A self-directed IRA (SDIRA) is an Individual Retirement Account that allows you to invest in alternative assets beyond the stocks, bonds, and mutual funds offered by standard brokerages.
What Makes It Self-Directed?
The term \"self-directed\" means you — not a fund manager or broker — choose the specific investments. The custodian administers the account and ensures compliance, but investment decisions are yours.
What Can a Self-Directed IRA Hold?
- Precious metals — physical gold, silver, platinum, palladium
- Real estate — rental properties, commercial real estate, raw land
- Private equity — shares in private companies
- Tax liens — local government tax lien certificates
- Promissory notes — private lending
- Cryptocurrency — Bitcoin, Ethereum (at some custodians)
Self-Directed vs Standard IRA
| Feature | Standard IRA | Self-Directed IRA |
|---|---|---|
| **Investment options** | Stocks, bonds, ETFs, mutual funds | All of the above plus alternatives |
| **Custodian type** | Standard brokerage | Specialized SDIRA custodian |
| **Control** | Choose from menu | You direct all investments |
| **Due diligence** | Fund managers research | You are responsible |
| **Fees** | Often lower | Higher due to complexity |
Prohibited Transactions
The IRS forbids certain transactions within a self-directed IRA:
- Self-dealing — you cannot buy metals from yourself or sell metals to yourself
- Disqualified persons — transactions with your spouse, parents, children, or entities you control are prohibited
- Personal use — you cannot use IRA assets for personal benefit before distribution
- Violating these rules can disqualify your entire IRA, making the full balance immediately taxable