What Is a Self-Directed IRA and How Is It Different Than a Regular IRA?

What Is a Self-Directed IRA?

You may have heard about self-directed IRAs and/or real estate IRAs. But do you understand how they really work? Do you still ask yourself: What is a self-directed IRA and how is it different than a regular IRA?

The answer is simple, and the benefits of a self-directed IRA compared to a conventional regular IRA are clear once you understand it.

The annual contribution limits and tax-advantaged savings are the same for regular IRAs and self-directed IRAs.

The differences in the account structures lie within two specific benefits—what you can invest in and how you invest.

Watch this video to learn more about self-directed IRAs.

How Is a Self-Directed IRA Different Than a Regular IRA?

Benefits of Self-Directed IRAs vs Regular IRAs

  1. A self-directed IRA can invest in alternative assets that are completely off limits for regular IRAs.
  2. The IRA account owner—not an investment broker or custodian—chooses the investments for the self-directed plan.

The benefits of a self-directed IRA allow you to:

  • Invest in assets and opportunities you know and understand
  • Buy or sell investments when you decide to
  • Avoid paying capital gains on the sale of real estate investments
  • Diversify your portfolio with assets that don’t rise and fall with the stock market

Regular IRAs don’t allow you to do any of the above. You may be able to direct your broker when to buy and sell stock in your conventional IRA. But you can’t invest in alternative assets like real estate and cryptocurrency, or in a potentially promising start-up business you discovered through another investor. And while you may be able to choose some assets for your plan—your menu of investment choices is relatively small and limited to the assets that are sold and/or recommended by the brokerage firm or custodian of your account. Those assets are typically stocks, bonds, and mutual funds, perhaps some REITs, mutual funds, and annuities.

Investments Available in Self-directed IRAs

Some Popular Alternative Investments:

Some Unique Alternative Investments:

With so many different assets to choose from, the potential to earn significant income in self-directed plans can provide more income to reinvest.

Why Choose  Advanta IRA?

Advanta IRA is a self-directed IRA provider with decades of experience in the alternative investment industry. We are committed to educating and empowering our clients and other investors who want the control to choose the investments for their retirement plans. The personal but professional relationships we foster with our clients are paramount to our success and theirs. We oversee nearly $2 billion assets under management, and our clients invest with confidence, knowing that the administrative details we provide are taken care of and in compliance with the IRS.

Learn More About Self-Directed IRAs