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Updated on Friday, January 10, 2020
Rocket Dollar is a unique investing platform that helps experienced investors add alternative assets to their retirement planning. Through Rocket Dollar, it’s possible to invest in assets such as real estate, private equity and precious metals — as long as they’re approved by the IRS for inclusion in self-directed individual retirement accounts (IRAs) and solo 401(k)s.
It’s important to note that Rocket Dollar is unlike other broker platforms, and it is not a robo-advisor. Instead, Rocket Dollar allows users to fund and manage alternative asset investments in self-directed, tax-advantaged retirement accounts. The platform walks you through the process of setting up a self-directed retirement account, but it’s up to you to identify and then make your own investment decisions.
Who should consider Rocket Dollar
Rocket Dollar is a specialized tool for confident, experienced investors who want to add alternative assets to self-directed IRAs and solo 401(k)s. You can hold traditional stocks and bonds in your Rocket Dollar account, but it’s designed for those who are seeking tax advantages for holding alternative assets allowed by the IRS. Before you invest, it’s a good idea to understand the asset class(es) you plan to hold in your retirement account, because you’re responsible for the investments.
If you’re a hands-off investor and just want a basic retirement account or online brokerage, Rocket Dollar isn’t the ideal choice. Check out our list of the best robo-advisors and the best online brokers instead.
Rocket Dollar fees and features
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Rocket Dollar pricing
Rocket Dollar has two pricing tiers:
- Core: This is a basic IRA or solo 401(k) account that allows you to hold a variety of assets. The cost is $15 monthly fee, plus one-time $360 setup fee.
- Gold: If you want expedited and premium service, the Gold account can provide you with a better experience. The cost is $30 monthly fee, plus one-time $600 setup fee.
A self-directed retirement account can take up to four weeks to open. A Gold account can get the ball rolling a little faster, but it’ll cost you.
Even though Rocket Dollar charges a flat monthly fee and a one-time setup fee instead of an annual percentage of assets under management, you have to be aware of the additional fees that your investment issuers will charge. Rocket Dollar doesn’t provide the assets you invest in, so investment and trading fees will come on top of the monthly fee you pay for the self-directed IRA or solo 401(k). Any expense ratios that come with investment funds also must be paid.
The unique component of Rocket Dollar’s approach is that it creates a Colorado LLC and also a checking account owned by the LLC on your behalf — the setup and monthly fees you pay covers that cost. However, if you have to create additional LLCs, such as one to own property in a specific state, you’re responsible for those fees, too. Self-directed IRAs and solo 401(k)s can be complicated, which is why it’s important to understand what you’re doing or consult with appropriate professional experts to help you to navigate the process.
Rocket Dollar account types
You can open only two types of accounts on Rocket Dollar: a 401(k) or an IRA. Both are self-directed, and they come with Roth options. On top of that, the self-directed IRA comes with the option to open a beneficiary IRA. Rocket Dollar also offers a SEP IRA.
One thing to be aware of with a self-directed retirement account from Rocket Dollar is checkbook control. Checkbook control means that Rocket Dollar sets up a structure whereby you control your portfolio through either an LLC bank account that’s created and held by Rocket Dollar’s preferred bank partner.
It’s important, though, to make sure that everything in a self-directed retirement account is kept separate from your personal finances. Otherwise, the IRS may impose penalties. However, you, the investor, have complete control, because no retirement account custodian reviews any deals, and you won’t be limited to a preapproved list of funds.
Rocket Dollar’s investable asset classes
Rocket Dollar works with third-party firms through which users buy and sell different assets. Rocket Dollar also works with partners that act as custodians for the self-directed IRA. Solera National Bank of Denver and IRAR Trust of La Jolla, California, are the firm’s custodian partners. In a solo 401(k), you buy a plan that’s preapproved by the IRS, and the assets are held in a trust tied to your business or sole proprietorship.
The following asset classes are a challenge for most investors to access. Rocket Dollar makes them much more accessible, thanks to its partner firms.
Many alternative investments come with their own tax requirements and special paperwork allowing them to be held in a tax-advantaged retirement account. Consequently, many retirement account custodians won’t deal with them. However, these are some of the asset classes that the IRS allows you to hold in a self-directed IRA or solo 401(k).
Buying and selling physical precious metal (rather than stocks of mining companies or ETFs that hold metals) for your retirement account comes with limitations, such as requiring a certain degree of purity. Bullion of gold, silver, palladium and platinum, as well as specifically approved coins, can be held in a self-directed retirement account. However, storage can be an issue, because you aren’t allowed to store these assets at your home.
When you use Rocket Dollar’s preferred partner, the U.S. Gold Bureau, for precious metals in your account, it arranges for storage at the Texas Bullion Depository.
When investing in real estate for an IRA, you aren’t allowed to hold it in your name. The IRA must be the buyer, and you or your relatives must not live in or use the property. And if repairs have to be made, you must hire a third party to perform the repair. The idea is you’re supposed to be removed from the day-to-day management of property you want in an IRA. Rocket Dollar’s real estate investment partners can help with that.
Early-stage investing and private equity
It’s possible to invest in startups and hold those investments in your self-directed retirement account. This includes access to private tech companies and venture funds. You also can hold expansion loans in your account on Rocket Dollar through its partners.
As with other asset classes, the key to holding cryptocurrencies and other blockchain investments in your self-directed retirement account is keeping it separate from your personal assets per IRS rules. This means that you’ll have to have a separate wallet set up in your IRA or solo 401(k).
Sure, you can hold stocks, bonds, mutual funds and ETFs in your self-directed retirement account alongside your alternative investments. However, that isn’t really the purpose of Rocket Dollar. Its focus is helping you to hold investments that many traditional custodians won’t allow you to keep in a retirement account.
Strengths of Rocket Dollar
- Access to alternative investments: Rocket Dollar makes it easier to add alternative investments to a tax-advantaged retirement account in a way that isn’t possible through most traditional providers.
- Step-by-step help opening a self-directed retirement account: The account setup fee comes with help and guidance in setting up your account, so it’s handled correctly. This includes setting up an LLC for an IRA and providing an IRS-approved plan for a solo 401(k).
- Expedited options: It can take a long time to get a self-directed retirement account through the bureaucracy. With the Gold account option, you can pay extra to speed the process and get extra service as you navigate the bureaucracy.
Drawbacks of Rocket Dollar
- Separate fees for everything: No matter what you do, there are fees. Rocket Dollar charges fees as a third-party administrator, including a setup fee to open the account and a monthly compliance fee. Investment issuers have their own fees as well, though it’s up the investor’s discretion whether they want to pay certain fees, such as convenience fees for wire transfers.
- No additional services: You won’t find tax-loss harvesting, rebalancing or any of the additional services you see with robo-advisors. Instead, you’re entirely on your own regarding your portfolio.
Is Rocket Dollar safe?
Rocket Dollar provides a way for you to access investments. However, Rocket Dollar isn’t a fiduciary, and it doesn’t provide any type of advice. You have to check individuals partners yourself before you move forward to make sure they have the proper insurances and memberships. For example, Rocket Dollar never holds your funds so it doesn’t carry FDIC insurance, but its partner bank does.
The only guarantee Rocket Dollar provides is that if it goes out of business, you’ll be able to transfer your self-directed IRA or solo 401(k) to another provider.
Final thoughts about Rocket Dollar
Rocket Dollar provides a relatively simple way to access alternative investments in a self-directed IRA or solo 401(k). However, it’s important to realize that this isn’t a robo-advisor or an investment manager. If you want a robo-advisor, you should consider Betterment or Wealthfront, but you won’t have access to alternative investments.
If you want more help with managing a self-directed retirement account, you can turn to a dedicated financial advisor that specializes in such accounts to help you reach your investing goals. For example, Innovative Wealth provides help with managing these types of accounts for those who want to invest in alternative asset classes. However, you might pay higher fees as a result of this more tailored approach.
In the end, Rocket Dollar can be a good choice if you’re confident in your ability to manage your own retirement portfolio and you want a little help streamlining the administration of that portfolio.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.