Today we shall look at the best self-directed ira custodians. In the recent past, we have seen a gradual increase in the number of investors seeking to diversify their retirement investment portfolios through opening self-directed IRAs (SDIRAs). To achieve this, these investors have to turn to reliable and efficient self-directed IRA custodians. If you are trying to take the route that these investors have taken, then you might want to read on till the end of this post to find out more.
What is a self-directed IRA?
A Self-directed IRA (SDIRA) is a special type of individual retirement account that allows investors to invest in a wide range of alternative assets. In this case, the term alternative assets refer to precious metals, cryptocurrencies, real estate, startups, agriculture, startups, and many more.
Another thing about SDIRAs is that they have tax benefits such as those presented by regular IRAs (e.g. Traditional and Roth IRAs), where you can stay clear from paying taxes during the investment period. You should, however, familiarize yourself with the taxation rules and other rules, in general, to avoid being on the wrong books with the IRS.
How to open a self-directed IRA
The steps followed to open a self-directed IRA differ from one custodian to the other, but you will generally be required to follow the steps below:
- Find a reliable custodian for your account
- Fund your self-directed IRA through an IRA rollover, or by depositing a check (or any other payment method allowed).
- Select the investments you intend to make
- Instruct the custodian to purchase the assets on your behalf. If you are investing in physical precious metals, you should also make arrangements for the storage of your assets in an IRS-approved depository.
- Track the performance of your investments.
What are the advantages of a self-directed IRA?
Investing through a self-directed IRA offers a couple of unique benefits which include:
- Tax breaks on the returns from your investments.
- Greater flexibility to hold the assets that you would prefer to hold in your account.
- The opportunity to pick and stick with assets that align with your experience or passion.
- Diversification of your retirement investment portfolio, in that you can hold assets whose price movements are negatively correlated.
- The opportunity to hold assets that have a significantly higher chance of appreciating with time.
What are the downsides of a self-directed IRA?
Whereas investing through this type of IRA can present you with the opportunity to have a thrilling time during investment, it can also have some downsides, which include:
- You are not allowed to invest in collectibles or life insurance
- Most assets in such accounts may have a higher risk ( but with the promise of higher returns).
- Managing the SDIRA may be complex.
- The fees and charges with such accounts may be higher.
Gold Investment Rules
Note that self-directed IRA custodians play a passive role, and do not guide or limit your choice of investment provided that they are all legal and allowed for use in SDIRAs by the IRS. The custodian purchases your assets and keeps them for you until it is time to sell them.
Which are the best self-directed IRA custodians?
We reviewed several top self-directed IRA custodians using criteria such as investment options allowed, fees, how easy it is to set up an account, as well as customer service, and compiled a list of the top SDIRA custodians as below:
1. Equity Trust
Equity Trust Company was founded back in 1974 and is one of the oldest firms of its kind in this industry. It takes pride and claims to be the leading custodian for real estate investors, having purchased, sold, and funded more than 200,000 properties. This privately-owned firm is regulated under the South Dakota rules of trust companies.
Besides being a go-to option for real estate owners, Equity Trust serves a significant number of investors who have their retirement investment funds held up in:
- Precious metals
- Private equity
- Oil and gas
- Agriculture and farmland
- Mineral rights
- Show horses
- Billboard signage
- Movie productions
- Equipment leasing
- Account receivables
- Royalty interests
- Structured settlements
Equity Trust is known for having higher administration fees than those of its peers (they may range from $225 to about $2250 depending on the contents of your IRA), but it makes up for that by not charging transaction fees. This makes it a favorable option for investors who intend to carry out several transactions annually. Setting up an account through their online platform will cost you $50, but if you want to do a paper application, you will be charged $75.
One main downside to Equity Trust is that it does not offer checkbook control. This may however only be an issue for you if you want to take charge of all investment processes, including the purchase of assets, and related paperwork.
- No transaction fees
- Sufficient customer support
- Long-term experience
- They also support traditional assets such as paper assets
- No checkbook control
- Annual admin fees are quite high
2. IRA Financial
IRA Financial is a Miami-based SDIRA custodian firm that began its operations in 2010. It went on to expand its operations to all 50 states, where it serves over 28,000 customers and managed more than $4.6 billion worth of alternative asset investments. The company, which describes itself as the fastest-growing firm of its kind, does not also charge transaction fees.
This company offers its services through partnering with 3rd party service providers e.g. Capital One, which offers banking services. Another example is Gemini, which offers cryptocurrency investment services.
IRA Financial offers SDIRAs without checkbook control, but there’s also an option for individuals to open checkbook IRA LLCs. If you want to open an SDIRA with checkbook control, you will have to part with a $999 one-time establishment fee, followed by an annual $360 custodian fee. After that, you will not pay any transaction fees upon buying, selling, or exchanging investments.
The asset classes allowed by this company include:
- Precious metals
- Hard money loans
- Real estate
- Hedge funds
- Private equity funds
- Tax liens
- Private businesses
- Offers checkbook control option
- Audit protection
- Annual custodian fees are lower than some competitors
- The account set-up process is lengthy
uDirect IRA is a California-based company that was established in 2009 to serve diverse clients. One of the key pillars of this company is its “learn and earn” approach to winning over customers. Newbies in the industry can through uDirect’s webinars learn how to manage their self-directed IRAs. This company also offers plenty of tools and information needed to get even intermediary investors on a winning trajectory, without necessarily promoting any investments.
This firm was founded by Kaaren Hall, whose experience in mortgage banking, real estate as well as property management enabled her to set up uDirect in a manner that has enabled it to gain popularity.
One main benefit of this company is that it has lower fees in comparison to most of its competitors. Customers are expected to part with $50 for the set-up of their accounts, and an extra $50 annual account maintenance fee.
Some of the asset classes supported by uDirect include:
- Precious metals
- Equipment Leasing
- Accounts receivable
- Commercial real estate
- Underdeveloped land
- Real Estate Notes
- Limited Liability Companies
- C corporations
- Tax Liens
- Oil and gas
- Private stocks
- Offers checkbook control option
- Low annual admin fees
- Low set-up fees
- A lot of informational materials for investors to use to learn about SDIRAs
- Account setup process not streamlined
4. Entrust Group
The Entrust Group has been around since 1981, with its staff gaining sufficient experience to make it one of the most reputable firms in this industry. This company stands out in the manner in which it allows its customers to access its services directly or through financial advisors. The customers can in both cases access an online platform that enables them to effectively manage their investments as they also select more investment options from the list of assets provided for them.
Entrust’s online platform also integrates with eMoney Advisor, which is quite a valuable addition amongst investors who are out to do holistic retirement planning. If you are, therefore, interested in managing your self-directed IRA through an online platform, then this is a company you can turn to.
The fees charged by this company are within the normal range. If you are a new client, for instance, here is what you can expect to get charged:
- Account set-up fee – $50
- Annual account administrative fees – these may vary based on the size of your account, but they range from $199 to $1995 annually.
- Transaction fees – these may vary based on the number of purchases or sales made, or the nature of the exchange of assets, but may generally range between $0 and $250.
Setting up an account with this company is relatively easy, and can take less than 10 minutes in some cases. Entrust can help you with the account opening process, but you are required to maintain your SDIRA on your own. You can also consult your independent financial advisor on whether they can offer help with the opening of an account with Entrust.
- Very experienced in offering SDIRA custodian services.
- Has an online portal with many reliable features.
- Clients can use tools offered to access their own investment options
- Fees charged may be high for some customers
- Does not offer a Checkbook control SDIRA option.
5. Alto IRA
This company is still a newcomer in this industry, after having only been formed in 2018. Alto IRA has a unique sales proposition to its customers, in the manner in which it claims to democratize SDIRA investing in alternative investments, in a bid to empower investors who are out to seek greater returns, as well as diversification in their self-directed IRAs. Whereas setting up and investing through SDIRAs can be complicated and expensive for some investors, Alto IRA seeks to ensure that investors have it easy.
Investors, for instance, have access to a wide variety of alternative investments that are offered through Alto’s platform, as a result of partnerships with companies in industries such as:
- Real estate lending
- Crypto exchange
- Angel investing, and many others.
Clients can utilize Alto’s Checkbook IRA to acquire maximum control over their assets for better management, and potentially greater returns. Moreover, this company also supports other types of IRAs, including traditional IRAs, Roth IRAs, and SEP-IRAs, which a customer can open if they need to increase their number of tax-advantaged retirement plans.
One of this company’s top objectives has been to make SDIRA investing affordable for the average investor, which it successfully does by offering two price tiers, which are:
- Pro – $25 per month
- Starter – $10 per month
You are also allowed to pay these fees annually, which in itself ensures that you save two months worth of fees.
With the Pro Plan, an investor is allowed to come up with their own ideal portfolio of investments from different companies, while the Starter Plan limits investors to the investments that are offered by Alto’s partners. The good thing is that Alto has over 50 partners.
Extra fees apply to the investments offered, in the following manner:
- Investments through the Starter plan – $10 to $50
- Investments through Pro plan – $75
Opening an account with this company is quick and easy, and you can do so through their defined online application process.
- An online platform that streamlines the investment process for investors
- Quick and easy online set-up process.
- Fees may be lower for most investors
- New to industry
- Complicated fee structure
- Deal sponsors are needed for one to create an account
6. Rocket Dollar
Established in 2018, Rocket Dollar is also one of the new entrants into this industry. It has, however, managed to build for itself a good reputation in the industry, to the extent that it now competes with some of the best firms. Clients can automatically set up a checkbook IRA with Rocket Dollar and gain exposure to the many investment opportunities available for them, which include:
- Real estate ( Including crowdfunded real estate).
- Precious metals
- Private equity
- Peer-to-peer loans
Rocket Dollar’s fee structure can be quite attractive to investors who have larger portfolios since the total costs are not based on a sliding scale. This company charges a flat fee of $15 per month.
The account set-up fee is $360, which is significantly higher than most of the other companies in this industry, but the good thing is that you only get to pay this fee once. If you are the type of client who prefers premium services, you can pay a $600 setup fee, followed by $30 per month, to access the Rocket Dollar Gold account.
The account set-up process with this company is fast and easy, and there is no minimum deposit required during the account opening process. Customers can also contact the support staff through the dashboard on this company’s official website, at any time.
- Quick and easy account setup
- Automatically sets up checkbook control for IRAs
- The fees structure is great for large portfolio holders
- Has not been around for many years
- High account setup fees
Other Firms worth considering
1. Pacific Premier Trust Company
Pacific Premier Trust was formerly known as PENSCO. It currently boasts one of the most extensive lineups of alternative assets in the entire industry, totaling nearly 42,000. It also claims to be one of the first firms of its kind to have offered its services through the internet, which it did since 1994. This San Francisco-based company was established in 1989 and has managed to refine its approach to service provision all through the years.
It is currently a wholly-owned subsidiary of Pacific Premier Bank, which is equally popular (and currently worth over $20 billion). Beyond offering custodial services, this company also provides brokerage services for assets such as:
- Mutual funds
- Certificates of deposit
Investors who turn to this company for SDIRA custodian services can hold assets in the following categories:
- Precious metals
- Land and mineral rights
- Peer-to-peer lending
- Wind farms
- Private equity
- Real estate
- Promissory Notes
- Marketable securities
- Tax liens
The one thing that can scare off the average investor from using Pacific Premier Trust’s services is the high fees charged. The annual fee is $750. The administrative fees are as illustrated below:
- 0.30% charged on the first $1 million
- 0.15% on the next $4 million
- 0.10% on the excess of the amount that exceeds $5 million
Some of the other fees you will be expected to meet include:
- Asset processing services – $175
- Asset registration fee – $75
- Account closure fee – $225
- A wide variety of alternative assets supported
- Has been operational for many years
- Different types of IRAs supported
- High fees
2. Strata Trust Company
Strata Trust Company is one of the widely-known alternative Self-directed IRA custodians. It supports a wide range of investment choices, the main ones on their list being:
- Precious Metals
- Real Estate
- Private equity
You can also invest in the above assets without necessarily relying on an SDIRA structure, though you may end up missing out on the tax-advantage element offered by the self-directed IRA.
This company allows investors to open their self-directed IRAs in any of the following structures:
- Traditional IRAs
- Roth IRAs
This company charges a $50 setup fee for 3 different types of accounts, which are:
- Precious metal IRA
- Basic IRA
- Flex IRA
The annual account fees for these accounts differ, as shown below:
- Precious metal IRA – $75
- Basic IRA – $100
- Flex IRA – $250
N.B. A basic IRA is an investment vehicle that enables investors to hold public investments such as brokerage accounts, CDs, REITs, and LLCs. With a flex IRA, investors can hold investments that are not considered public, such as private stock, real estate, precious metals, futures, commodities, and private notes. The precious metal IRA offered by Strata is strictly used for holding precious metals such as gold, silver, platinum, and palladium.
- Low annual fees
- Solid management team
- Has a robust resource center
- Does not have a cryptocurrency offering
- Does not have an individual 401(k) option.
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Frequently Asked Questions on “Self-directed IRA Custodians”
1. What are the main factors to consider when choosing the best self-directed IRA custodian?
To ensure that you end up with a reliable custodian, you need to scrutinize the efficiency of the companies you shortlist, based on a couple of factors, including:
- Their fees and charges
- Minimum investment required
- Availability of checkbook control option
- Ease of account set-up
- Quality of customer service
- Range of investment options
- Learning materials/educational resources offered
The company you settle on should tick most if not all the boxes based on the above factors. You can check out the customer reviews and trust ratings on sites such as Trustpilot, Better Business Bureau, and Business Consumer Alliance.
2. Is a self-directed IRA right for me?
This depends on a number of factors including the type of assets you intend to use for the purpose of investment for retirement, as well as the amount of money you intend to put aside in your retirement plan annually. I would mainly recommend opening a self-directed IRA as the best option if you intend to hold alternative assets such as precious metals and cryptocurrencies.
3. How much does a self-directed IRA cost?
Most Self-directed IRA custodians charge their fees in form of:
- Setup fees -most set-up fees range between $0 and $360
- Annual maintenance fees – range from $150 to $2000+ (may be more or less depending on the size of the investment account)
- Transaction fees – range from $35 to $250 per transaction. Some do not charge transaction fees at all.
4. How can I open a self-directed IRA?
If you are convinced that a self-directed IRA is suitable for you, then you can open your account by simply visiting the official website of your preferred company, and filling out the account application forms. You can also contact their customer care staff to get the step-by-step instructions on how to open your account.
That will be all for this post on the best self-directed IRA custodians. I hope that you found this post helpful. If you have more questions regarding it, drop them in the comments section and I will get back to you ASAP. I wish you well,
Eric, Investor and Team Member at Gold Retired!