Definition

What is a self-directed IRA?

The Short Version(Quick Answer)

A self-directed IRA (SDIRA) is a retirement account that allows investments beyond stocks, bonds, and mutual funds. You can hold alternative assets like physical precious metals, real estate, private equity, and more. The 'self-directed' means you—not a fund manager—choose the investments, while an IRS-approved custodian handles administration and compliance.

The Ledger

Key Facts

  • Self-directed IRAs allow investments in gold, real estate, and private equity.
  • SDIRA holders direct investments while custodians handle IRS compliance.
  • Self-directed IRAs have the same contribution limits as traditional IRAs.(IRS Publication 590-A)
  • Prohibited transactions in SDIRAs can trigger taxes and penalties.
  • Not all IRA custodians support alternative investments like precious metals.

How Self-Directed IRAs Work

A self-directed IRA (SDIRA) puts you in charge of your retirement investments beyond the usual menu of stocks, bonds, and mutual funds. With an SDIRA, you can invest in other asset types like precious metals, real estate, private equity, and more — while keeping the tax benefits of a traditional or Roth IRA.

The Basics of a Self-Directed IRA

The "self-directed" label means you pick the investments, not a fund manager. Still, you need an IRS-approved custodian to:

  • Hold and run the account
  • Handle contributions and payouts
  • Carry out trades per your orders
  • Manage IRS reporting and compliance

You direct; the custodian acts. This setup gives you investment freedom while staying within IRS rules.

What Can You Invest In?

Self-directed IRAs can hold many types of investments:

  • Precious Metals: Gold, silver, platinum, palladium (IRS-approved)
  • Real Estate: Rental properties, raw land, commercial buildings
  • Private Equity: Private company stock, startups
  • Promissory Notes: Private lending deals
  • Tax Liens: Tax lien certificates
  • Cryptocurrencies: Through certain custodians

Off-limits investments include: life insurance, collectibles (except certain coins), and S-corporation stock.

Contribution Limits and Tax Treatment

SDIRAs follow the same rules as regular IRAs:

  • 2026 Contribution Limits: $7,000 ($8,000 if 50+)
  • Traditional SDIRA: Tax-deductible contributions, tax-deferred growth
  • Roth SDIRA: After-tax contributions, tax-free growth
  • Rollovers: Can move funds from 401(k)s and other IRAs with no cap

Banned Transactions

The IRS strictly bars deals between your IRA and "disqualified persons" — including yourself and close family members. You can't:

  • Buy assets from yourself or family
  • Sell assets to yourself or family
  • Use IRA property for yourself (no living in IRA real estate)
  • Take pay for managing IRA assets
  • Borrow from or lend to your IRA

Breaking these rules can void your whole IRA, triggering immediate taxation and likely penalties.

The Questions

Frequently Asked Questions

How is a self-directed IRA different from a regular IRA?

A regular IRA through a brokerage typically limits you to stocks, bonds, ETFs, and mutual funds. A self-directed IRA allows alternative investments: precious metals, real estate, private businesses, tax liens, and more. Both have identical contribution limits and tax treatment—the difference is investment flexibility.

What can I invest in with a self-directed IRA?

Permitted investments include: physical precious metals (gold, silver, platinum, palladium), real estate, private company stock, promissory notes, tax lien certificates, and certain cryptocurrencies. Prohibited investments include life insurance, collectibles (except certain coins), and S-corporation stock.

What are prohibited transactions in a self-directed IRA?

The IRS prohibits transactions between your IRA and 'disqualified persons'—yourself, your spouse, ancestors, descendants, and their spouses. You cannot buy property from yourself, use IRA real estate personally, pay yourself to manage IRA assets, or lend IRA funds to family members. Violations trigger immediate taxation and penalties.

How do I open a self-directed IRA?

Choose a custodian specializing in self-directed accounts—not all custodians allow alternative investments. Complete the application, fund via contribution, rollover, or transfer, then direct your custodian to execute purchases. For precious metals, the custodian coordinates with your dealer and depository.

Are self-directed IRAs riskier than regular IRAs?

Self-directed IRAs give you more control—and responsibility. Alternative investments may have less liquidity, more complexity, and require greater due diligence. The assets themselves vary in risk: Treasury bonds are conservative while private equity is aggressive. Success depends on your investment knowledge and research.

The Closing Word

Understand how self-directed IRAs work, what assets they can hold, and what responsibilities come with them.

Explore Self-Directed Gold IRAs
The Register

Related Topics

What is a Gold IRA?Self-directed IRA holding physical precious metals
Gold IRA CustodiansChoosing the right custodian for your SDIRA
IRA Rollover GuideMoving funds into a self-directed IRA
Self-Directed IRA HubComplete guide to precious metals in SDIRAs

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