Lending Club Introduces Self-Directed IRA in Peer-to-Peer Lending

Lending Club, the only SEC registered peer-to-peer lending site, today announced the introduction of the first ever self-directed IRA to let lenders save for retirements through P2P lending. The new self-directed IRA accounts are managed by EntrustCAMA, a custodian of both self-directed and real estate IRAs.

Currently, Lending Club self-directed IRA plan participants can choose to invest in either a Roth or Traditional IRA (for individuals) or SEP or SIMPLE IRA (for small businesses) through the new service. And investments in the Lending Club self-directed IRA, like investments in an ordinary IRA account, also enjoy tax free growth (which means that contributions to the Lending Club self-direct IRA are also subject to the annual IRA contribution limit, which is at $5,000 for 2008). To enroll in the program and contribute for the 2008 tax year, you need to:

  1. Complete the secure online account application with EntrustCAMA;
  2. Print, sign, and mail your forms to the address provided by EntrustCAMA (Must be postmarked by April 15, 2009 for 2008 tax season);
  3. Fund your account with a check, 401(k) rollover, or existing IRA account transfer to Lending Club.

According to Lending Club website, the self-directed IRA plan charges a flat $250 annual account maintenance fee (there will be no fee in 2009 if the account is opened before April 15).

I have been lending through Lending Club for a little over a month (check out my Lending Club review and lending portfolio if you are not familiar with LC) and so far I am quite happy with how things go with LC, mainly because there’s no late payment yet. Despite the good but still very short experience, I don’t think I will get a self-directed IRA through Lending Club for myself because of the high fee, if nothing else. I don’t have a self-directed IRA account, so there’s no way for me to compare it with what others charge, but a $250 annual fee is more than 5% of the total allowed contribution of $5,000. That’s just too much for an IRA account.

It’s good that P2P lending now becomes an option for retirement savings. But at this cost, I think it’s better to just use it as a small diversification of ordinary investments.

This article was originally written or modified on . If you enjoyed reading this post, please consider subscribing to my full RSS feed. Or you can also choose to have free daily updates delivered right to your inbox.


Author Info

This post was written by Sun You can find out more about Sun and his activities on Facebook , or follow him on Twitter .

Comments are closed.