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Self-Directed IRA: Benefits, Fees & Everything You Need to Know

flik eco finance personal what is a self directed ira

A Self-Directed IRA is a retirement account that gives you more control over your investments. This type of IRA offers a number of benefits, including investment options beyond stocks and bonds, as well as lower fees than many other retirement accounts.

In this guide, we will discuss the basics of Self-Directed IRAs, including the benefits and fees associated with them. We will also provide tips on how to get started with a Self-Directed IRA.

What is a Self-Directed IRA?

A Self-Directed Individual Retirement Account is an IRA that allows the account holder to choose and invest in a wider range of assets than a traditional IRA. This type of account gives investors more control over their retirement savings, allowing them to invest in alternative assets such as real estate, private loans, and precious metals.

How Does a Self-Directed IRA Work?

A Self-Directed IRA is an Individual Retirement Account (IRA), which allows alternative investments for retirement saving purposes. Self-Directed IRAs are established by financial institutions, such as banks, brokerages, or trust companies, and they allow the account holder to make their own investment decisions.

How to Get a Self-Directed IRA

To get a Self-Directed IRA, you’ll need to find a financial institution that offers them. Once you’ve found a provider, you’ll need to open an account and fund it.

You can fund your account with cash or investments. If you choose to fund it with investments, you’ll need to transfer the ownership of the investment into the account. This process is called “rolling over” your investment.

Once your account is funded, you can start investing in anything that is allowed by the IRS. Some common investments include real estate, private mortgages, and precious metals.

What Are The Different Types of Self-Directed IRAs?

There are four main types of Self-Directed IRAs: Traditional, Roth, SEP, and SIMPLE. Each has its own unique benefits and drawbacks.

Traditional IRA

Traditional IRAs are the most common type of IRA. They allow you to contribute pre-tax dollars, which grow tax-deferred. That means you don’t have to pay taxes on your gains until you withdraw the money in retirement.

Roth IRA

Roth IRAs are similar to traditional IRAs, but they allow you to contribute after-tax dollars. That means your contributions are not tax deductible, but your withdrawals in retirement are completely tax free.


SEP IRAs are designed for small business owners and self-employed individuals. They allow you to contribute much more money than traditional or Roth IRAs, but they have stricter rules about who can participate.


SIMPLE IRAs are similar to SEP IRAs, but they’re designed for small businesses with fewer than 100 employees. They have lower contribution limits than SEP IRAs, but they’re easier to set up and maintain.

What Are The Benefits of a Self-Directed IRA?

There are a few key benefits of a Self-Directed IRA that make it an attractive investment option for many people. First, with a Self-Directed IRA, you have control over your own investments. This means that you can choose to invest in what you want, when you want, and how you want. You're not limited to the investment options offered by traditional IRA providers.

Second, a Self-Directed IRA offers tax advantages. Any money that you contribute to your Self-Directed IRA is tax-deferred, which means that you won't have to pay taxes on it until you withdraw it at retirement age. Additionally, any earnings on your investments grow tax-deferred as well. This can result in significant tax savings over time.

Finally, a Self-Directed IRA can be a great way to diversify your investment portfolio. By investing in a variety of assets, you can reduce your overall risk and potential for loss. This diversification can help you reach your financial goals more quickly and with less risk.

What Are The Disadvantages of a Self-Directed IRA?

There are a few potential disadvantages to consider before investing in a Self-Directed IRA.

First, you may have difficulty finding a custodian who is willing to hold alternative assets like cryptocurrency or real estate. This can be a challenge if you're not working with an established firm.

Second, Self-Directed IRAs typically have higher fees than traditional IRAs. This is because the custodian has to put in extra work to manage these types of assets.

Finally, there's always the risk that your investment will not perform as well as you hoped. This is true of any investment, but it's something to keep in mind with a Self-Directed IRA.

Overall, a Self-Directed IRA can be a great way to invest in alternative assets. Just be sure to do your research and work with a reputable custodian.

What Are The Best Self-Directed IRA Accounts?

There are a lot of great Self-Directed IRA providers out there. But, there are a few that stand out above the rest. Here are the best Self-Directed IRA providers, along with some details about each one:

Fidelity Investments

Fidelity Investments is one of the largest and most popular investment firms in the world. They offer a Self-Directed IRA that has no account fees and no minimum balance requirements. You can choose from a wide variety of investments, including stocks, bonds, mutual funds, and ETFs.

Charles Schwab

Charles Schwab is another large investment firm that offers a Self-Directed IRA. Like Fidelity, they have no account fees and no minimum balance requirements. They offer a wide variety of investment options as well, including stocks, bonds, mutual funds, and ETFs.


Vanguard is another large investment firm that offers a Self-Directed IRA. They have no account fees and no minimum balance requirements. Vanguard offers a variety of investment options, including stocks, bonds, mutual funds, and ETFs.

Fidelity Investments, Charles Schwab, and Vanguard are all great choices for Self-Directed IRAs. They all have low fees, no minimum balance requirements, and offer a wide variety of investment options. So, it really comes down to personal preference as to which one you choose. But rest assured that any of these three firms would be a great choice for your Self-Directed IRA needs.

What Commissions and Management Fees Come With Self-Directed IRAs?

The fees you'll pay for a Self-Directed IRA will depend on the provider you choose and the type of account you set up. Generally, there are three types of fees associated with these accounts: setup fees, management fees, and transaction fees.

Setup fees are typically charged by the provider when you first open your account. They can range from $50-$200, depending on the provider.

Management fees are usually an annual fee charged by the provider to maintain your account. These can range from $25-$100 per year, depending on the provider.

Transaction fees are charges assessed by the provider every time you make a trade or transaction within your account. These can range from $0-$75 per trade, depending on the provider.

Overall, Self-Directed IRAs can have higher fees than traditional IRAs. However, they also offer more flexibility and control over your investments. So, it's important to weigh the pros and cons before deciding if a Self-Directed IRA is right for you.

What Is The Minimum Amount Required to Open a Self-Directed IRA?

There is no minimum amount required to open a Self-Directed IRA. You can open one with as little as $100. However, most people choose to put at least $1000 into their account to get started.

What Are The Eligibility Requirements for a Self-Directed IRA?

To be eligible for a Self-Directed IRA, you must:

  • Be 18 years or older
  • Have earned income from a job or business (alimony and child support payments do not count)
  • Not have an annual income exceeding $135,000 if single or $199,000 if married filing jointly

If you meet these requirements, you can open a Self-Directed IRA at any financial institution that offers them. Be sure to compare fees and investment options before deciding on a provider.

How Much Can You Contribute to a Self-Directed IRA?

The contribution limit for a Self-Directed IRA is the same as it is for a traditional or Roth IRA. For 2022, the contribution limit is $6000 ($ 7000 if you're 50 or older).

What is The Self-Directed IRA Contribution Deadline?

The Self-Directed IRA contribution deadline is the same as the traditional IRA deadline; April 15th of the year in which you wish to make the contribution. However, there are some important things to keep in mind.

First, if you are making a contribution for the previous year (e.g., 2017), you have until April 15th, 2018 to do so. Second, if you want your contribution to be tax-deductible, it must be made before you file your taxes for that year.

For example, if you plan on contributing $5000 for 2017 and you file your taxes on March 15th, 2018, your contribution will not be tax-deductible. However, if you wait until after you file your taxes to make the contribution (on April 16th, 2018), it will be tax-deductible for 2017.

What Are Some Alternatives to a Self-Directed IRA?

There are a few alternatives to a Self-Directed IRA that you may want to consider. One option is a traditional IRA. With a traditional IRA, you will have to pay taxes on your contributions when you withdraw them in retirement.

Another option is a Roth IRA. With a Roth IRA, you will not have to pay taxes on your withdrawals in retirement. Finally, you could also consider investing in real estate outside of an IRA. This would allow you more control over your investment, but you would not get the tax benefits of an IRA.

Which one of these options is best for you will depend on your individual circumstances. If you are looking for more control over your investments, then a Self-Directed IRA may be the best option for you.

However, if you are looking for the most tax-advantaged way to invest in real estate, then investing outside of an IRA may be the better choice. Speak with a financial advisor to help you determine which option is best for you.

How Does a Self-Directed IRA Compare to a 401k?

401k plans have a number of advantages, including the ability to offer employees matching contributions and the option to invest in a wide variety of assets. However, there are also some significant disadvantages to consider, including high fees and limited investment options.

A Self-Directed IRA offers many of the same benefits as a 401k, but with far fewer restrictions. For example, you’re not limited to investing only in stocks and bonds – you can also invest in real estate, precious metals, and private equity. And because you’re not relying on your employer for matching contributions, you can save as much or as little as you want.

What Is The Difference Between a Traditional IRA & a Self-Directed IRA?

The biggest difference between a traditional IRA and a Self-Directed IRA is who manages the account. With a traditional IRA, you have a financial institution managing your account for you. They will make investment decisions on your behalf based on what they think is best.

With a Self-Directed IRA, YOU are in charge of making all investment decisions. This means that you can invest in anything that you want, as long as it’s allowed by the IRS.

When Can You Withdraw Money From a Self-Directed IRA?

You can withdraw money from a Self-Directed IRA at any time, but there are some restrictions. If you're younger than 59½, you'll generally have to pay a penalty of ten percent plus taxes on the withdrawal. However, there are some exceptions, such as using the money for certain medical expenses or higher education costs.

When Should You Open a Self-Directed IRA?

There is no minimum age to open a Self-Directed IRA, but you must have earned income from employment or self-employment during the tax year.

Is It Easy to Switch to a Self-Directed IRA?

Yes, you can easily switch to a Self-Directed IRA. You will need to find a custodian that offers this type of account and then open an account with them. Once you have done this, you will be able to move your funds from your current IRA into your new Self-Directed IRA.

Can You Lose Money With a Self-Directed IRA?

The answer is yes, you can lose money with a Self-Directed IRA. However, there are ways to minimize your risk. One way is to diversify your investments. Another way is to use a professional investment advisor.

How Much Should You Contribute to a Self-Directed IRA?

The beauty of a Self-Directed IRA is that you can contribute as much or as little as you want. There are no mandatory contributions like there are with traditional IRAs. However, if you want to maximize the benefits of a Self-Directed IRA, you should contribute as much as possible.

The annual contribution limit for a Self-Directed IRA is $6000. This means that you can contribute up to $6000 per year to your Self-Directed IRA. If you're over the age of 50, you can contribute an additional $1000 per year. This is known as a "catch-up" contribution and it's designed to help people who are closer to retirement age save more money.

Does a Self-Directed IRA Earn Interest?

Yes, a Self-Directed IRA can earn interest. The earnings are taxed at the same rate as traditional IRAs.

Do You Pay Taxes On a Self-Directed IRA?

The answer to this question is a little complicated. Generally, you don't pay taxes on the money you contribute to your Self-Directed IRA. However, you may have to pay taxes on the earnings when you withdraw them in retirement.

What is a Self-Directed IRA Rollover?

A Self-Directed IRA Rollover is a type of Individual Retirement Account (IRA) that gives the account holder more control over their investment choices. With a Self-Directed IRA, investors are able to choose from a wider range of investments, including real estate, private equity, and hedge funds.

Self-Directed IRA Rollovers have become increasingly popular in recent years, as investors look for ways to diversify their portfolios and take more control of their retirement planning.


About Jermaine Hagan (The Plantsman)

Jermaine Hagan, also known as The Plantsman is the Founder of Flik Eco. Jermaine is the perfect hybrid of personal finance expert and nemophilist. On a mission to make personal finance simple and accessible, Jermaine uses his inside knowledge to help the average Joe, Kwame or Sarah to improve their lives. Before founding Flik Eco, Jermaine managed teams across several large financial companies, including Equifax, Admiral Plc, New Wave Capital & HSBC. He has been featured in several large publications including BBC, The Guardian & The Times.

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