I understand that assets which are taxed at ordinary income rates are most appropriately housed in tax deferred vehicles.
All my equity funds are at Vanguard but none of my fixed income is there. For fixed income, I did not like anything available at Vanguard (I guess you can count me in the camp of people who think bond yields do no justify the risk) so I have three CDs yielding 2.2% - 3% at various banks (Ally, Discover and a local credit union), some private money loans yielding 8.5% - 15% collateralized by homes/autos, and some peer-to-peer (P2P) lending at LendingClub.com and Prosper. All of my fixed income interest is currently taxed as ordinary income at my marginal rate of 35%.
While I realize many Bogleheads will disagree with my fixed income choices, let's please get past that as I have questions about moving my Roth IRA. I've been doing the P2P lending for about three years, and it's pretty consistently returned 8% - 11% before taxes. I'm comfortable with this form of fixed income for now. At such point as bond yields approach their historical averages, I'll be happy to move out of all this weird stuff into a normal bond fund. Given that it'll likely be a long time for bond yields to get to their historic averages, I'm thinking of transferring my Roth IRA to LendingClub.com to get some tax benefit on the income I'm earning. LendingClub is a start up but supposedly the investor funds are shielded in the event the underlying company has issues.
My questions for the BogleHeads:
1. Before considering moving my IRA to LendingClub, what questions should I ask LC and/or Vanguard?
2. Anyone know if this would be considered a "self-directed" IRA after the move? If so, what pitfalls would I need to avoid to keep the IRA benefits?
3. How hard is to to move the IRA back to Vanguard in a few years if/when bond yields meet my criteria for investment? (At that point, I'll go to the 3 fund portfolio at Vanguard and be done with the funky alternatives.)
4. What other eventualities should I think about?
5. For the sake of argument, assume that you agreed with me on bonds/fixed income and that you had the investment mix I do. Would you move your IRA to LendingClub or keep it at Vanguard (where it currently holds equity funds and therefore isn't providing all the much tax benefit)?