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Self-Directed IRA: Ultimate Retirement Guide

Donny Gamble
February 25, 2022
Self Directed IRA
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You have to think about retirement at some point, and the most common form of retirement accounts are IRAs. These stand for individual retirement accounts, and they’re pivotal in helping you invest for the future, and live off of the difference in your golden years.

Investing can be tricky, and there are so many different accounts to choose from. Make no mistake, these account types are financial products, and they all come with their own pros and cons (otherwise everyone would just flock to the same type of retirement account).

But just what is a SDIRA, and how does it help you? We’re going to talk about all the different types of IRAs, what you stand to gain with a SDIRA, and how that can affect your future.

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Not That Different From a Traditional IRA

The owner of the account (you) has full control over the investments made within the SDIRA, but with a traditional IRA, the account holder may be a broker or a custodian who has been given power over the account to make financial decisions.

You will pay a custodian fee for your traditional IRA when they make transactions for you, but you will also have to pay fees for holding a SDIRA account, so either way you’re paying something to someone.

However, both accounts have similar pricing structures. This varies depending on where you go, but a traditional IRA and SDIRA may actually be the same price.

The difference is in the level of control you have over the account.  It’s worth noting that you should become comfortable with making your own investments within your SDIRA.

While a broker in a traditional IRA is nice, learning about investments and how to make smart moves with your money will extend to financial matters beyond your retirement accounts.

It should also be noted that a traditional IRA is limited to traditional forms of investments, such as stocks, bonds, and securities. Basically, paper investments.

A SDIRA can hold onto gold, palladium, silver, platinum, cryptocurrency, real estate, and other assets. This is the main difference between both account types, so if you want to invest in real estate and have it matter for your future, you should consider a SDIRA instead of a traditional IRA.

7 Kinds of IRAs to Choose From

Today we’re exploring self-directed IRAs, but it’s important to know that they’re not your only option. You can also choose from:

  • Simple IRA: Allows self-employed individuals to contribute tax-deferred income outside of their paycheck, and may be used to pay employees IRAs as well
  • Traditional IRA: Better for those in a higher tax bracket who may be in a low tax bracket upon retirement age
  • Roth IRA: Not deductible at contribution, but tax-free at withdrawal in your retirement age
  • SEP IRA: Set up for employees by the employer, and often done for self-employed individuals who still want to contribute towards their future
  • Spousal IRA: Allows you to contribute to your spouse’s IRA even if they aren’t working
  • Nondeductible IRA: Designed to help if you meet deposit limits for your IRA, but it has hoops to jump through

Then, of course, there’s all the information we have in this article about SDIRAs as well. If you have a specific tax situation that meets those of what’s been mentioned above, you might have a better time with other types of IRA accounts.

Should You Open a Self-Directed IRA?

Yes, you should open a self-directed IRA. Some say that the risks are greater with a SDIRA, and that may be true to some extent, but with the right information and research you can make intelligent contributions to your SDIRA and profit.

  • Tax Deferred: This is the main reason we’re all here: for tax-deferred investments so we can prepare for the future with today’s money. The main point is to not have to worry about taxes up front.
  • Creditor Protection: Ever run the risk of going bankrupt? As long as you haven’t exceeded $1 million in your SDIRA, it’s all protected from creditors. Your retirement doesn’t have to be in jeopardy because of unfortunate short-term financial issues. If you build it, it will be there for you when the time comes.
  • Utilize Investment Knowledge: If you know a thing or two about investing, that would all be wasted with a traditional IRA. You can use that knowledge and experience to create more wealth for the future instead of relying on stiff margins.
  • You Choose Your Investments: There’s more versatility with a SDIRA, so you aren’t just limited to stocks and bonds. However, you can still include those if you’d like, as well as other assets and forms of investment. Diversification is the strongest aspect of a SDIRA.
  • Fees: You can’t avoid this either way, but some arguments state that a SDIRA actually has higher fees than a traditional IRA. However, transactional fees may be lower, and of course it’s all subjective depending on the brokerage and custodian service you choose. Just shop wisely, and you should be okay.
  • Higher Risk: With a traditional IRA, you have someone to invest for you, and they typically know what they’re doing. Nobody can predict the market, but they likely have a pretty good track record with it. With a SDIRA, it’s all up to you, and that can be a good thing or a bad thing.
  • Early Withdrawal Fee: SDIRAs allow you to accrue wealth with your money, the whole you need money to make money principle. This is something you can’t do with a traditional savings account, but you know what you can do with a traditional savings account? Use your money whenever you want, and however you want. There’s a 10% early withdrawal fee applied to your SDIRA, unless you can validate that they are for qualified purchases (more on this later) that fit into a specific category of necessity.


Is an IRA better than a 401(k)?

They’re different plans with entirely different perks associated with them. Yes, they’re both designed for retirement, but a 401(k) means that your employer will match your contributions up to the amount that gives them a tax break.

You can use a 401(k) as an investment bin, so to speak, similarly to an IRA. However, you do have less control over a 401(k) than you with an SDIRA, which is why the latter option is usually preferred amongst anyone who wants to take their investments into their own hands.

How long does it take to set up a SDIRA?

The actual sign-up process doesn’t take long. Depending on your financial history and how you plan to use your SDIRA, it can just take 15 minutes up to an hour.

This varies from person to person. However, on the back end of things, it can take anywhere from 7 up to 21 days to actually complete the account setup process to the point that you can invest within your SDIRA.

Everything must be processed by the IRA custodian, and the time frame that it takes is all on them. Be sure to talk with your custodian’s customer service representatives to learn how you can stay up-to-date on the process and know what’s going on with your account.

How much does a self-directed IRA cost?

Self-directed IRAs actually cost more than traditional IRAs do, but the misconception here is that either of them are expensive: they’re not. It’s extremely inexpensive to maintain a self-directed IRA.

You’ll encounter annual fees or monthly fees for maintaining the account, and based on the numerous SDIRA custodians we’ve reviewed, that number will be under $400 annually regardless of how it is charged.

There are also fees that may be incurred when you buy, sell, or exchange investment assets within the SDIRA. This ranges from custodian to custodian, but you can expect around $35 per transaction, in excess of $250 per transaction depending on the size and custodian.

Can a SDIRA invest in corporations?

No. You may not invest in corporations, life insurance, or collectibles with a SDIRA, or a traditional IRA for that matter. These are seen as volatile investments, or those with no actual return.

Life insurance terms can run out, collectibles lose value and are subjective to societal changes, and corporations can go under (or can be used as a fraudulent way for you to move money out of your IRA). They are prohibited.

Can I use my SDIRA for qualified medical reasons?

While these can be subjective, medical reasons are legitimate reasons to dip into your retirement account.

Normally, you would face a 10% penalty for reaching into the funds stored here (along with taxation), but if you can show that it’s for a qualified medical reason and it is paid directly from the SDIRA, it will qualify without penalty.

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Rocket Dollar account holders have the power to invest in any asset class allowed by the IRS. Put your frozen retirement investment dollars to work for you with self-directed retirement investing, in either a solo 401(k) or IRA.

About the author 

Donny Gamble

I’m Donny. I’m a world traveler, investor, entrepreneur, and online marketing aficionado who has a big appetite to compete and disrupt big markets. I thrive on being able to create things that impact change, difficult challenges, and being able to add value in negative situations.

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