Self-directed IRAs or retirement saving accounts are just that: accounts that you direct. And by direct, we don’t mean checking off a box to indicate your investment choices (like you do with any account managed by a bank or brokerage firm.) We mean you get to directly pick, buy, and sell the assets held in your account— alternative assets like real estate, notes, and private equity. You’re truly in control.
With a self-directed IRA, you have the freedom to invest in a broad array of investments, as long as the investment is not prohibited by the IRS. Your imagination is the only other limitation.
Self-directed IRAs come with rules. Although you can invest in many alternative assets, there are things that you cannot do or people (disqualified persons) that you cannot do deals with. In a nutshell, you or your relatives cannot take personal benefit of the IRA or its assets.
For example, if your Traditional or Roth IRA invested in real estate, you the account owner could not live in the property. You would be taking personal benefit and this is a prohibited transactions.
See Self-Directed IRA Rules for more details on this topic.
Often, self-directed IRA owners invest in non-traditional assets that they are familiar with. These accounts help them take full advantage of their existing expertise to build retirement wealth. For example, a real estate agent might hold real estate in her self-directed IRA. There are only two things that IRAs cannot invest in: collectibles, and life insurance.
Here is a list of the most popular assets in self-directed IRAs. They include, but are not limited to:
Explore all your investment options >
Like all regular IRA investments, these types of investments are in a tax-free or tax-deferred environment. Self-directed IRA accounts have the same tax benefits as any other IRA.
With a truly self-directed IRA, your administrator or financial institution is not a bank or a brokerage firm, but a trust company like IRAR. We specialize in administering alternative investments in IRAs. This means we process transactions, keep records, and report to the IRS as required by law. IRAR offers assistance to educate you about the investment process and the rules governing tax-advantaged savings accounts, but does not sell, promote, or conduct due diligence on any investment.
It's very important to know how custodians are regulated and the difference between the many companies that offer these services.
If you decide that self-directing is for you, IRAR is here to answer your questions regarding fees. We focus on keeping our fees low so you can invest more.
Do your research! It's very important you understand how fees are charged, because every custodian is different. Here are the most common fees associated to a self-directed IRA (but you can also compare costs directly with our Fee Comparison Template):
Account Establishment Fee
IRA custodians usually charge an account establishing fee to open your account. This is usually a one time fee.
Annual Recordkeeping Fee & Asset Holding Fees
Providers don’t all charge the same. These fees can be based on the value of the account or per asset.
It’s typical for IRA custodians to charge fees for processing speciﬁc transactions— but some charge more than others. Beware of the all inclusive fees, usually there is a catch!
Other additional fees can include: asset custody fees, quarterly maintenance fees, and below minimum balance fees.
It's important to understand all of your options and how this impacts your savings. It is also wise to consult with a financial professional to discuss your goals. Learn more about investments allowed in self-directed IRAs, strategies, and how to get started here.