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.