Retirement accounts
Secondary market annuities in a self-directed IRA
You can hold secondary market annuities in a self-directed IRA. In practice these are factored structured settlement payment rights, not new annuity contracts. The account buys the payment stream, the payments flow back into the account, and the income compounds under IRA tax treatment. The process takes four steps, and the only real prerequisite is a custodian that handles alternative assets. Here is how it works in practice.
How an IRA purchase works
Once your self-directed IRA is open, a purchase comes down to four plain steps. Our team and your custodian carry most of the load.
Choose an available payment stream
Pick a listing from our available inventory that fits your timeline and the amount you want to commit. Our team can help you shortlist options that work well inside an IRA.
Your custodian reviews the documents
Your self-directed IRA custodian reviews the assignment paperwork and the court-approval file. PSA prepares those documents and works directly with the custodian.
IRA funds are wired for the purchase
Your custodian wires the IRA funds to close, and the payment rights are titled in the name of the IRA rather than to you personally.
Scheduled payments flow back to your IRA
Every scheduled payment is directed back into the IRA, where the income can accumulate and be redeployed into new streams as it builds up.
PSA does not provide tax advice. Please consult your tax advisor or IRA custodian.
The setup, in more detail
This sounds more involved than it is. The custodian and our team handle most of the mechanics, and investors who have done one IRA purchase tell us the second takes half the effort.
Open a self-directed IRA with a custodian that accepts alternative assets
A standard brokerage IRA cannot hold assigned payment rights. You need a self-directed IRA at a custodian that handles alternative assets such as private notes and payment streams. Several national custodians do this every day, and our team works with them regularly. If you already have a custodian in mind, we can usually confirm compatibility in one phone call.
Fund the account
Fund the self-directed IRA the same way you would any IRA: an annual contribution, a transfer from an existing IRA, or a rollover from an old employer plan. Transfers and rollovers between qualified accounts are the most common route we see, because they let an investor redeploy an existing balance without touching contribution limits.
Direct the custodian to purchase the stream
You pick the listing, and the custodian executes the purchase in the name of the IRA. The paperwork names the IRA as the assignee of the payment rights, not you personally, and the funds move from the IRA to closing. PSA coordinates the assignment documents and the court-approval file directly with the custodian, so your job is mostly reviewing and authorizing.
Payments flow back into the IRA
Once the transfer funds, every scheduled payment is directed to the IRA. The payments accumulate inside the account and can be redeployed into new streams as they build up. Many of our IRA investors ladder several streams so that payments arrive on a schedule that matches when they expect to draw on the account.
Who the IRA route fits
The IRA route fits investors who want the higher estimated yield but do not need the payments as spendable income yet. The stream's income lands inside the account, so a 55-year-old buying a schedule that starts paying at 62 gets the discount of a deferred start and the tax treatment of the wrapper at the same time.
It fits less well if you need the cash flow personally, or if the IRA would hold little else. An account that is all long-term streams with limited liquidity has little flexibility when required minimum distributions begin. That said, most of our IRA buyers hold streams as one sleeve of a larger account, next to conventional assets.
Pricing works the same inside or outside the wrapper. Whatever estimated yield a listing shows on our current rates page, the IRA earns the same. And if you are still weighing the asset class against more liquid fixed income, start with our comparison of SMAs versus CDs, Treasuries, and new annuities.
IRA questions we hear most
Can an IRA legally hold secondary market annuities?
Why hold these in an IRA instead of a taxable account?
What should I watch out for?
How do I get started?
Pacific Structured Assets, Inc. does not provide tax, legal, financial or accounting advice. The material on this website has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial or accounting advisors before engaging in any transaction, including the acquisition of factored structured settlement payments. Pacific Structured Assets is not registered with the Securities and Exchange Commission and is not licensed to sell insurance in any state.
Pacific Structured Assets
Put a fixed payment stream to work inside your IRA.
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