Most retirement accounts limit you to stocks and mutual funds. A Self-Directed IRA allows you to invest in real assets like real estate, private funds, and alternative investments.
While many investors are familiar with traditional IRAs offered by major brokerage firms like Schwab or Fidelity, fewer realize that these accounts often restrict what you can invest in.
Self-Directed IRAs (SDIRAs), administered by specialty custodians, expand your investment options and allow you to place retirement capital into alternative assets.
Traditional IRA vs Self-Directed IRA
Feature |
Traditional Brokerage IRA |
Self-Directed IRA |
|---|---|---|
Typical Provider |
Schwab, Fidelity, Vanguard |
Directed IRA, Madison Trust, Alto IRA |
Investment Options |
Stocks, bonds, ETFs, mutual funds |
Real estate, private funds, notes, tax liens, private equity |
Custodian Role |
Brokerage platform |
Administrative custodian |
Control Over Investments |
Limited to platform offerings |
Investor chooses the investments |
Access to Alternatives |
Rarely available |
Core purpose of the account |
Key takeaway: A traditional IRA focuses on public market investments, while a Self-Directed IRA allows investors to access private markets and real assets.
What Can You Invest in with a Self-Directed IRA?
Private Real Estate
Private real estate funds
Mortgage Notes
Tax Liens
Private Equity
Venture capital
Precious metals
Private lending
Example: Instead of buying a REIT through the stock market, an SDIRA investor could invest directly in a private real estate fund or individual property.
Why Investors Use SDIRAs
Many investors choose SDIRAs for three main reasons:
Diversification
Gain exposure to investments outside of public markets.
Tax Advantages
Maintain the same tax benefits as traditional retirement accounts.
Access to Private Markets
Participate in investments typically reserved for institutions.
How Self-Directed IRA Investing Works
A Simple 4-Step Process
STEP 1
Open the Self-Directed Account
Open a Self-Directed IRA with a specialty custodian.
STEP 2
Fund the Account
Transfer or roll over funds from an existing retirement account.
STEP 3
Select the Investment
Direct the custodian to invest in an approved alternative asset.
STEP 4
Grow Tax-Advantaged
Income and profits return to the IRA tax-advantaged.
Custodian Facilitates & Manages the Investment
Curious to discuss the benefits of a Self Directed IRA? Schedule a brief call with our Investor Relations Team.
Work With Trusted Self-Directed IRA Custodians
Opening a Self-Directed IRA requires working with a specialized custodian that administers alternative investments.
While many investors are familiar with brokerage firms, SDIRA custodians are specifically designed to support investments such as private funds, real estate, and mortgage notes.
Over the years, many investors have successfully worked with the custodians below when establishing Self-Directed IRAs.
Preferred SDIRA Custodians
Important Rules to Understand
While Self-Directed IRAs offer flexibility, they are governed by specific IRS guidelines.
Key considerations include:
Prohibited transactions
Certain actions are not allowed if they provide a direct personal benefit to the account owner or related parties.
Disqualified persons
Certain individuals, including the account holder and close family members, are restricted from transacting with the IRA.
Custodian administration requirements
Self-directed IRAs must be held and administered by an approved custodian who processes transactions and maintains the account.
Proper documentation and reporting
All investments and transactions must be properly documented and reported to maintain compliance with IRS requirements.
Working with experienced custodians and investment sponsors helps ensure these rules are followed properly.
Common Questions About Self-Directed IRAs
Can IRA funds be invested in real estate?
Yes. A properly structured Self-Directed IRA allows investors to allocate retirement capital into real estate investments.
Is a Self-Directed IRA different from a traditional IRA?
The tax structure remains the same. The primary difference is the expanded investment flexibility.
Are Self-Directed IRAs only for experienced investors?
While many experienced investors use them, anyone with eligible retirement funds can establish a Self-Directed IRA.
Interested in Using Your IRA for Alternative Investments?
Speak with our Investor Relations team to learn how other investors are using Self-Directed IRAs.