5 Best Self Directed IRAs for September 2024

Mainstream brokers don’t offer SDIRAs, partly because non-traditional assets are riskier than the usual stocks, bonds, and funds comprising most IRAs. Instead, you’ll need to work with a specialized SDIRA custodian to invest in alternative assets with your retirement savings. Here are five options to consider.

Our recommendations

Best overall

Rocket Dollar

Best overall

Rocket Dollar

Fees

$360 setup fee + $15 monthly fee

$600 setup fee + $30 monthly fee for checkbook IRA

Minimum

$0

Promotion

Save up to $180 per year on monthly subscriptions and $300 on setup fees when you open multiple accounts

Why we like it:

Launched in 2018, Rocket Dollar offers a $0 opening deposit and low flat-rate fees that may attract investors with more substantial portfolios. You can choose a direct custody IRA or checkbook IRA, depending on how much control you want. There’s no preset menu of investments, so you can invest in anything the IRS allows, including a “bring your own deal” investment.

Pros & cons:

Pros:

• Low monthly fees.
• Automatically sets up checkbook control.

Cons:

• Short track record.
• High setup fees.

Best for cryptocurrency

Alto IRA

Best for cryptocurrency

Alto IRA

Fees

$0, $37.50, or $100 quarterly account fee, depending on total invested capital

 Crypto IRA has a 1% trade fee

Minimum

$10

Promotion

N/A

Why we like it:

Founded in 2018, Alto IRA offers an SDIRA for alternative assets like real estate and private equity, plus a cryptocurrency IRA with one of the largest selections of any crypto IRA on the market. Through Alto’s integration with cryptocurrency exchange Coinbase, you can access 200+ cryptocurrencies with a competitive 1% transaction fee and zero hidden fees.

Pros & cons:

Pros:

• 200+ cryptocurrencies.
• Low fees.

Cons:

• Short track record.

Best online platform

The Entrust Group

Best online platform

The Entrust Group

Fees

$50 setup fee + annual fee of $199 for one asset or $299 for two or more if the account value is under $50,000

$50 setup fee + annual fee of $199 + 0.15% for one asset or $299 + 0.15% for two or more for assets over $50,000

Minimum

$0

Promotion

Earn up to $500/year referring new clients.

Why we like it:

The Entrust Group has provided account administration services for SDIRAs and tax-advantaged plans since 1981, and its years of experience make it one of today’s most reputable custodians. The well-designed website is easy to navigate, and Entrust clients have access to a proprietary online platform for researching opportunities and conducting seamless transactions.

Pros & cons:

Pros:

• Excellent platform.
• Integrates with eMoney Advisor.

Cons:

• Complicated fee structure.

Best for real estate

Equity Trust

Best for real estate

Equity Trust

Fees

$50 to $75 setup fee + $225 to $2,250 annual fee, depending on portfolio value

Minimum

$500

Promotion

Earn up to $500/year referring new clients

Why we like it:

Established in 1974, Equity Trust has a firm footing in the SDIRA space, with $45 billion in assets and 334,000+ accounts under custody and administration. In addition to a robust lineup of alternative investments, the company’s real estate offerings include residential rentals, fix-and-flips, commercial properties, land development, and more.

Pros & cons:

Pros:

• Extensive experience as an SDIRA custodian.
• Zero transaction fees.

Cons:

• No checkbook control.

Best for foreign currency

IRA Financial

Best for foreign currency

IRA Financial

Fees

$0 setup fee + $460 annual fee

$999 setup fee + $460 annual fee for checkbook IRA

Minimum

$0

Promotion

N/A

Why we like it:

Founded in 2010, IRA Financial supports foreign currencies and dozens of alternative assets. It offers both regular SDIRAs and SDIRA LLCs. The latter comes with checkbook control, making it possible to buy and sell foreign currencies, also referred to as forex, quickly as opportunities arise. You’ll also have access to forex options with advanced order types, such as married puts and covered calls.

Pros & cons:

Pros:

• Checkbook control.
• Competitive annual fees.

Cons:

• High setup fees.

Compare the best self-directed IRA companies

Methodology

To create our list, we reviewed a dozen SDIRA custodians and selected the top five based on factors like fees, investment options, customer service, experience, and reputation.

How to pick the best SDIRA

There are several factors to consider when choosing an SDIRA custodian, including:

• Fees. It’s a good idea to compare at least three custodians to ensure fees are transparent and reasonable.
• Investment options. Confirm that the custodian supports the assets you want to invest in.
• Experience and reputation. Focus on custodians with solid track records. Research backgrounds and read online reviews to determine whether the company is reputable.
• Customer support. Look for custodians with flexible and reliable customer service.

We also recommend reviewing the SDIRA investor alert from the U.S. Securities and Exchange Commission (SEC) so you understand the risks and know the red flags to watch for.

Alternatives to SDIRAs

You don’t need an SDIRA to invest in alternative assets. Instead, you can access non-traditional investments via mutual funds and exchange-traded funds (ETFs), which you can trade through a taxable brokerage account or investing platform. For example, you can buy shares in a real estate investment trust (REIT) or a gold ETF.

However, these other avenues don’t offer the same tax benefits as nontaxable retirement accounts. Investment earnings and capital gains in non-retirement accounts are taxable in the calendar year in which they occur.

More on self-directed IRAs

What is a self-directed IRA?

Self-directed IRAs are structured like standard IRAs, with the same contribution limits, withdrawal rules, and tax advantages. However, SDIRAs let you invest in a broader set of assets than most IRAs permit, including real estate, precious metals, cryptocurrency, and private equity. For this reason, SDIRAs can offer greater flexibility, broader diversification, and higher potential returns than their conventional counterparts.

Who is an SDIRA for?

SDIRAs are not intended for investors interested in holding traditional assets like stocks and mutual funds in their IRAs. Instead, SDIRAs are for those wanting access to alternative investments like real estate, private equity, and commodities.

How does an SDIRA work?

Mainstream brokers don’t offer SDIRAs. Instead, you’ll have to go through a specialty SDIRA custodian that provides access to alternative assets.

Once you choose a self-directed IRA company, you can set up the SDIRA as either a traditional IRA or a Roth IRA. While there are a few differences between traditional and Roth IRAs, the most significant is the timing of the tax benefits. With traditional IRAs, your contributions may be tax deductible, depending on your filing status, income, and whether you or your spouse has a retirement plan at work.

Contributions and earnings grow tax-free, and then you pay taxes on withdrawals. Roth IRAs don’t offer an upfront tax break, so you can’t deduct your contributions. However, your contributions and earnings grow tax-free, and qualified distributions are also tax-free.

The contribution limits are the same for all types of IRAs. For 2024, you can contribute up to $7,000—or $8,000 if you’re 50 or older. Note that these limits are the combined maximum you can contribute to all your IRAs.

After you fund the SDIRA, you can choose the investments it holds. Unlike regular IRAs, self-directed IRAs can hold alternative assets, including real estate, cryptocurrency, precious metals, and private company shares. Keep in mind that alternative assets have complex guidelines and tax implications. Working with a financial advisor and tax professional experienced with SDIRA investing can help you navigate the process and ensure you follow the rules.

What transactions are prohibited?

The IRS frowns on prohibited transactions, including any improper use of an IRA account by the IRA owner, their beneficiaries, or a disqualified person, including the IRA owner’s fiduciary and family members.

Because an IRA is meant to benefit you when you retire, you (and other disqualified persons) are not allowed to benefit from anything the IRA does. For example, you can’t borrow money from the SDIRA, sell property to it, use it as security for a loan, or use it to buy property for personal use. Nor can you furnish goods or services for a property held in your SDIRA (e.g., you can’t fix a leaky faucet in your rental property; you have to pay someone else to do it). In other words, any action that benefits you or a disqualified person is forbidden.

The consequences for prohibited transactions are steep. There’s an initial 15% penalty tax on the amount involved, plus an additional 100% tax if you don’t correct the transaction within a set period. Moreover, a prohibited transaction could sometimes mean the SDIRA loses its tax-advantaged IRA status, with all its assets considered distributed. It’s essential to avoid prohibited transactions and self-dealing so your SDIRA can do what it’s supposed to: Help you save for retirement and grow your wealth.

Types of SDIRAs

Individuals can opt for a traditional or Roth SDIRA. For small business owners, SEP IRAs, SIMPLE IRAs, and solo 401(k)s can also be self-directed.

Self-directed IRA pros and cons

SDIRAs have a few advantages (and disadvantages) compared to standard IRAs.

How to open a self-directed IRA

An SDIRA must be held by a custodian, which could be a bank, licensed trust firm, or another entity the IRS allows to serve in a custodial capacity. Once you find a custodian, you’ll open an account, pay any one-time setup fees, and contribute funds so you can start investing.

By definition, SDIRAs are self-directed, so your custodian can’t give you any financial advice or guidance. For this reason, you’ll need to perform your own due diligence when choosing investments. Consider working with a financial advisor if you need help picking or managing your investments.

What is the cost of a self-directed IRA?

Self-directed IRAs have several fees that can add up to hundreds or thousands of dollars per year, depending on the assets you invest in, your account’s value, and your SDIRA custodian. While fees vary by custodian, here are some standard fees you might encounter:

• A one-time setup fee.
• Transaction fees.
• Asset-based fees (typically charged on a quarterly or annual basis).
• Annual account fees.
• Asset holding fees (for assets like gold that require specialized storage).

Should you save for retirement with an SDIRA?

A standard IRA provides enough investment choices for most investors and is easier to open and manage than an SDIRA. Still, if you want an IRA’s tax benefits and an SDIRA’s asset flexibility, a self-directed IRA can be a good way to save for retirement. However, it’s a good idea to work with a financial advisor and tax professional to ensure you understand and adhere to IRS rules—and avoid any issues at tax time.

TIME Stamp: SDIRAs allow for alternative investments but beware of prohibited transactions

Because they allow retirement savers to invest in alternative assets, SDIRAs offer great flexibility in terms of investment choices. To set up an SDIRA, you’ll need to choose a custodian that specializes in these accounts. Make sure to steer clear of prohibited transactions; otherwise, you’ll be subject to steep IRS penalties.

Frequently asked questions (FAQs)

How do you set up a self-directed IRA?

To set up an SDIRA, open an account with your chosen SDIRA custodian. Next, fund the account by making an initial contribution or rolling over some or all your funds from an existing retirement account. After that, you’re ready to begin researching and choosing investments.

What can a self-directed IRA invest in?

SDIRAs can hold virtually any investment except for life insurance, S-corporations, and collectibles. According to the IRS, if you invest your IRA in collectibles, the amount you invest is considered distributed in the year invested, and you may owe a 10% penalty tax on early distributions. Collectibles include alcoholic beverages, antiques, artwork, most coins, gems, metals (except for certain types of bullion), rugs, and stamps.

Can you buy real estate with a self-directed IRA?

Real estate is one of the most popular assets held in SDIRAs. You can invest in all types of real estate and real estate-related assets, from single-family homes and commercial properties to mortgage notes and raw land. By law, the real estate must be for investment purposes, not personal use.