When it comes to investing for your retirement, a diversified portfolio that has assets with a proven track record of growth and high returns is the best way to go. A self-directed IRA is one of the options to build such a portfolio.
As the global economy continues to head towards what might be a very difficult time for investors, you need to start looking towards alternative investments beyond stocks, bonds, ETFs, and mutual funds. With the right self-directed IRA company, you can take charge of your financial future.
However, that is where the problem starts for many investors. When trying to choose the best self-directed IRA provider, there are simply too many options to consider. Without the right guidance, the chances of choosing the wrong custodian are significant.
This article will help investors who are considering opening a self-directed IRA retirement account but are not sure which type of account to go for, or which custodian they should trust.
After extensive research, six self-directed IRA custodians have been identified as viable options to take charge of your retirement accounts from 2024 going forward. Read on to learn more about self-directed IRAs before choosing the best custodian for your needs.
What Will I Learn?
- Understanding Self-Directed IRAs
- Exploring Investment Options in Self-Directed IRAs
- Best Self-Directed IRA Providers of 2024
- Choosing the Best Self-Directed IRA: A Step-by-Step Guide
- Who Should Consider a Self-Directed IRA?
- Frequently Asked Questions
Understanding Self-Directed IRAs
Before choosing the best self-directed IRAs, you need to understand more about retirement accounts, IRA funds, tax advantages of a self-directed IRA, alternative investments, and how all these things tie together to help you secure your finances.
The following are some of the key points every investor needs to understand when building the foundations of a strong and resilient individual retirement account:
Defining Self-Directed IRAs
What is a self-directed IRA? When defining the concept of IRAs, the most important factor to understand is what is meant by “self-directed.”
You are probably familiar with 401(K)s and other types of retirement accounts. However, a self-directed IRA differs from all of them because you, the investor, have a lot more say in how the account is managed. You are in the driving seat when it comes to deciding which alternative investments to diversify your funds into.
While financial advisors are available to guide you, with a self-directed IRA, due diligence, choice of alternative investments, and the final decisions on all account-related issues lie with you. There are not many retirement accounts that can offer such a hands-on experience in managing long-term investments.
You can enjoy trying out new investment options besides stocks, ETFs, and mutual fund investments. IRS guidelines and your financial advisor will help you avoid any alternative investments that are listed as “prohibited transactions,” allowing you to explore precious metals, cryptocurrencies, and many other unique investment options.
Traditional vs. Self-Directed IRAs
A traditional IRA offers limited investment options because the companies that provide these often do not have the infrastructure to hold alternative investments. This means your retirement account will often rely on a handful of assets, which is very risky in times of such unpredictable market volatility.
Reliable self-directed IRA companies can expand your reach because they have the expertise, knowledgeable staff, and the capacity to offer you a wider selection of investment options.
You can enjoy the best of both worlds by setting up a traditional self-directed IRA that will allow you to invest in traditional assets as well as other alternative asset classes. This means you keep the tax advantages of a self-directed IRA while exploring assets that can bring you higher returns.
Benefits of a Self-Directed IRA
If you are considering many different options for your retirement account, you may want to look at some of the benefits of investing in a self-directed IRA. There is a reason why some of the most experienced investors consider this a great way to save for your retirement.
Consider the following five advantages of opening a self-directed IRA with the right custodian:
Greater Control and Flexibility
The financial markets can be very unpredictable. One minute your mutual funds are doing very well before they suddenly start struggling.
In such a volatile environment, you need to have as much control and flexibility as possible. A self-directed IRA can give you that. You can choose your investments and decide when to buy or sell to give yourself the best chance for success.
Paying taxes is something every investor loathes. It can be very frustrating to watch as the IRS reaches into your savings account to take away a huge chunk of your returns.
However, with a self-directed IRA, you can choose from a variety of tax-free and tax-deferred retirement accounts that will minimize the impact of having to pay income taxes.
Possibilities of Higher Returns
When you diversify your retirement account properly, you will have the chance to enjoy high returns while minimizing the risk.
Alternative investments have the opportunity to grow much faster than traditional asset classes. Many seasoned investors diversify a portion of their savings towards alternative investments such as precious metals.
More Investment Options
While retirement accounts such as 401(K)s are tried and tested, they offer a limited number of alternative assets for investors.
You will only have a handful of stocks, mutual funds, bonds, and EFTs to choose from. That is why you should consider investing in a self-directed IRA to avoid missing out on a variety of asset classes that may be doing well on the market.
Estate Planning Benefits
In the event that you pass on before getting a chance to liquidate your self-directed IRA, your beneficiaries will be able to inherit your estate with all your investments without the need to pay a huge amount of taxes. This makes self-directed IRAs a great way to leave a lasting legacy for your children.
Risks and Challenges of Self-Directed IRAs
As with all types of investment options, self-directed IRAs have some risks and challenges that you need to be aware of. However, instead of being afraid of these risks, all you need is to understand how they impact self-directed accounts so that you can better manage your portfolio.
The following are four of the most common challenges that investors face when they choose a self-directed individual retirement account:
Higher Transaction Fees
The fees that a self-directed IRA custodian will charge you may be a lot higher and have a complicated fee schedule compared to a traditional IRA. This is usually due to the added complexity of administering a self-directed IRA and the need for specialized infrastructure.
Your investment options may also require storage, as is the case with precious metals. This will come with added costs that make self-directed IRAs a more expensive option.
Greater Potential for Fraud
Self-directed IRAs, especially those in the precious metals and cryptocurrency industries, are the hunting ground for criminals and fraudsters. Many investors have been fooled by such individuals and have ended up losing a lot of money.
However, with some due diligence and a reliable self-directed IRA company, you can avoid becoming a victim of these criminals, and enjoy the benefits of having a self-directed IRA.
While having greater control of your self-directed IRA is a great thing for any investor, it also comes with its share of responsibilities. You will have to dedicate a lot more time to researching than you would if you simply put your money in a 401(K).
Self-directed IRA custodians cannot make investment decisions for you. If your investment collapses and you lose a lot of money, you will have no one to blame but yourself. This means a lot of due diligence is necessary before making any transactions.
Lack of Liquidity
Alternative asset classes are not as easy to liquidate compared to stocks and bonds. If you find yourself faced with an emergency that requires quick funds, you may find it difficult to offload your assets in time.
Your investment may also be subject to various self-directed IRA rules such as those that do not allow distributions before you reach the age of retirement. In such cases, making any withdrawals may come with very severe penalties from the IRS.
Exploring Investment Options in Self-Directed IRAs
The main reason why so many investors are attracted to self-directed IRAs is because they allow access to both traditional and alternative investments. Being able to spread your retirement account over so many different asset classes reduces the level of risk you face in the event of a market crash.
If you partner with one of the best self-directed IRA custodians in 2024, you will have access to the following common and alternative investment options:
Common Investment Options
Most self-directed IRA funds are invested in these three main types of investments:
Mutual Funds, Stocks, and Bonds
If you have a low-risk tolerance and you are looking for investments that have been tried and tested, you should consider investing in mutual funds, stocks, bonds, and ETFs. The stock market is a place where you can grow your self-directed IRA accounts over time if you make the right financial decisions.
However, you must keep in mind the inherent volatility of stock markets, especially these days with the world going through a period of financial uncertainty. You need to keep an eye on global events to remain updated on how the markets are performing.
If you want to invest in something that is guaranteed to give you good returns in the long run, opening a real estate IRA is a good option. By investing in property using a self-directed IRA, you can directly pick and choose the properties you want to invest in.
This is a great way to invest in real estate while enjoying the tax benefits of a self-directed IRA. A real estate IRA also gives you a greater amount of control over your investment options. However, it can be a pricey investment that is sometimes subject to unpredictable market fluctuations. You need to research well before putting any money into such investments.
In times of global crisis and economic uncertainty, individuals usually turn to precious metals investment as safeguard option. As such, it is no surprise that the COVID-19 pandemic triggered an increase in the demand for gold.
You can diversify a part of your self-directed IRA portfolio to gold, silver, and other precious metals so that if the markets take a huge hit, you will have some protection. A self-directed precious metals IRA is a great way to protect your financial future while experimenting with other alternative investments.
Alternative Investment Options
Recently, three types of alternative investments have been trending among self-directed IRA investors. If you want to become a part of this growing industry, the following are some of the investments you should be focusing on:
The crypto market indeed took a huge hit in 2023. Many investors have lost confidence in this emerging market and this has seen the price of many of the biggest crypto assets, such as Bitcoin and Ether fall to record lows.
However, many people still believe that crypto is still the future of global currency. Thanks to the recent crypto meltdown, you can buy these digital assets at very low prices. If the price begins to rise again in the future, which many people believe it will, you will have set yourself up for huge returns to your self-directed IRA accounts.
With private equity, you can pick and choose a handful of privately held companies to invest in if you believe the business is likely to do well. By choosing private equity companies not listed on the stock market, you can avoid the hustle and bustle of the financial services industry while still enjoying the tax advantages offered by self-directed IRAs.
Investing privately is also a great way to get in on the next big thing before the public hears about it. With the right financial advisor backing you, you can even invest in a private equity trust that will allow you to be a part of a handful of unlisted companies that have shown good potential for growth.
ESG stands for Environmental, Social, and Governance. Companies that have high ESG ratings are becoming increasingly popular among investors. Focusing your private equity investments on such companies is a great way to ensure that you are putting your money into a business that cares about the environment and has a great chance of being supported and succeeding.
Best Self-Directed IRA Providers of 2024
With so many self-directed IRA companies offering their services to investors, it is not easy to choose the best option for your needs.
However, after a lot of research and due diligence, the following six custodians are good options for 2024 investors:
1. Alto: Low Fees and User-Friendly Interface
Established in 2018, Alto IRA has quickly become one of the best self-directed IRA companies in the country. It is the kind of company that is well-suited to investors who are looking for a less complicated way to open and manage their self-directed IRA accounts.
If you are looking for a streamlined investment experience, Alto IRA has the staff and technology to deliver.
Key Features and Benefits
The most impressive thing about Alto IRA is the amazing user-friendly interface. Usually, when it is your first time experimenting with self-directed IRAs, you may find the industry to be complicated and intimidating.
However, once you get to the Alto IRA website, you will find it easy to navigate from one feature to another. Even the account setup process has been streamlined to help you create and activate your self-directed IRA account in very little time.
The custodian is also very popular among crypto enthusiasts who are looking for ways to invest in cryptocurrency using self-directed IRAs. Alto IRA has more than 200 different types of digital assets for you to choose from and is ready to provide you with a wide range of storage solutions.
However, you should know that Alto is a relative newcomer in the self-directed IRA industry. As such, it still has a lot to do to prove that it can be a reliable custodian. Thus far, the company has done very well, which is why it is widely regarded as one of the best self-directed IRA custodians for 2024.
Fee Structure and Commissions
Some investors find Alto IRA’s fee structure to be a bit overly complicated. However, once you understand how everything works, you will find that this custodian actually charges very low fees.
Investors have a choice between two price tiers; the Starter plan and the Pro plan. Each price tier is customized to suit the needs of different types of investors.
With the Pro plan, you will be expected to pay $25 per month for the privilege of being able to bring your own deal. Alternatively, you can settle for the Starter plan which costs only $10 and gives you access to a wide range of investment partners. Partner investing will cost you $10 – $50, while you will be charged $75 for private investment partners.
2. Rocket Dollar: Wide Range of Investment Options
The key to a secure retirement account portfolio is to diversify as much as possible. However, to do that effectively, you will need the right custodian to guide you. One such self-directed IRA company is Rocket Dollar.
Key Features and Benefits
If you ask many seasoned investors about Rocket Dollar, you will find that many of them regard this company as the best self-directed IRA custodian in the business. It was only established in 2018 but is already able to support a wide range of investment options.
There are also impressive features, such as “Bring your own deal,” which allows you to bypass the lengthy custodian deal review process. When you join this custodian, it will also automatically set up checkbook IRA LLC control, which is one of the things many investors expect when they create a self-directed IRA account.
Rocket Dollar even goes further and supports self-directed solo-401(k). This makes processes such as rollovers a lot more convenient and cost-effective. Surprisingly, the whole setup process can be done online in just 10 minutes!
Fee Structure and Commissions
One thing you have to know before going further is that Rocket Dollar does charge high setup fees. At a cost of $360 to set up your account, this custodian is one of the most expensive around. If you want to set up a premium account, the fee goes up to an eye-watering $600. However, it does somewhat make up for these high fees by only charging $15 per month to maintain the account.
3. Equity Trust: Comprehensive Services and Support
If you believe that the longer a company has been in the industry, the more experienced and reliable it is, then you will love the fact that Equity Trust was established in 1984. That means by 2024 it will be celebrating an impressive 40 years in the self-directed IRA industry.
Key Features and Benefits
With such a long history of providing reliable IRA financial services to investors, Equity Trust is one of the first names on the list when looking for reliable custodians. The company has over 400 specialists ready to provide comprehensive support services to investors.
When you put your faith in Equity Trust, you can rest assured that your investment will be in good hands. You will have unlimited access to a wide range of alternative assets as well as traditional options, such as stocks, bonds, and ETFs.
One of the few downsides is that Equity Trust does not offer Checkbook IRA LLC control, which is very surprising for a company of this magnitude that has extensive experience in the industry.
Fee Structure and Commissions
Equity Trust does not charge its investors any transaction fees. That means once you complete the setup process, you will be free to conduct as many transactions as you want without worrying about how much it will cost you.
On the other hand, the administrative costs of maintaining your IRA account are very high. This custodian charges from $225 to $2,250 depending on the size of your account or the number of investments you are involved in. This makes Equity Trust a lot more expensive than many other custodians that you could partner with.
4. uDirect IRA: Real Estate Investment Specialist
If you are leaning towards real estate IRA investments, uDirect IRA may be the perfect investment partner for your needs. The company got its start in the real estate IRA sector, meaning it is the best place to get all the advice you need about such investments.
Key Features and Benefits
Although uDirect IRA offers a wide range of financial services that target retirement accounts, its most impressive offering is the real estate IRA. If you have always wanted to become a property investor and believe that this is a great way to save up for retirement, you can get the best real estate notes from one of the top custodians in the business.
Once you buy the real estate property that you want, uDirect IRA allows you to hold it in a wide variety of retirement account types, such as 401(K)s, health savings accounts, SEP IRAs, Roth IRAs, and traditional IRAs.
uDirect IRA also allows Checkbook control, although you will not get any assistance with LLC formation. In terms of the variety of services, there are other custodians that may be better options than uDirect IRA. Its setup process is also not as streamlined as it should be.
Fee Structure and Commissions
Investors can expect some of the lowest fees in the industry when they partner with uDirect IRA. However, the company requires that all investors maintain a deposit of at least $325 over and above the required LLC funds.
When investing in property, you will need to have at least 10% of the value of the property in your account. Other fees you will have to pay include a setup fee of $50 and an account maintenance fee of $275 per year.
5. IRA Financial: Checkbook Control for Easy Access
Are you an avid investor in foreign currencies? IRA Financial is tailor-made for FOREX enthusiasts who want to start planning for their retirement. Founded in 2010, IRA Financial has the experience and knowledge to give you peace of mind regarding the security of your retirement funds.
Key Features and Benefits
When you choose IRA Financial, you can go beyond simply buying and selling FOREX. The custodian will allow you access to a wide range of fascinating FOREX trading tools, such as protective collars, covered calls, and married puts. Used correctly, these tools can help you realize your FOREX goals and grow your retirement account portfolio.
However, such features are meant for more experienced FOREX traders, which is why in many cases, IRA Financial seems better suited for investors who have been in the industry for a while.
The company does offer a low custodian fee and Checkbook control, which makes it an attractive option for many investors. You will also get to enjoy a wide range of online educational resources and audit protection.
Fee Structure and Commissions
The account setup process for IRA Financial is both cumbersome and very expensive. You can expect to pay around $999 just to set up your account, which most investors will find prohibitively expensive compared to similar custodians.
After the setup is complete, you will get a chance to access a wide selection of features and great benefits, but these will come at an additional cost of $400 for annual maintenance fees.
6. The Entrust Group: Emphasis on ESG Investments
The last custodian on this list is the Entrust Group. If you care about the environment and are planning to only invest in the top ESG companies of 2024, this is the right custodian for you.
Key Features and Benefits
With many years in the industry, the Entrust Group is one of the most experienced custodians you will find. When you are ready to invest in your chosen ESG companies, you will find the online portal that allows Entrust Group investors to integrate with financial planning tools such as eMoney Advisor to be very helpful.
More than four decades in the self-directed IRA industry have made the Entrust Group one of the best options for investors looking for a reliable custodian that will not let them down when it matters most. The custodian has educational courses and a broad library of online content to help new investors learn as much as they can about the industry.
While the company does not provide any Checkbook assistance, its massive range of educational tools will provide you with the necessary skills to set up your own checkbook LLC. Setting up your account on the Entrust Group is an easy online process that takes less than 10 minutes to complete.
Fee Structure and Commissions
In terms of fees, the Entrust Group is similar to many other self-directed IRA custodians in this bracket. You can expect to pay about $50 to set up your account and an annual fee that ranges from $199 to $2,299. Transactions will usually be charged at around $250 per transaction.
Choosing the Best Self-Directed IRA: A Step-by-Step Guide
How do you go about choosing the best self-directed IRA custodian when faced with so many great options? Well, you need to do it step-by-step.
You must take as much time as you need when looking for the best self-directed IRA provider because this is a long-term investment that you are making.
Consider the following five simple steps:
Identifying Your Investment Goals
You have to be very clear regarding what you want to achieve with your self-directed IRA investment. Different custodians are better suited to different types of investors.
How old are you? When do you want to retire? How much do you want to have when you start making withdrawals from your retirement account? These questions will help you evaluate your goals and direct you to the right self-directed IRA companies that can cater to your needs.
Understanding Costs and Fees
One thing you must understand is that most long-term investment options have very slim margins when it comes to growth. Any misstep could result in a loss of your returns. This is especially true when it comes to self-directed IRA custodian costs and fees.
Look carefully at what the custodians charge for their services and compare this with other self-directed IRA companies.
If the fee schedule and amounts seem too good to be true, watch out for hidden costs. A reliable self-directed IRA company is one that charges fair prices for its services and is transparent regarding all its transaction fees.
Evaluating Investment Options
As mentioned earlier, you have a wide range of investment options when it comes to a self-directed IRA. However, not all custodians can provide the type of asset classes you want.
If you are looking for unique options such as cryptocurrency, make sure the investment partners you choose have the capacity and experience to assist you.
Checking Provider Reputation and Customer Service
The Securities and Exchange Commission is always working hard to crack down on fraudulent companies that are looking for ways to defraud the public. Make sure the self-directed IRA custodian you choose is not one of these companies.
These days, it is easy to do your research and due diligence on a self-directed IRA provider before you hand over your hard-earned money. There are many online customer review platforms where you can check the reputation and level of customer service of a custodian. Trustpilot, Better Business Bureau, and Business Consumer Alliance are some great options to consider.
Considering Tax Implications
Finally, you need to remember that one of the primary reasons for opening a self-directed IRA account is to enjoy the added tax advantages.
Take time to consider all the tax implications associated with partnering with that self-directed IRA custodian. If you realize that you may end up missing out on the tax benefits necessary for the growth of your portfolio, choose another custodian better suited to your financial needs.
Who Should Consider a Self-Directed IRA?
As popular as self-directed IRA companies are these days, investing in a private equity trust, cryptocurrency, or real estate IRA account is not for everyone. There are many other IRA types out there that may help you reach your goals faster.
Therefore, you should only consider investing in alternative assets through a self-directed IRA custodian if you fall into one of the following three categories:
Experienced investors know the importance of a diversified retirement account portfolio. Spreading the risk among several different types of investments is a great way to protect your funds in this current unstable economic environment. If portfolio diversification is what you are after, a self-directed IRA will serve you well.
Do you think you know enough about the investment process to be able to take charge of your own retirement account? If that is the case, you will enjoy the level of control that is offered by self-directed accounts compared to a traditional IRA.
Long-Term Financial Planners
One of the most important things you need to understand about all individual retirement accounts, in general, is that they are long-term investments meant to help you save money for retirement. As such, you should be prepared to leave your funds sitting in the account for many years. This is true for a self-directed IRA account, regardless of which investment assets you decide to invest in.
Frequently Asked Questions
What Is a Self-directed IRA?
A self-directed IRA is a type of retirement account that allows the investor to retain as much control of the portfolio as possible.
It can hold a wide range of alternative investment asset classes, such as private equity trust funds, real estate IRA accounts, and cryptocurrencies, as well as the more traditional options such as mutual funds and stocks.
This type of retirement account also enjoys a wide range of tax advantages similar to those found in a traditional IRA or Roth IRA account.
What Are the Benefits of a Self-directed IRA?
Choosing a self-directed IRA financial plan has many advantages for the investor, such as:
- Greater control of the account and flexibility
- Enjoys a tax-advantaged status
- Estate planning benefits
- Wide selection of investment options
- Potential for higher returns
What Are the Risks Associated With Self-directed IRAs?
In some cases, a self-directed IRA can be considered a higher-risk investment when compared to traditional retirement accounts, such as a 401(K). If you decide to invest in such an account, you will have to be wary of the following risks:
- Lack of liquidity
- Higher risk of fraud
- Increased level of responsibility
- High transaction fees
How Do I Choose the Best Self-directed IRA Custodian?
Choosing the best self-directed IRA provider requires a lot of research and due diligence. You should consider the following factors before settling on a long-term investment partner for your retirement accounts:
- Tax implications
- Reputation and customer services
- Selection of investment options
- Transaction fees and related costs
- Your individual goals
What Are Some Modern-day Alternative Asset Investment Options?
If you are looking for some alternative assets to invest in through your self-directed IRA, there are many modern options to choose from, such as cryptocurrency, private equity trusts, and ESG investments. However, be sure you research as much as possible about these assets because the level of risk is often higher.
Have you been considering investing in self-directed IRAs to help secure your financial future? Many investors have enjoyed a lot of success by diversifying their portfolios in that way. There is a large number of custodians who can help you be a part of this growing trend.
However, there are also a lot of risks with this type of investment. Advice from a seasoned financial advisor and careful consideration of the custodian you partner with are very important factors that will determine how well your investments perform.
If you want to choose a safe option, any one of the six self-directed IRA custodians reviewed in this article will be a good choice for an investor ready to take charge of their financial future in 2024.