Individual Retirement Accounts

Self-directed Individual Retirement Accounts (IRA) are gradually gaining popularity as a retirement investing option. Some time ago, IRAs were almost unheard of in the investment market. 

Related post: Factors to Consider Before Getting Your IRA

Self-directed IRA and traditional IRA are not similar, they are different. The investor of the self-directed IRAs is in the overall charge of all decision making. And at the same time, the self-directed accounts allow the investor to invest in a wide array of alternative investment options in addition to the traditional options, like bonds, mutual funds, and stocks. Greater autonomy is what self-directed IRAs entail, and that also is what differentiates it from the traditional retirement accounts.

So, it would be beneficial for you to maximize your savings by investing in self-directed IRAs rather than investing in traditional retirement accounts.

Go through the following benefits to understand why you should start investing in self-directed IRAs.

#1 Control Is In Your Hands

With a self-directed IRA, you have full control over your retirement investment account. The service provider will not interfere in any way on what you do with your account. And that is not possible with any traditional retirement investment account. If you want to incorporate any change in your investment at any point, you are free to do that (provided you follow the applicable Internal Revenue Service rules). 

Self-directed IRAs do not restrict you to invest in limited instruments, like bonds, stocks, and mutual funds. You can thus empower yourself to benefit more rather than your retirement plan providing company.

You get the entire control to invest in the way you think is the best, without any external interference.

#2 Freedom to Diversify

Unlike with a traditional retirement investment service provider which gives you a list of approved bonds, stocks, and funds to choose from for investing in, you can invest in any instrument as per your wish with self-directed IRAs. 

As there is no restriction, as with the traditional retirement investment service providers, you have the freedom to diversify your retirement savings in many ways.

You can invest in assets, such as

  • Real estate
  • Equity
  • Foreclosures
  • Land
  • Limited partnerships
  • Limited Liability Partnership companies
  • Trust Deeds & Mortgage Notes
  • Tax Lien certificates
  • Others

#3 Freedom to Invest in Your Best Known Assets

Self-directed IRAs allow you the freedom to divert investments in the assets you know the best. Without any constraint, you can invest in the assets you are best comfortable with. You can leverage your professional experience to build your retirement investment portfolio due to the flexibility of self-directed IRAs.

#4 Retain Tax Benefits of Your Existing Retirement Savings

If you already have a retirement account, you need not close that down. You can use those savings to invest in your self-directed IRA. And at the same time, retain the tax advantages of your already existing account.

#5 Move Faster Towards Attaining Your Financial Goals

One of the ways in which self-directed IRAs score over the traditional retirement investment accounts is by allowing you to work towards attaining your financial goals faster. You can work out your own way to put together your assets to derive the financial returns you intend to attain.

This aspect is particularly beneficial if you are late in starting your retirement investment account. In that case, you certainly cannot reach your intended financial goals with the traditional assets, like bonds, mutual funds, and stocks. A self-directed IRA is the only answer.

#6 Investing in Bitcoins

With a self-directed IRA, you can also invest in Bitcoins. Even if you invest in the cryptocurrency, you can avail of all the involved tax benefits.

Downsides of Self-Directed IRAs

There are also some downsides of self-directed IRAs in parallel to the benefits already detailed. The following some of the disadvantages, which are also the potential risks:

Fees associated with self-directed IRAs are somewhat on the higher side. Since the fees can run up to 10 percent of your investment, the returns should be in double digits for you to stay profitable. So, try to negotiate on the fees with your service provider

Although self-directed IRAs enable you to invest in a wide range of financial assets, those assets often are not liquid. Meaning, if you suddenly run out of money, you will not be able to get money out of your self-directed IRA. If you try to sell some of the involved assets, it might happen that there are no buyers; and so you will be left without liquid funds

There are also the prospects of fraudsters using self-directed IRAs as stamps of the legitimacy of their fake financial schemes. They are most likely to claim that since the IRA custodian has approved the underlying investment, that scheme is legitimate. But, custodians do assess neither the quality nor the legitimacy of any investment involved in self-directed IRAs. So, you should exercise due diligence


Self-directed IRAs are loaded with advantages as well as disadvantages. It is needless to say that to reap the advantages, you need to tactfully bypass the disadvantages. And you can do so if you do the necessary due diligence before investing in self-directed IRA. 

Nevertheless, a self-directed IRA enables you to take control of your retirement investment in your own hands. You can thus your financial security for the post-retirement phase of your life.