While you have likely heard of it, the Self-Directed IRA is really nothing more than marketing term, it’s industry lingo; a descriptive term implying that you have control over the investments made by your IRA account, but understand that a self-directed IRA is not a legal distinction of account type. The degree in which your Traditional IRA, ROTH IRA, SIMPLE IRA, or SEP IRA can be “self-directed” really boils down to the discretion of your IRA provider. Some providers allow for investment to be made in any asset type, while others will restrict you to certain investment types.

For example, Fidelity Investments allows its customers to “self-direct” their IRA’s investments. However, these self-directed choices are limited to the investments that Fidelity has to offer, e.g. mutual funds, ETFs, Stocks/Bonds, etc. With that said, although Fidelity offers a “self-directed” or “self-managed” IRA option, I wouldn’t expect them to facilitate an investment in real estate, private equity, or any other non-publicly traded alternative assets. It’s simply not administratively feasible for them, or the many other brokerage IRA providers out there. Therefore, in order to truly self-direct your IRA you will need to find an IRA provider which allows for the investments in which you are interested in.

Some common alternative investments made by IRA accounts include:

Residential propertyCommercial property
Vacation propertyRaw land
MortgagesDeeds
Private loansTax liens
Private businessesMineral rights
Single Member LLC’sStocks, bonds, mutual funds
CurrenciesDigital assets
Precious Metals (Gold and Silver)Foreclosure properties
Land TrustsAnd much more…

The true beauty of self-directed IRA accounts lies in the investment options available. This means that investors can rely on their own investment expertise to make tax-free or tax-deferred investments in assets they already know and understand. For instance, a self-directed IRA with investments in real estate can charge rent to tenants or visitors, allow land to appreciate in value, rent commercial space to a business, fix-and-flip property, and much more. The property can also be distributed for personal use after reaching retirement age.

While most IRA providers limit investments to publicly traded securities, funds, or bank CDs/savings accounts, a self-directed IRA account empowers investors to put funds in alternative assets and realize the true depth of their investment opportunities.

Self-directed IRAs grant investors control and diversification of retirement funds, while giving them the ability to adapt to economic conditions. With ongoing stock market volatility, more investors are turning to self-directed IRAs to invest their retirement funds in what they know and trust.