What is a Self Directed IRA?

Many Americans utilize the tax advantages of individual retirement accounts or IRAs as part of their retirement strategy. In fact, over 25 million Americans have an IRA, with combined assets around $2.5 trillion.* The majority of IRAs are custodied at recognizable financial institutions such as Fidelity Investments and Vanguard. But there is another class of IRAs, known as self directed IRAs, which are relatively unknown to the public. But this is about to change as investors realize limited product offerings of traditional IRAs may jeopardize their ability to retire. People are tired of being burned by the stock market and during every market decline, the demand for self-directed IRAs should climb as investors actively pursue alternative investments. This should prompt more investors to ask the question, what is a self directed IRA?

Self directed IRAs enjoy the same tax deferred or tax free earnings growth and potential tax deductions of traditional or Roth IRAs. They also enjoy asset protection and estate planning benefits. Maybe the most appealing aspect of self directed IRAs is that investors are able to invest in exactly what they know best and that allows them to be confident in their ability to be able to retire.

What is a Self Directed IRA?

Self directed IRAs are individual retirement accounts that offer a wide array of alternative investment choices. These include precious metals, real estate, inverse ETFs and even closely-held businesses. You control the investments in the account and make the decisions for your retirement.

Why Open a Self-Directed IRA?

Given the volatility experienced by investors since 2000, many are distrustful of the stock market and the quality of advice they receive from market experts. Many feel Wall Street is a rigged game.

With a self-directed IRA you can invest in what you know best. This may be a closely held business, or a real estate investment. You may be able to put

What Type of Investments are Allowed in a Self Directed IRA?

There is a wide variety of investments allowed in a self directed IRA. The benefit of these alternative investment choices is to provide non-correlated assets in a portfolio. As a consequence, some investment choices may seem a little esoteric. In addition to the standard equity and fixed income investments offered at traditional IRAs, self directed IRAs allow the following alternative investments:

Raw Land

Residential Real Estate

Tax Lien Certificates

Private Placements

Gold and Silver American Eagle coins

Oil and Gas Investments

Foreign Exchange Currency

Structured Settlements

Equipment Leases

Private Loans

Commercial Paper

What Investments Are Not Allowed in a Self Directed IRA?

The IRS has a list of prohibited transactions in a self directed IRA,mostly involving ‘self-dealing’. This means close family businesses where you are the majority owner.


Where Can I Open a Self Directed IRA?

Many traditional asset managers don’t offer self-directed IRAs, but they aren’t difficult to find.


Most people think that stocks, exchange traded funds and mutual funds are all you can put into an IRA.