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Traditional IRA vs Self-Directed IRA

traditional ira vs self-directed ira
2 Minute Read

There is a difference between the traditional IRA vs Self-Directed IRA, and it may be greater than you think.

An Individual Retirement Account (IRA) is a tax-deferred retirement account designed for individuals to set aside money for savings each year. Earnings will be tax-deferred until a withdrawal at age 59 1/2 or later (sometimes earlier, but a 10% penalty applies).

Traditional IRA vs Self-Directed IRA

A Traditional IRA is generally overseen by a broker or investment advisor. The IRA funds are restricted to traditional investments, such as stocks, bonds and mutual funds. While Self-Directed IRAs also allow you to purchase stocks, you can also hard assets, such as real-estate, cryptocurrencies, gold and precious metals, hard-money loans, and more!

If you are interested in establishing a Self-Directed IRA, it’s important to research the organization you wish to establish your plan. IRA Financial Group allows you to open an account directly through our app. IRA Financial Group also offers checkbook control. While many traditional IRA custodians advertise that they offer Self-Directed IRAs with checkbook control, this is not the case.

Learn More: How to Transfer a Simple IRA to a Self-Directed IRA

A Self-Directed IRA with checkbook control allows you to invest in a world of investment opportunities, such as real estate, tax liens, precious metals and cryptocurrencies without custodian consent. However, when you establish a Self-Directed IRA with a traditional custodian, you are unable to make any of the aforementioned investments. You can only use your retirement funds to invest in equities, mutual funds, bonds or investments offered by the custodian.

Learn More: Real Estate Investing with a Self-Directed IRA

Self-Directed IRA with Checkbook Control

In the case of a “truly” Self-Directed IRA LLC with “checkbook control”, a limited liability company (“LLC”) is established that is owned by the IRA account and managed by the IRA account holder. The IRA Holder’s IRA funds are then transferred by the Custodian to the LLC’s bank account providing the IRA holder with a “truly” Self Directed IRA LLC.

When you establish a true Self-Directed IRA LLC. you receive complete control over your IRA funds. You no longer need each investment to be approved by the custodian of your account, as you will work with a passive custodian. A passive custodian does not approve investments or offer investment advice.

When you want to make an investment, simply write a check or wire the funds from your Self-Directed IRA LLC bank account. Ultimately, this eliminates custodian delays, which allows you to act quickly when an investment opportunity presents itself.

Read More:

Practical Ways to Buy Real Estate with Your Self-Directed IRA

Self-Directed IRA Investments

How Do Self-Directed IRAs Work? – IRA Financial Group

Get in Touch

If you have additional questions about traditional IRA vs the Self-Directed IRA, get in touch with IRA Financial directly at 800-472-0646. You can also fill out our contact form to speak with one of our specialists.

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[10:44 PM] Valerie Marszalek-Boik