Gold Retired

  • Buying Guide
  • Learn
    • 401k to Gold IRA Rollover Guide
    • #1 Recommended Gold & Silver IRA Solution!
    • Avoid Gold IRA Scams! | (Learn how)
    • Investing in Gold for Beginners | Basics & Tips
    • Top-5 List of Gold Investment Companies | U.S. 2023
    • What is a Gold IRA?
    • What is a 401k to Gold IRA rollover?
    • What is Numismatic Gold Coins? | BEWARE!
    • Gold IRA Pros and Cons
    • Gold IRA Rules and Regulations | 2022
    • Top-5 Gold & Silver IRA Companies | 2022
    • Top 5 Best Gold Coins – Investors Favorite Picks
  • Reviews
    • Augusta Precious Metals
    • Goldco Precious Metals
    • American Hartford Gold
    • Birch Gold Group
    • Advantage Gold
    • Noble Gold
    • Oxford Gold Group
  • Blog
    • Central Bank Digital Currency in USA – Is it being introduced?
    • Why Gold Hedge Against Inflation | one-eyed man in the kingdom of the blind
    • Where do wealthy people invest their money?
    • Gold in War | Why is it a good idea?
    • What Does the Bible Say About Retirement? | Gold & Silver?
    • How to Invest in Gold? | Different Ways You Can Do It
    • Gold Vs. Silver Investment | What makes most sense to you?
    • How to Protect Your 401k From a Market Crash | 6 Best Tips!
    • Gold IRA Scams! | Learn How to Avoid Them!
    • Roth IRA versus Traditional IRA | What Are The Differences?
    • Is it Worth Investing in Gold? Your Freedom is Under Attack!
    • What is IRA Basis? | Simple Explanation
    • 16 coins to have in a Cryptocurrency IRA | New 21/22 List!
    • What is The 702(j) Retirement Plan? | Not a Smart Idea?
  • My #1 Recommendation

What is a Self-Directed IRA account? | The Basics to know!

October 24, 2021 by Eric 4 Comments

What is a self-directed IRA?

What is a self-directed IRA account? Does it have any unique benefits over traditional IRAs? Which assets can you hold in the self-directed IRA? What are some of the rules and requirements that you need to be aware of when opening your self-directed IRA? Such are some of the questions that those who come across this peculiar term ask themselves. If you’re here because you’re looking for answers as well, then you’re in the right place. Read on to discover what it will take for you to open your self-directed IRA and what you can invest through it.


P.S:

See Top-5 List of Gold & Silver IRA service providers


What is a self-directed IRA?ira precious metals

A Self-directed IRA, or SDIRA, as popularly abbreviated is a type of IRA that allows an investor to hold a wider variety of assets, including alternative assets which are otherwise not allowed in regular IRAs. Despite SDIRAs being administered by custodians or trustees, they’re usually directly managed by their account holder, hence the name self-directed.

These unique IRAs are structured as either:

  • Traditional self-directed IRA in which an investor makes tax-deductible contributions to their account.
  • Roth self-directed IRA – in which an investor takes tax-free distributions.

Generally, self-directed IRAs are best-suited for investors who are interested in diversifying their retirement investment portfolio.


SDIRAs in detail

The key difference between SDIRAs and common IRAs is the type of assets that one can hold in their account. Generally, regular IRAs only allows you to hold paper assets such as:

  • Stocks
  • Bonds
  • Certificates of deposit (CDs)
  • Mutual Funds
  • Exchange-Traded Funds (ETFs)

SDIRAs, on the other hand, allows their owners to allocate their funds to a wider variety of assets including:

  • Precious metals such as gold, silver, platinum, and palladium
  • Commodities
  • Tax lien certificates
  • Real estate
  • Private placements
  • Cryptocurrencies
  • Limited partnerships
  • Promissory notes

As you can see SDIRAs call for greater for the account owner to do their due diligence before getting started, owing to the unique properties of assets invested in them.


Which assets are prohibited for use in SDIRAs (& disqualified persons and transactions that are prohibited)?not recommended

As much as SDIRAs allows for investors to invest in a wide range of alternative assets, there are two asset classes that you cannot invest in which are:

  • Life insurance
  • Collectibles such as antiques, jewelry stamps, artwork, rare coins, alcoholic beverages, antiques, and baseball cards.

You will also come to learn that the IRS prohibits account holders from doing certain transactions with “disqualified persons”. These include:

  • Yourself
  • Your spouse
  • Ancestors
  • Lineal descendants
  • The spouses of your lineal descendants

The IRS generally expects that you will not conduct any transactions between your self-directed IRA and any of the disqualified persons. Some of the prohibited transactions include:

  • The lending of money
  • The selling of property
  • Using the funds in the IRA as collateral for loans
  • Purchasing property for use in your IRA.

Those who violate these transaction rules risk being stripped of their account’s IRA status.


How can you open a self-directed IRA?idea

Most of the IRA providers today only offer traditional or Roth IRA options, in which you can only invest in paper assets. If you’re trying to open an SDIRA, then you need to search for an IRA custodian who specializes in the provision of such accounts.

One thing you should also know is that different SDIRA service providers accept different types of investments. If you’re, as such, interested in a specific asset, say precious metal, you should confirm that your SDIRA service provider of choice supports precious metal investments.

Also note that your SDIRA custodian is not allowed to offer any financial advice, which is a service that other investment firms, banks, and regular brokerages offer. This implies that as you open your SDIRA, you should be ready to come up with an investment strategy. In the event that you realize that you need help with picking or managing your investments, then you should seek the services of a financial advisor so that you can get help with creating a reliable plan.


Choosing your self-directed IRA provider.

Your choice of SDIRA service provider can make a big difference in how smooth your investment years become. As you start searching for the right SDIRA service provider, you will learn that their fees structures and fees differ quite significantly. The best SDIRA custodian is the one that offers you the services that you need at affordable prices. You need to establish which company is the best fit in terms of value for money. cheap may end up being expensive, and expensive does not necessarily mean that the high quality of services is guaranteed.

When making your choice, start by highlighting your must-haves, based on some of the following considerations:

  • Do they allow checkbook control?
  • Does the custodian support specific asset classes such as gold and cryptocurrencies?
  • Would you like to also hold traditional assets in your IRA?
  • The fees charged – e.g. set-up fees, transaction fees, maintenance fees, other admin fees.

You should also come up with a list of questions to ask your SDIRA custodian, to get a clear picture of what you are getting yourself into.


The taxes, contributions, and distributions

Like traditional IRAs, self-directed IRAs are subject to certain rules that pertain to the making of contributions, withdrawing funds, as well as required minimum distributions, also known as RMDs. Most of the rules also apply to traditional IRAs, including:

  • One must adhere to annual contribution limits that are usually set by the IRA.
  • All qualified withdrawals upon retirement are usually taxed in the same manner as ordinary income.
  • Those who withdraw funds before hitting 59.5 years (and do not qualify for withdrawal exceptions) usually get hit with a 10% early withdrawal penalty, alongside the normal income taxes.
  • Retirees who live up to the age of 72 years are necessitated to take RMDs. The amount one must withdraw annually is based on their year-end account balance, as well as their life expectancy.
  • Those who wish to make post-tax contributions should open self-directed Roth IRAs.

If you are ready to open your SDIRA today, here are some reliable service providers worth considering:Gold IRA recommendation

See Gold Retired’s Top-5 Recommended Gold and Silver IRA Solutions

OR

See Gold Retired’s Top-5 Recommended Bitcoin IRA Solutions


That will be all for today’s article in which we have addressed what a self-directed IRA account is all about, and what you can expect from one. I hope that you now have the answers to the questions that you had in mind and that you now know what to do as you open your account. Let me know if you have more questions or concerns with regards to how you can open your SDIRA today and start investing in alternative assets.

I wish you well,

Eric, Investor and Team Member at Gold Retired.

Filed Under: Retirement

Comments

  1. Lily says

    November 2, 2021 at 10:35 pm

    I think that setting up your retirement fund is one of the most important that we will make and it’s a shame that the basics are not taught in school. This article is excellent in that it sets out the process of how to create a self-directed IRA if you feel that you want to invest in more than the standard choices in a 401. There are certainly plenty of rules to take into account and knowing what to invest in would be important. I think that you would need to feel comfortable to either learn about investing yourself or pay a financial advisor to help you.

    Great article thanks.

    Reply
    • admin says

      November 2, 2021 at 11:39 pm

      Thank you for your comment!

      Very happy to hear you found thé post interesting and educational!

      /Best

      Reply
  2. genbumon says

    December 25, 2021 at 3:00 pm

    Thanks for the information! I did not know anything amount SDIRAs before this article!

    I’m not the most financially-savvy individual and it’s sites like yours that make learning and understanding financial concepts that much easier. Planning for retirement is one of the most important parts of life and the vast amount of information and options is daunting for the average consumer. Thanks for taking the time to explain SDIRAs and how to use them.

    Reply
    • admin says

      December 25, 2021 at 8:42 pm

      Thank you! Much appreciated comment!

      We are very happy to hear that you have found value from our site!

      /All the best

      Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Trending from blog

  • Central Bank Digital Currency in USA – Is it being introduced?
  • How to Protect Your 401k From a Market Crash | Some Tips!
  • What the Bible Say About Retirement? | Gold & Silver IRAs?
  • Where do wealthy people invest their money?
  • How To Write a Retirement Speech | 6 Tips To Get You Started

Important pages

  • 401k to Gold IRA Rollover Guide | 5-Steps
  • Our #1 Recommended Gold & Silver IRA Solution
  • Avoid Gold Scams! | (7-Minute Read)
  • Top-5 Gold IRA Companies 2023
  • 2023 Buying Guide (gold & silver for any budget)
  • How To Invest In Bitcoin – From Your Retirement Account
  • How to avoid Bitcoin Scams
  • 401k to Gold IRA Rollover Guide | 5-Steps
  • Our #1 Recommended Gold & Silver IRA Solution
  • Avoid Gold Scams! | (7-Minute Read)
  • Top-5 Gold IRA Companies 2023
  • 2023 Buying Guide (gold & silver for any budget)
  • How To Invest In Bitcoin – From Your Retirement Account
  • How to avoid Bitcoin Scams

Useful Links

  • About Us
  • Contact Us
  • Affiliate Disclaimer
  • Privacy Policy

Gold Retired © 2023 | All Rights Are Reserved

  • See #1 Recommended Gold & Silver Firm