Self Directed IRA

What is a Self-Directed IRA

A self-directed IRA allows you to invest in unique and varied assets that are normally off-limits. While it is held by a trustee or custodian, account owners have the freedom to make their own investment decisions – the reason why it's called a “self-directed” account.  

Self-directed IRAs are best suited for investors who have in-depth understanding of alternative investments and would want to earn tax-advantage by diversifying their portfolio. You can invest in SDIRA as either a Traditional IRA or Roth IRA, which means you can make tax-deductible contributions or take tax-free contributions. 

What makes SDIRA different from other IRAs are the types of investments you can hold in your account. Regular IRAs are limited to paper assets such as bonds, certificate of deposits, stocks, and the like. 

An SDIRA, on the other hand, allows an account holder to invest in a greater range of assets. Besides precious metals, you can invest in private placements, real estate, cryptocurrencies, commodities, and limited partnerships among others. 

Before making an investment in a SDIRA, it’s important to assess the risks and rewards involved. Keep reading, and we’ll tell you how to make the best out of your investment options!

How can you invest in a Self-Directed IRA

The first requirement for investing in a self-directed IRA is to find a qualified IRA custodian. You should know that not every SDIRA custodian offers a similar range of investment options. Thus, if you’re looking for a specific type of asset, such as gold IRAs, make sure it’s something they specialize in!

Since SDIRAs are self-directed, you are not allowed to refer to your custodians for financial advice. More often than not, traditional brokerages, investment companies, and banks don’t offer this kind of service to their clients. You’ll need to do your own research and work with a reputable financial advisor if you need help managing your investments.

You should also note that there are specified investments that are not approved by the IRS, regardless of whether it's a traditional or Roth account. For instance, you can’t hold certain collectibleslife insurances, and S-corporations in your retirement account.

What are the benefits of investing in a Self-Directed IRA

Investors who choose SDIRA enjoy several unique perks that boost their retirement savings. Here are some benefits you can take advantage of:

Investment Flexibility

You’ll have the freedom to make your own investment decisions, and select options beyond paper assets  in your retirement account.

Greater Diversification

Market volatility and inflation are few factors that can affect your retirement savings. With an SDIRA, you can invest in alternative investments that balance your portfolio when market downturns threaten to diminish your money’s value. You may invest in unique assets that are not tied to financial markets like precious metals IRAs, which are known to retain their value even amidst economic crisis.

Higher Returns

With a self-directed retirement account, you can invest in high-risk, high-reward options like private companies and Bitcoin. These types of assets entail higher rewards than investing in the stock market, but there’s also greater risk attached.

Tax Advantages

SDIRA also gives you the opportunity to take advantage of tax breaks that are available for certain types of investments.

Self-directed IRAs are not for everyone, they’re far more complicated to handle and come with higher fees compared to traditional IRAs. So it's important to understand the rules and regulations before setting one up. If you need help with managing investments, be sure to work with a financial advisor.

What are some common investment options for Self-Directed IRAs

Real Estate

Self-directed IRA investors can hold property through their IRA account. You can invest in commercial properties, rentals, and more.

Precious Metals

Offers value stability as it is not tied to the financial market’s performance, it’s great for hedging economic uncertainty and inflation. You can invest in gold, silver, palladium, or platinum at certain purity levels that are approved by the IRS standards.


You can put your money in digital currency, like Bitcoin or Ethereum, and enjoy the benefits of security, anonymity, and decentralization.

Foreign Currencies

Offers ease of money movement, you can convert your assets quickly into cash, and earn profit as the currency’s value fluctuates.

Promissory Notes

With an SDIRA, you can also loan funds from your retirement account, allowing you to earn passive, tax-advantaged returns.


Self-directed IRAs can also be used to invest in LLCs, which can provide a variety of opportunities for growth.

Again, not all SDIRA custodians provide the same variety of investment options. So, if you’re looking to invest in a specific asset, look up your potential custodian and get a list of their offerings.

How to Invest in Precious Metals IRAs?

Setting up a Precious Metals IRA can be a bit more challenging than Traditional IRAs. Well, you shouldn’t need to worry because we’ve listed what you would need to do:

1. Select a Self-Directed IRA Custodian.

 You can avail for custodianship through trust companies, banks, and other eligible entities under the IRS standards. To ensure their reliability, you should check for any reviews or complaints filed with federal agencies before selecting one.

2. Complete the Self-Directed IRA application form.

This form will require your personal information, such as your name, address and Social Security number.

3. Fund your account.

You will need to transfer money into your new Self-Directed IRA in order to begin investing.

4. Make investment choices.

Once your account is funded, you can start making investment choices for your Self-Directed IRA. This could include investing in traditional assets such as stocks and bonds, or alternative assets such as real estate and precious metals.

When you’ve already decided on your alternative assets, you may need to look for a trusted dealer, especially if your custodian does not have an existing partnership with a dealer company. 

Note: Some custodians focus on certain classes of assets, like precious metals or cryptocurrencies, so it may be better if you already have an idea which asset to invest in prior to choosing your custodian.

5. Complete the Set up.

Once you’ve settled on your alternative assets, you can now prompt  your custodian to buy the investments from your dealer.

What are the risk of self-directed IRAs

Even if you have thorough knowledge on how SDIRAs work, we cannot deny that they carry greater risks and downsides. Here’s a few that you need to look out for:


Higher Fee

You can typically set up a regular IRA without having to pay for trading fees and account management. However, with SDIRAs, this may not be the case. Along with account-related fees, you will be paying for additional costs related to the assets you invest in. You may be charged with storage fees, maintenance, and insurance fees, among others. So, make sure you know all the fees involved before investing. 


Low Liquidity

Since you're investing in alternative assets like gold or real estate, your holdings may take longer to be converted to cash. Even if you sell your asset prematurely, there’s a possibility that you’ll reap returns


IRS Rule Violations

Like any other IRAs, you’ll be penalized if you do not follow certain guidelines. However, with SDIRAs the stakes are particularly high, your entire retirement account can be held liable. 

For illustration purposes, here’s an example: Under the IRS, you are not allowed to use an IRA to purchase a property for personal use. If, for instance, you have spent a single night in a rental property funded with SDIRA, your entire account could be suspended and no longer considered an IRA starting the day of the violation. Moreover, if you had made any gains in your account, you’ll be charged with applicable taxes plus an early withdrawal penalty.


Self-directed IRAs are a great way to invest your money and take greater control over your retirement savings. However, just like any other IRAs, it comes with risks and potential losses to your money – especially if you lack understanding of how it works and of the underlying IRS standards that go with it.

If you're interested in learning more about self-directed IRAs we'll be happy to answer any questions you have. We’ll help you get started on the path to a secure retirement!

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