Self-directed IRAs allow you to invest in all types of investments within your retirement account.
If you have a retirement account at a traditional brokerage firm like Fidelity, Schwab, E*TRADE or Vanguard, you’ve probably noticed that your investment options are limited to stocks, funds and bonds. This limitation is not due to some law. It is a restriction imposed by financial institutions. After all, financial institutions sell financial products.
What if you want to invest in something outside of securities on the stock market? This probably wouldn’t happen in traditional brokerage. You’ll usually have to move your money into what’s called a self-directed IRA (SDIRA).
The best self-directed IRA providers are likely to be companies separate from the financial institution where your retirement is now housed. But once you open a self-directed IRA, you’ll have much more freedom to invest in so-called alternative assets. Keep reading to learn more about how they work and the best providers available today.
Self-Directed IRA Quick Comparison
Learn how different SDIRA providers charge fees for one asset versus multiple assets under management. These fees are fees for a single asset or asset type (i.e. one property, one brokerage account):
What is a Self-Directed IRA?
A Self-Directed IRA is the trustee or administrator that allows you to use your IRA as you see fit. This means that you have the ability to invest in alternative assets. Alternative assets include gold, real estate, startups, Bitcoin, and more. The custodian is passive, meaning it does not guide or restrict your choices (as long as your investments are legal).
Along with the ability to invest in alternative assets, a self-directed IRA retains its tax advantages. Let’s say you bought a property worth $100,000 and sold it for $150,000. This $50,000 profit would typically generate a large tax bill. But in a self-directed IRA, you may not be taxed on that gain. Just like stock gains within a typical IRA, these gains are sheltered from taxes.
But you must be careful to follow the rules and not create a taxable event. It is best to work with your tax advisor when investing in alternative assets. As a side note, you can still invest in stocks, funds, and bonds with a self-directed IRA. You are not limited to only alternative assets.
Related to: These are the best retirement investment plans for the self-employed
Investing in alternative assets in the modern era
A few years ago, if you wanted to participate in alternative assets, you had to find someone who would sell that particular asset. It can be a very time consuming process. Once the deal was completed, the holding period for the investment was usually a few years because many alternative assets are fairly illiquid.
Finally, the investor is required to be an accredited investor, which means an income of $250,000 over the last two years or a net worth of $1 million, not including primary residence. If this is not enough to achieve a high target, alternative assets generally require a high initial investment that can start in the hundreds of thousands.
Then came crowdfunding and new methods of investing in alternative investments. Modernizing investment in alternative assets has reduced holding periods, lowered initial investment minimums, and no longer requires investor accreditation.
Lowering the barrier to entry for alternative investments has led to the growth of the self-directed IRA market. Using a retirement account to invest in alternative assets has become much easier than it was in the recent past.
Our picks for the best self-directed IRA providers
To set up a self-directed IRA, you’ll first need to choose a self-directed IRA provider. It takes time to set up a self-directed IRA and transfer funds from your brokerage firm. You will need to keep this in mind if you plan to invest in any alternative investments in the near future.
Talk to both your traditional IRA broker and your self-directed IRA provider about timelines and format. Here are some of the best self-directed IRAs available today.
ira financial
IRA Financial oversees more than $5 billion in assets across more than 26,000 clients. With a Self-Directed Financial IRA, you can invest in the following stocks, bonds, and alternative assets: real estate, private equity, private lending, precious metals, timber, oil/mineral rights, livestock, and more.
You can open the following account types: Traditional, Roth, SIMPLE, Inherited, SEP IRAs, Health Savings Accounts, Solo 401(k), and Coverdell Educational Savings Account (ESA). They also offer a ROBS plan.
IRA Financial charges a flat fee of $495, regardless of account size.
Read our full IRA financial review here.
Directed IRA
Directed IRA is an Arizona-based trust with over $1 billion in assets under custody and over 10,000 client accounts. According to the Directed IRA, you can use a self-directed IRA to invest in real estate, private companies, private funds, checkbook IRA/LLCs, notes, cryptocurrencies, and other alternative assets.
Directed IRA offers simple pricing, with a low annual fee of $395, regardless of your account balance or how many assets you have. There is a one-time new account fee of $50.
Stock fund
Equity Trust is one of the oldest self-directed IRA providers still in business today. It has been around since 1974 and began allowing its clients to invest in real estate through their IRA accounts in 1983. It offers a wide range of alternative investment options, including:
IRA Resources
Ira Trust Company He is the custodian of a self-directed IRA. It charges a low annual fee of $199 for the first asset ($75 for the second), so the fees don’t grow with the value of your account.
Using IRA resources, you can invest a self-directed IRA in real estate (rental properties, single and multifamily homes, commercial and international real estate, mortgage securities, and real estate investment trusts (REITs). You can also invest in private placements, stocks and shares, promissory notes, and other alternative investments.
Madison Trust Company
Madison Trust Company Chartered in South Dakota, with administrative offices in Montville, New Jersey. It allows you to hold the following assets in a self-directed IRA: real estate, promissory notes, private placements, precious metals, startups and crowdfunding.
It charges a one-time setup fee of $50, and $105 per quarter to maintain your account. The company has assets in custody of more than $4 billion as of February 2024.
Dollar rocket
Rocket Dollar differs from Alto in that you can use a self-directed solo 401(k). It will also create an LLC to invest in alternative assets. Rocket Dollar actually creates an LLC, but it’s the entity inside your retirement account through which all alternative asset transactions flow.
Once your account is set up, you can invest in a variety of alternative assets including real estate, gold, precious metals, cryptocurrencies, startups, and more. Read our full review of Rocket Dollar.
Strata Trust Company
Strata Trust is one of the country’s leading alternative investment firms. They offer a wide range of alternative investment options, including:
- Real estate
- Precious metals
- Crowdfunding
- Private equity
You can invest in each of these types of assets within a Self-Directed IRA from Strata Trust Company as well. Multiple IRA types are offered including Traditional, Roth, SEP, and Self-Directed SIMPLE IRAs.
Intrust Group
Entrust Group (TEG) She has been in this business for about 40 years. The company has more than $4 billion in assets under custody and serves more than 45,000 investors. With TEG, you have direct access to an account manager, and can access your accounts online 24/7.
Annual recordkeeping fees combine a flat fee with a percentage of total asset value for portfolios over $50,000. For example, if you have $150,000 in assets, your annual fee would be $349 ($199 per year + 0.15% for asset value over $50,000).
Read our full Entrust Group review.
Specialized shots
These are companies that offer a Self-Directed IRA but offer them for more specialized purposes. However, if you’re just looking for a specific purpose, this might suit you!
Bitcoin era
Bitcoin era It is a platform that allows you to invest in cryptocurrencies in your IRA. This has been a growing trend over the past few years, and a Bitcoin IRA combines the best of a cryptocurrency wallet and a self-directed IRA. You can invest in most major cryptocurrencies on the platform. Unfortunately, Bitcoin IRA charges very high fees compared to similar platforms. This includes an account setup fee of up to 4.99% of assets, and an annual custody fee of 1.00% of assets under management (AUM).
Read our full Bitcoin IRA review here.
iTrust Capital
iTrustCapital Specializes in investing in cryptocurrencies within your IRA and securing non-IRA crypto custodial accounts.
The company has already supported more than $14 billion in transactions. iTrustCapital allows investors to buy and sell cryptocurrencies in real-time within tax-advantaged retirement accounts (Crypto IRA).
They do not charge setup or maintenance fees, but rather a percentage of the transaction.
Read our full iTrustCapital review here.
petera
petera It is a competitor to the Bitcoin IRA and essentially does the same thing – it allows you to invest in cryptocurrencies in your IRA. The main difference is that they allow you to hold a slightly larger number of coins and tokens, and they don’t charge any setup fees or ongoing fees, versus the high setup fees of a Bitcoin IRA, and annual AUM fees. According to BitIRA, they charge a small fee on the spread when making transactions. They have additional fees for special orders, such as a wire transfer fee or a return check fee.
Read our full BitIRA review here.
Final thoughts
Alternative investments are a great way to diversify your retirement portfolio. But it’s not for everyone. There is more risk, less liquidity, and there are often fees.
You will have to weigh the returns on alternative investments with what you can get in the stock market, which has a lot of liquidity and low-cost products to invest in.
If you’re looking to diversify and have a longer time horizon, alternative investments with self-directed IRA providers may be right for you. But if you’re new to investing, opening a regular retirement account with one of the best low-cost stock brokers may be a better place to start.
methodology
College Investor is committed to helping you make informed decisions about complex financial topics like finding the best self-directed IRA. We do this by providing unbiased reviews of the best brokerage firms and retirement accounts to our readers, then compiling those picks into this list.
We chose SD-IRA accounts based on our opinions on how easy they are to use, their costs and fees, any interest rates and bonuses offered, and a variety of other factors. We believe our list accurately reflects the best self-directed IRA accounts on the market for consumers.
