What You Need to Know about Self Directed IRAs

What You Need To Know about SDIRA

Most people who have a retirement account or are looking to set up a retirement account have not heard of a self directed IRA. A self directed IRA is the same thing as any other IRA except that you can invest in non-traditional investments that most IRAs do not allow. That is why it is called a self directed IRA because you can "self direct" your investments. You can choose what you invest in. Most IRA custodians limit you and don't allow certain types of investments, but when you go with a self directed IRA you have more control over these investments. Self directed IRA custodians allow most types of investments and a few of the most popular investments in self directed accounts are gold, silver and other precious metals, real estate and even businesses.

To make a self directed account less daunting here are a few general rules you should know about self directed IRAs.

  • All types of retirement plans can be self directed. Those include: Traditional, Roth, SEP, SIMPLE, and even 401ks.
  • As noted before your investments inside a self directed account can be real estate, gold, private placements and more. Most custodians if they allow self directed accounts will allow you to invest in just about whatever you want as long as it is within IRS regulations.
  • There are two main investments that the IRS does not allow, life insurance and collectibles (art, jewelry, collectable coins, etc.) Learn More: Disqualified Transactions
  • Transactions to avoid inside of an IRA: No personal benefit from IRA owned asset. For example, you cannot live in a home that you purchase with your IRA. It cannot be lived in by any disqualified parties which brings us to our next transaction to avoid. No self dealing among disqualified parties. You cannot do business with linear descendents or your spouse. Learn More: Disqualified Persons
  • All income from the IRA investment goes back to the IRA tax-deferred. Any money made from rent, interest or sale of metals, ect. goes back to the IRA. Also, if you have any expenses on the asset (repairs to property) they need to be paid by the IRA.  
  • The IRA can be a part owner of a specific investment. For example: John Anderson's IRA may own 50% of a rental property while Lance Johnson's IRA owns the other 50%. In that case they split 50/50 all of the income and expenses.
  • An IRA can borrow money but only if the situation is right.  Loans in this type of scenario have to be non-recourse and typically you will have a higher interest rate and be required to put more down.


One thing that you need to remember is that one of the greatest benefits of a self directed IRA is that it allows you to invest in opportunities that are typically not available through most IRA custodians. Some of these investments include real estate, mortgage notes, gold, private placements, private stock, mineral rights and lease options are just a few of the investments that are possible through a self directed IRA.

Hopefully this has helped shed some positive light on what a self directed IRA is and help you learn what it can do for you and how to best use one. Each situation is different and could cause a different outcome as to what is possible for you to do inside an IRA. Always consult a professional before doing anything that could potentially cancel your IRA. If you find yourself still confused or want additional information feel free to contact us or leave a comment below. If you are looking for a quality custodian with low costs and great customer service set up an account at: Account Setup

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