Rocket Dollar for Socially Responsible Investing (Review)

Rocket Dollar lets you add alternative investments to your retirement portfolio. If you are interested in socially responsible investing and want to go beyond environmental, social, and governance (ESG) mutual funds, Rocket Dollar has options for you. Keep reading to learn how you can find green investments with Rocket Dollar.

SustainFi September 1, 2021

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Summary

  • Rocket Dollar lets you open a self-directed retirement account
  • You can invest in non-traditional asset classes like startups, real estate, farmland, and more
  • Account types: self-directed traditional, Roth, SEP IRAs; IRA rollovers; self-directed solo 401(k)s
  • Minimum investment: none
  • Fees: $360 to open an account and $15 per month for the Core Plan ($600 to open an account and $30 per month for the Gold Plan)

Pros

  • Invest in non-traditional assets through your tax-advantaged retirement account
  • No minimum investment
  • Fees are low for large account balances
  • You can invest in traditional assets, like stocks or funds

Cons

  • Rocket Dollar doesn’t offer investment advice; you choose investments at your own risk
  • Fees can be high for smaller balances
  • No taxable investment accounts
  • No mobile app

What does Rocket Dollar do? 

Founder in 2018 and based in Austin, Texas, Rocket Dollar lets you open a self-directed retirement account and invest in alternative assets.

These types of assets are not offered by traditional retirement providers and include:

  • Startups, including “green” and cleantech startups or startups run by female founders
  • Sustainable farmland and conventional to organic conversions
  • Real estate
  • Peer-to-peer lending
  • Small business lending
  • Cryptocurrencies
  • Precious metals like gold and silver

Not all of these investments are “sustainable.” Although Rocket Dollar isn’t specifically designed for ESG investors, they help you access sustainable alternatives if you want them. Rocket Dollar even covers impact investments on their company blog.

Rocket Dollar is best for sophisticated, high-net-worth investors who want to diversify their retirement holdings with alternative assets. Alternative assets are risky, and you should know what you are doing. It may not be the best choice for beginners who should stick to funds or stocks or work with a robo-advisor or a financial advisor.

Not all investments are eligible for retirement accounts. Some investments prohibited by the IRS include collectibles like art, gems, coins, fine wine, S-Corp stock as well as life insurance. If in doubt, consult a professional.

How does Rocket Dollar work?

Rocket Dollar lets you quickly and easily open a self-directed IRA or a self-directed solo 401(k). They will help you set up an LLC with a bank account for a self-directed IRA or a trust bank account for a solo 401(k). You will have “checkbook control” over the account, letting you buy and hold alternative assets in a tax-advantaged account.

Self-directed IRAs

You’ve already heard of traditional and Roth IRAs – tax-deferred retirement accounts. With a traditional IRA, you deduct contributions from your taxes and pay taxes when you make withdrawals upon retirement. With the Roth option, you pay taxes upfront, making withdrawals tax-free after the age of 59 1/2.

The difference between traditional and Roth IRAs and self-directed IRAs is the type of assets you can invest in. Traditional and Roth IRAs require you to stick to stocks, bonds, and funds, which limits your options, particularly if you are a high-net-worth individual.

Created in 1975, self-directed IRAs let you invest in non-traditional assets, with only a few exceptions. Once you want to diversify beyond stocks and bonds, you can create a self-directed IRA and invest in startups or real estate.

Rocket Dollar lets you create self-directed traditional, Roth, and SEP IRAs. (A SEP IRA is an IRA for the self-employed.)

Who can open a self-directed IRA?

You can open a self-directed traditional or Roth IRA if you have U.S. taxable income or an old retirement account.

As per IRS guidelines, there is a limit to how much you can contribute each year. In 2021, you can contribute up to $6,000 (those over 50 can contribute $7,000). You must be under the age of 70 ½ to contribute. (The SEP IRA for the self-employed has higher contribution limits, up to $58,000 in 2021.)

Aside from contributing your taxable income, you can also roll over your old retirement account, like an IRA or a 401(k), to Rocket Dollar.

Solo 401(k) plans

What is a solo 401(k) plan?

A solo 401(k) plan is a 401(k) plan for a single person. It is designed for self-employed workers with no employees other than their spouses. (If you have employees, you can open a self-directed SEP IRA.)

A solo 401(k) lets you maximize your contribution by contributing both as an employee and an employer. In 2021, you could contribute up to $58,000 from these two buckets. (If you are over 50, you can contribute up to $64,500.)

Solo 401(k) plans also let you borrow money, as much as 50% of the plan’s assets up to $50,000.

Who can contribute to a solo 401(k) plan?

To be eligible for the self-directed solo 401(k) account, you must be self-employed and have no full-time employees. Your income needs to be earned rather than passive or portfolio income (like income from rental properties). Your business also needs to be owned by you and your spouse, with no third parties. Additional information can be found here

The solo 401(k) product is more complicated than a self-directed IRA. There are many regulations, and making a mistake may result in heavy IRS penalties. Consult a tax professional to learn about the nuances.

Rocket Dollar can open a self-directed solo 401(k) in two to four weeks or two weeks with Rocket Dollar Gold.

Socially responsible investing with Rocket Dollar

Rocket Dollar has many partners that let you invest in alternative assets. Many of them are crypto or real estate-focused, and some are really bad choices from the sustainability perspective. For example, Eckard Enterprises lets you invest in oil and gas in proven oil and gas shale basins.

However, Rocket Dollar is also a great way of accessing alternative ESG investments like green startups. Rocket Dollar lists several partners with sustainable offerings that you can now invest in through a retirement account. Here are some examples:

  • EnergeaEnergea is a renewable energy portfolio manager, connecting investors to renewable energy projects globally
  • EquityzenEquityzen is an online marketplace for trading pre-IPO shares. They have showcased green options like the electric truck maker Rivian and the fossil free insurer Lemonade
  • FarmTogetherFarmTogether lets you invest in farmland, one of the best-performing asset classes of the past two decades. FarmTogether has joined the Leading Harvest Sustainability Standard, and featured many traditional to organic farmland conversions
  • RepublicRepublic is an equity crowdfunding platform that lets you be an angel investor. They feature “green” startups like the sustainable soil company PittMoss
  • Harvest Returns. Harvest Returns is an agriculture crowdfunding platform, letting you invest in its Sustainable Agriculture Opportunity Zone Fund and projects like hydroponic farms
  • EnrichHer. EnrichHer lets you invest in women-led companies
  • NetCapital offers a selection of green startups 
  • Honeycomb Credit lets you lend to local, “Main Street” small businesses

You can also add traditional ESG investments, like stocks or funds. (But if you only want stocks and funds, there is no point going to Rocket Dollar and paying to set up a trust or an LLC.)

Note: Rocket Dollar does not provide investment advice, so you should do diligence on its partners before investing through them.

Rocket Dollar Fees

Rocket Dollar offers Core and Gold Accounts.

The Core account costs $360 to set up and $15 monthly after that. These fees pay for administration and compliance. Rocket Dollar does not charge fees for assets under management. But there may be additional fees from the third parties you invest in.

The Gold account, which offers service, priority support, a physical debit card, and more, costs $600 to set up and $30 per month after that.

Note that there may be extra bank fees from Rocket Dollar’s banking partner, Solera National Bank, including:

  • Domestic outgoing wire transfer: $25 (Gold includes four free wires per year)
  • International outgoing wire fee: $50
  • ACH fees: free up to $100,000
  • Custom Checkbook: $20 (automatically included with Gold Accounts; not included with Core)
  • Debit Card $10 (automatically included with Gold Accounts; not included with Core)

Is Rocket Dollar safe?

Any cash held in your account is FDIC-insured for up to $250,000. FDIC insurance is offered by Rocket Dollar’s partner bank, Solera National Bank.

Rocket Dollar’s custodian partners are Solera National Bank of Denver, Colorado, IRAR Trust (IRA Resources INC) of La Jolla, California, and Goldstar Trust of Amarillo, Texas.

However, alternative investments are risky, so you should know what you are doing and invest at your own risk. SIPC insurance does not cover alternative investments.


🔔 Rocket Dollar doesn’t provide any financial advice or help with asset allocation. If you prefer working with a robo-advisor, read our sustainable robo-advisor guide.