-up fee of $360, then a $15 per month fee. There may be additional fees charged by third parties for the investments you add to your account.
How to sign up for Rocket Dollar
To sign up for Rocket Dollar you’ll need to do so through the website. Once again, the platform currently does not offer a mobile app.
You’ll start by entering your email address to create your account. You’ll also be asked if you’re self-employed. If the answer is no, you’ll be directed to sign up for a self-directed IRA. If you answer yes, you’ll be directed to a Solo 401(k) plan.
If you answer yes to being self-employed, you’ll then be asked if you have employees. If you do, you’ll be directed to a SEP IRA.
Under federal law, you’ll be required to furnish identifying information, including a government-issued photo ID. The entire sign-up process takes about five minutes.
Once your account has been opened, you’ll need to set up and LLC bank account. Rocket Dollar will work with a partner bank to provide LLC checking accounts. Accounts can usually be opened in one business day. The checking account will provide checkbook control of your retirement accounts.
Pros & cons
- No minimum initial investment — You can open an account with no funds whatsoever. However, you will need to fund your account to begin investing.
- Alternative investments — Rocket Dollar provides for investing in the type of assets that are not available with traditional investment brokers.
- Retirement account that specializes in alternative investments — Rocket Dollar enables you to add alternative investments to your retirement portfolio.
- The fee structure is kind to larger portfolios — The $15 monthly flat fee works out to be just $180. On a $100,000 portfolio, that’s a fee of just 0.18% per year, which is lower than the vast majority of robo-advisors.
- Multiple retirement plan options — Roth, rollover and SEP IRAs, as well as Solo 401(k) plans – whichever will work best for your situation.
- You can also hold more traditional assets in your account — Since Rocket Dollar works using an umbrella LLC or trust, you can hold any investments that are not prohibited by the IRS. Note that the process is more complicated than traditional retirement plans.)
- High sign up fee — Rocket Dollar charges a fee of $360 just to open an account, which is particularly expensive on smaller portfolios.
- Monthly fee will be high for small accounts — The monthly fee of $15, or $180, is the equivalent of a 1.8% annual fee on a $10,000 account.
- Not open to taxable investment accounts — Rocket Dollar is strictly for retirement accounts and self-directed plans at that.
- No mobile app — The platform was only launched in 2018, so a mobile app may be available in the future. But at the moment, the option doesn’t exist.
- No SIPC insurance — Rocket Dollar has FDIC coverage on cash deposits, but no SIPC coverage for your investment assets.
Who is Rocket Dollar best for?
Large investment portfolios
Because of the fee structure, Rocket Dollar will work best for investors with fairly large retirement portfolios. This will naturally favor either Solo 401(k) plans or SEP IRAs, because of their higher contribution amounts, as well as high balance rollover IRAs.
The $180 annual fee will require an account balance of at least $36,000 to be competitive with the fee structure at the higher end of the robo-advisor fee range, which is 0.50%.
However, it must also be remembered that Rocket Dollar isn’t a robo-advisor, and is instead a highly specialized type of retirement account. That certainly justifies a higher fee structure, though fees can never be completely ignored, especially with long-term investing.
You may also be interested in Rocket Dollar if you have more appetite for risk than the average investor. The alternative investments available through the platform are not only highly specialized but generally recognized as speculations. You’ll need to be willing to engage in that kind of investing to even consider this platform.
We must offer a word of warning: Before investing in any of these alternatives, consult your CPA or tax attorney. These are highly specialized investments, and there are costly IRS penalties if you make a mistake.
Rocket Dollar offers a very unique investment platform. You can invest in alternative investments such as cryptocurrencies, peer-to-peer (P2P) lending, gold and silver, real estate, and more.
For those who can handle a little risk, Rocket Dollar may be a great way to diversify.