Rocket Dollar Review - Easy Access to Alternative Investments
Exploring alternative investments is no longer rocket science. All you need is Rocket Dollar and our review to find out if this rocket ship is worth launching.
- Alternative asset choices
- Broad range of choices
- Self-directed 401(k) plans
If you are interested in a solo 401(k) plan or a self-directed IRA for alternative assets investment, then you should consider Rocket Dollar.
This financial platform allows you to invest in non-traditional assets, such as private equity, peer to peer loans, real estate, cryptocurrencies, and precious metals.
Rocket Dollar is an excellent avenue for diversifying your portfolio. Even if you have an employer-sponsored plan in place, you can still expand your portfolio by investing in non-traditional assets via Rocket Dollar.
Headquartered in Austin, Texas, Rocket Dollar was founded in 2018. Its purpose is to provide you with greater control over your savings and easy access to alternative assets. These assets are often not part of employer-sponsored plans.
As a result, Rocket Dollar offers a broader range of choice for investors as compared to other investment firms, which typically exclude such investment assets. Coupled with providing a variety of alternative investment options, it also offers traditional assets, such as bonds and stocks to individuals.
Rocket Dollar allows you to make investments through debit cards, wire transfer, or by writing a check. Hence, you can manage your portfolio in the same way as you use your checkbook for handling your bank account.
Key Aspects of Rocket Dollar
- No minimum investment requirement
- Account types: rollover IRA accounts, Roth, traditional and solo 401(k)
- Permitted investments:
- Precious metals
- Rental properties
- Undeveloped land
- Mineral rights
- Real estate
- Joint ventures
- Business loans
- Certificates of deposit
- Account custodian: Rocket Dollar funds are held by the IRA Resources Trust (IRAR).
- Financial protection: Cash balances are protected by using FDIC insurance via IRA Resources Trust. However, the SIPC does not cover alternative investments. SIPC coverage is available for brokerage accounts that hold conventional assets.
You can begin investing via Rocket Dollar by opening a self-directed IRA or a solo 401(k). Investments can be made in any asset that is not prohibited by the IRS.
Rocket Dollar investment tracker allows you to follow and monitor your assets. An intuitive and self-explanatory dashboard has been provided with a full suite of useful tools. You can track your investment performance easily with this feature.
To make it convenient for you to invest in alternative asset classes, Rocket Dollar assists you in setting up the right investment vehicle. This can take the form of an LLC or trust.
LLCs for Checkbook Control Accounts
For attaining checkbook control accounts, you will have to open them as part of an LLC. You will be provided with the operating agreement, articles of incorporation as well as an employee identification number. This will let you start a business bank account. You can invest via the LLC since your IRA controls it.
Trust Accounts for Solo 401(K)
For a solo 401(k), you will need a trust account. Rocket Dollar will help you in this regard via an EIN document and plan documents.
For opening a Roth account, a second account is required. If you want to invest in real estate, you can also establish an LLC within the solo 401(k) plan.
Once you open up a bank account, either through a trust or an LLC, you can use it to invest. You can also use your account to invest in conventional asset classes, such as bonds, stocks, exchange-traded funds, mutual funds, and options. You can make these investment purchases by maintaining brokerage accounts in your trust or LLC within your Rocket Dollar-IRA.
There are two basic plans available at Rocket Dollar:
This plan can either be Roth or Traditional. The major advantage here is that you can enjoy virtually unlimited investment choices with a Rocket Dollar self-directed IRA. You can hold all types of alternative investments that are not offered by robo advisors or traditional investment brokerages.
For instance, you may hold actual real estate in your account instead of a real estate investment trust. But for this, you will have to establish an LLC that is owned by your own plan. You can utilize this LLC to make alternative investments. Through this procedure, you can also invest in private companies, startups, venture capital, and hard money lending.
Self-Directed Solo 401(k)
This plan operates similarly to the self-directed IRA. The primary difference is that you must establish a trust owned by the IRA to hold alternative investments. To establish a solo 401(k), you must be self-employed as well.
One advantage of the solo 401(k) over an IRA is that you can make larger contributions. For instance, you are allowed to make $19,000 contribution per year if you are less than 50 years old. But if you are 50 and above, you can contribute as much as $25,000 per year in 2019.
In addition to your own contributions, employer contributions, as much as 25% of your compensation, are also allowed. The aggregate of the employee and employer contribution can go up to $56,000 per year if you are under 50 years of age. But if you are over 50, you can make a total contribution of $62,000 annually.
With the Solo 401(k) plan, you can accumulate a significant amount of retirement funds in a short timeframe. Tax benefits are available in the form of big tax deductions. You can also borrow money from your fund–borrowing up to 50% of the amount of the plan is permitted. Also, $50,000 is the borrowing limit.
Business Value Proposition
Unlike other investment platforms that allow you to select from limited options, Rocket Dollar does not restrict your investment choices. The platform offers all types of alternative investment assets, which can possibly boost your portfolio performance.
Most brokerages and financial service providers are motivated by economic incentives, which is why they limit your choices. At these platforms, your decision may be narrowed down to those products that are profitable to these services. Companies can earn commissions, fiduciary advice fees, and assets under management fees by offering investment products to their clients.
Commission percentages and transaction fees have fallen over the years due to stiff competition in the financial sector. But financial companies can still earn high revenue through commissions and fees due to the sheer volume of trade, transactions, and investments.
Alternative investments are not a feasible income source for these financial firms due to a small client base.
Innovations Introduced by Rocket Dollar
Rocket Dollar is a refreshing change from the industry standard because it makes it easier, more affordable, and efficient for such clients to invest in alternative assets.
Self-directed IRAs are now easily accessible due to Rocket Dollar. It is no longer necessary to fly hundreds of miles to attend expensive conferences and pay an immense amount of money to make alternative investments. If you have an in-depth knowledge of these asset classes, then you can invest in them easily via Rocket Dollar. You can now benefit financially from your expertise and insights in community businesses, startups, real estate, precious metals, cryptocurrencies, and other categories.
Learn More: Invest in Cryptocurrencies with eToro
By allowing you to create trusts or LLCs, Rocket Dollar provides an innovative investment vehicle where you are the investment manager in charge of making all decisions. As a result, purchasing an investment asset is now as easy as writing a check or using a debit card. The investments that you make are then owned by the trust or LLC that you created. Tax benefits are available for these structures.
This is a radical improvement over the status quo. Previously, self- directing and checkbook control accounts were plagued by unreasonably high management fees. Moreover, there was a lack of prompt and reliable service as well as technology.
To make an alternative investment today, your application has to undergo a lengthy and arduous process. Your application could even be denied simply because of the investment issuer’s reluctance to put in extra effort into reviewing your application. This may happen, even though your alternative investment is permissible under the IRS regulations.
Rocket Dollar offers trust bank account, trust, and a plan document as part of the self-directed solo 401(k) to help you to regain checkbook control.
Rocket firm is not just about alternative investments; it offers a viable and versatile solution for you to invest in traditional asset classes alongside alternative assets. You can do this by tying your IRA LLC EIN or Solo 401(k) with a brokerage account. As a result, you can invest in all kinds of publicly traded securities, including exchange-traded funds, mutual/index funds, bonds, and stocks.
Most financial firms do not allow investors to hold both traditional and alternative assets. The few that permit holding both assets can impose many restrictions that limit your freedom to invest. They allow you to make investments across a very narrow category. This will not allow you to gain the level of diversification that you desire with your portfolio. Rocket Dollar, on the other hand, does away with all of these restrictions to help you achieve a high level of diversity for your portfolio.
A lot of investors mistakenly believe that they cannot invest in startups, real estate, and other alternatives with an IRA account. Rocket Dollar removes the hindrances and barriers that stand in the way of investing in these asset classes by using an IRA account. As a result, you can benefit from high-performing alternative assets when the stock markets are falling, and the bond markets are offering meager returns.
You will be charged a flat working fee of $15 each month. Large investors will benefit from this low monthly cost. Here is an example to show you how low this fee works as a percentage of your investment.
$15 monthly payments translate to almost $180 annual fee. So if your account has $100,000 worth of investments, then the yearly rate is 0.18%. On the other hand, robo advisors charge between 0.25% and 0.5% of your investments on an annual basis. Therefore, Rocket Dollar is much more economical as compared to other investment platforms.
From this specific calculation, you will notice that the effective rate is higher for lower investments. For instance, if your account balance is worth $10,000, then the effective rate stands at 1.8%. This means that higher investments will result in greater relative cost savings. You must also pay a one-time $360 annual fee to open your account. There are no transaction fees though as all transactions are made via the trust or LLC bank account.
You can pay the fees with your debit card from your retirement fund. Or if you do not want to withdraw money from your retirement fund, you can use your credit card.
Signing up for an account is pretty straightforward with Rocket Dollar. You merely enter your email and personal information like you would with any brokerage, choose how you want to fund the account, select your products, and dive right in. Rocket Dollar makes this process incredibly simple, but if you have trouble you can contact their customer support team.
Rocket Dollar features a SOC2 certification to protect your account. Rigorous audits are performed through this procedure to ensure up-to-date security standards of the highest level. The American Institute of Certified Public Accountants has designed this audit procedure to manage and safeguard customer information at the maximum level of privacy, confidentiality, processing integrity, availability, and security.
Unfortunately, there is no mobile app for Rocket Dollar. This is one of the biggest cons of this investment portal. You will need to use a laptop or a PC to use/monitor your account.
Phone support is available Monday to Friday from 9:00 AM to 5:00 PM Central Time on this platform. If you have any issues, concerns, or queries, you can also leave a voicemail or create an electronic ticket at any time.
Rocket Dollar Pros and Cons
- Overall cost is low for big investors: Its $15 monthly flat fee is attractive for big investors since the cost as a percentage of the investment is smaller with more substantial investments.
- Alternative asset choices: You can invest in alternative assets not prohibited by the IRS. Investors have more options at Rocket Dollar than other investment services.
- Self-directed 401(k) plans: You can invest in a self-directed 401(k) plan at Rocket Dollar. Thus, you can make larger contributions, earn bigger tax deductions, and also take loans from your investment.
- Other account options help you diversify: Solo 401(k) and self-directed IRA plans at Rocket Dollar are a smart way to diversify your portfolio with alternative investments.
- Broad range of choices: You can invest in traditional assets as well as alternative assets.
- Not viable for small investors: $15 monthly charges will be more expensive for small investors.
- One-time fee is a significant sunk cost: You must pay a one-time $360 fee. This is a large sunk cost that many investors may not want to take on.
- Limited customer service hours: If you need help outside of business hours, you won’t hear back until they re-open. This can be frustrating, especially for big investors who want immediate support.
- No mobile app is available: A huge downside in the age of mobile-first. I anticipate them coming out with one, but for now you’ll have to live without it.
Here are some of the best alternatives to Rocket Dollar
With reasonable fees and minimum account balance, Charles Schwab is an IRA provider that offers an array of commission-free ETFs and zero-transaction-fee funds. The brokerage also provides excellent customer service. Investors can also benefit from their high-quality mobile app and the absence of inactivity fees.
This brokerage offers comprehensive benefits that you would want for your IRA account. You can take advantage of their vast assortment of commission-free ETFs and zero-transaction-fee mutual funds. TD Ameritrade also offers a zero account minimum, making it suitable for all kinds of investors.
New investors can benefit from retirement planning and research tools, which are entirely free. Novices can develop their trading skills with the paper trading account and the extensive library of educational material on investment.
Learn More: TD Ameritrade Review
Fidelity IRA offers a wide range of plans as well as retirement accounts. Investors can leverage robust trading capabilities, which include an intuitive and easy-to-use app.
They can also gain benefits from the depth of research and data to make the best investment decisions. While the brokerage firm provides low commissions on trading, you must meet the minimum trade requirements to use the trading platform.
Rocket Dollar is not for all investors. You will stand to gain at Rocket Dollar if you understand alternative investments and if you are not very risk-averse. Rocket Dollar is a specialized investment platform for those who know about non-traditional asset classes and are willing to face the risk.
If you are new to investment and don’t have an in-depth understanding of alternative investments in particular, then Rocket Dollar is not for you. You should know that alternative investments carry higher risks. Hence, they are too risky for novice investors.
Take note of the fact that Rocket Dollar will not manage your investments. You are solely responsible for controlling your account.
If you are a seasoned investor, then you can give your portfolio a potential performance boost by diversifying it towards alternative investments.
Rocket Dollar is more suitable for larger investors since the $15 flat fee is smaller as a percentage of these investments.
As you can see, Rocket Dollar is pretty unique and has an interesting value proposition. While Rocket Dollar isn’t for everyone, we feel strongly that it will suit most active investors and recommend you giving it a try.