Self-Directed IRAs

Do more than check a box. Directly find, pick, buy, and sell alternative assets with your retirement savings.

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Self-Directed IRA (SDIRA) vs  Managed IRA

With the self-managed IRA or regular IRA you find at most financial institutions, you simply check a box to indicate the mix of stocks and mutual funds you want. You are limited to traditional investments. With self-directed IRAs, you get to find, buy, and sell the alternative investments in your individual retirement account- this is true self-directed investing.

You can also invest in alternative assets that you can't invest in with a regular IRA or managed IRA. This is especially beneficial if you already have expertise in a certain types of investments or market, such as real estate.

Open an Account

What is a Self-Directed IRA?

Self-Directed IRAs (SDIRAs) are retirement accounts that let you choose your investments (like real estate!), offering the same tax perks as traditional IRAs. You manage the retirement investing account by picking, buying, and overseeing its assets. 

Self-directed IRAs offer investors three key benefits: diversification, investment control, and the same tax benefits as IRAs managed by a broker-dealer. Beyond stocks, bonds, and mutual funds, you can invest in non-traditional assets like real estate and private equity that give you added protection from a turbulent stock market- the investment decision is yours.

How Self-Directed IRAs Work

With any truly self-directed retirement plan, the IRS requires you to have an account custodian for protection and oversight. Custodians like IRAR are regulated by state and federal law and are regularly audited. IRAR is a South Dakota trust company regulated by the Division of Banking. Make sure you know the difference between an IRA custodian and an IRA administrator.

After you choose a self directed IRA company, you'll want to determine which self-directed  account type is best for your goals and open an account . You can choose from a Roth self-directed IRA, Traditional IRA, or if you have a small business, a SEP IRA,  SIMPLE IRA, or Solo 401(k) might be best— all can be self-directed.

You can fund your SDIRA with an existing retirement account. This can be an IRA or old 401(k), or by making scheduled contributions.

If you're funding it with an existing retirement account, there are two ways to do this: a rollover or a transfer . Be sure to check IRA compatibility. Given the different tax benefits of different types of IRAs, you want to know the type of account you can move funds to.

Once your account is funded, simply tell your SDIRA custodian what alternative asset you want to purchase. When it's time to take distributions (age 59 1/2) or required minimum distributions (age 72), you can liquidate the assets or you can take in-kind distributions.

How Do I Set up a Self-Directed IRA?

First, conduct a comparison on Custodians or trust companies for self directed IRA services. Third-party self-directed IRA providers, like administrators and promoters, are generally not custodians. Instead, they work with a trust company to conduct business. It's important to know the difference.

More thank likely, your standard IRA provider or custodian, will not allow you to make investments in tangible alternative assets such as real estate— that's not their expertise.

Opening and Managing A Self-Directed IRA

Once you choose a custodian, opening a self-directed IRA is simple and you can do it yourself online. You can complete a new account application and fund your account with an existing IRA or old 401(k), or you can make regularly scheduled contributions, not to exceed the contribution limits for the year.

There are different types of accounts to choose from. If you are an individual investor, explore the Roth IRA and Traditional IRA. For small business owners, you can look into the SEP IRA , SIMPLE IRA or Solo 401(k).

Transferring funds from an existing IRA to your self-directed IRA is an easy process and it is not a taxable event. You can start an IRA transfer by completing a Transfer Form and submitting it with your new account application. You can also open an account with an IRA contribution . But not to worry, IRAR guides you through this process and rule.

Once your account is funded, you can tell your IRA custodian what to invest in and your custodian will make the purchase. The investment options are yours to make. The investments are titled in the name of the self-directed IRA (not the account holder.) The expenses for the investment are paid from the self-directed IRA and the income is put back in the self-directed IRA. The same is true if you sell the investment, the profits are put back into the self-directed IRA.

Unlock the Potential for Higher ROI— Alternative Investments

Why leave your money at the mercy of the market? With a self-directed IRA, you can invest in specific assets such as a private company or tax liens. But you can also invest in other non-traditional assets , like real estate or an LLC, that have the potential for a higher rate of return. And, you don't have to transfer all your account, you can leave your mutual fund or other retirement assets with the existing IRA providers.

Alternative investments are the major benefit of opening a self-directed IRA. By investing in these assets, you can further diversify your portfolio, capitalize on any industry knowledge, and protect your savings from a volatile stock market or unpredictable changes in the economy.  In fact, one of the best investments in a self-directed IRA is real estate.

A real estate professional or real estate investor, for example, can use their expertise to invest in residential, commercial real estate, and other types of rental properties . With their knowledge of the industry, they can invest in properties that stand to grow faster than the market. They can also help their clients invest in real estate with self directed IRAs.

Self-Directed IRA Investment Strategies

You will need to decide what type of individual retirement account (IRA) is right for you. Different account types offer different tax benefits. 

For instance, a self-directed Roth IRA (tax exempt) could be a part of your retirement plan if you anticipate being in a higher tax bracket upon retirement. On the other hand, a self-directed Traditional IRA (tax delayed) might be more suitable if you expect to be in a lower tax bracket when you retire. If you are a small business, you may want to explore a Solo 401(k), SEP, or SIMPLE.

Your IRA investment options will also determine your strategy. For example, you may be interested in many different types of real estate or maybe just residential real estate. Identifying your options will help you narrow down funds needed.

You can decide if you need an LLC or a checkbook IRA. A checkbook IRA gives you control over your LLC. This is important if you are buying many properties.

If you are interested in purchasing commercial properties, you can utilize a non-recourse loan. Another option is to team up with others' retirement funds for larger real estate deals. 

Self-Directed IRA Rules 

Keep your self-directed retirement account on the right side of IRS regulations. With this tax-enhanced environment comes added responsibility. 

Prohibited Transactions in Self-Directed IRAs

There are three key rules to keep in mind:

  1. You cannot engage in a transaction with a disqualified person
  2. You cannot use the IRA to take personal benefit
  3. You cannot invest in disallowed investments (life insurance and collectibles)

As the account owner, you are responsible for making all the investment choices and finding the investment opportunity for your self directed IRA account. This means that you are also responsible for making sure you do not break the rules or engage in a prohibited transaction.

You are responsible for conducting due diligence on the investment; finding, vetting, and keeping track of investment performance- and for updating the fair market value ( FMV ) of your investments or assets annually. Your are also responsible for getting investment advice from a qualified financial or tax professional.

With self-directed IRAs you get a lot of investment freedom, but you do have some responsibility. You should always discuss your strategy with a financial advisor or professional that handles your retirement portfolio.

Low Cost Self-Directed IRAs

When it comes to self-directed IRAs, there may be many companies offering low-cost options, but not all of them truly provide self-directed IRA services. It is crucial to fully understand the roles of both the company and yourself, as well as the types of investments allowed, before making a decision.

For example, a self-directed IRA at Fidelity does not allow you to purchase real estate,  precious metals, or real estate notes. 

In terms of fees, self-directed IRAs typically involve an account establishment fee, transaction fees, and maintenance fees. Before opening an account, it is advisable to compare these fees among different providers.

Your Search for the Best Self-Directed IRA Custodian Ends Here!

Specializing in real estate and private equity transactions in self-directed IRAs, our employees each have nearly a decade of industry experience and a passion for educating clients. That means we share what we know with you as soon as we know it, so you can always make the best investment decisions possible.

We also keep our transaction fees low so you can save for retirement and build equity— trust that we have your best interest first.

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Self-Directed IRA FAQs

What is a self-directed IRA? 

A Self-directed IRA is a retirement account that you, the IRA owner, control. With a self-directed IRA, you do more than check a box. These types of retirement accounts are usually used to invest in alternative assets like real estate. Self directed IRA investors directly find, pick, buy, and sell the assets held in the IRA. You need a self-directed IRA custodian or trust company to establish an account. 

How do I set up a self-directed IRA? 

You can open a self-directed IRA yourself. Open a new account online, move savings from another IRA to the account, or make a contribution to the new account. 

Can a self-directed IRA invest in a business? 

Yes. A self-directed IRA can invest in business where you or a disqualified person do not own 50% or more of the business. A business is considered an alternative investment in private stock.

What are the fees for a self-directed IRA? 

The costs associated with self-directed IRAs can differ based on the chosen custodian. Typically, there are fees for both setting up and maintaining the IRA. It is advisable to carefully examine the fee structures, also known as fee schedules, when comparing custodians' fees prior to opening an account.

Who offers self-directed IRAs? 

Unlike most big banks such as Fidelity, this specialized IRA service is unavailable. While they may provide a self-directed IRA option, it ultimately functions as a self-managed IRA, where you have the freedom to personally select stocks and bonds.

I have a Fidelity Self-Directed IRA, can I move it to IRAR? 

Absolutely! You have the freedom to seamlessly transfer any IRA from another custodian to a self-directed IRA at IRAR. To kickstart this hassle-free process, simply open an account with IRAR and swiftly fill out our transfer form. 

Self-Directed IRAs: What You Need To Know To Get Started

Understand the basics before getting started with a Self-Directed IRA.