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What is a Self-Directed IRA?

A self-directed Individual Retirement Account (SDIRA) only differs from other Individual Retirement Accounts (IRAs) in that the IRA owner has more control and flexibility when it comes to choosing investments.

VIDEO: What is a Self-Directed IRA (1:15)

Within the retirement industry, the term “self-directed IRA” is used to describe an IRA in which the custodian or administrator allows for an IRA account to go beyond the stock market and hold non-traded alternative assets. Holding alternative assets in retirement accounts requires specialized knowledge and expertise, so alternative asset custodianship has been limited to a smaller number of entities, like PENSCO, and the IRAs we custody (which hold alternative assets in addition to traditional assets) have become commonly referred to as “self-directed.” 

Some alternative asset custodians have made things more confusing by calling their IRAs things like “real estate IRA” or “gold IRA” – this is just a marketing tactic. All IRAs allow investments to grow on either a tax-free or tax-deferred basis, and it’s perfectly legal for investors to use any of these IRAs to hold any type of investment (including alternatives if the custodian is authorized to hold alternatives.)

The bottom line is that if you are choosing your investments then you are “self-directed.” If you want to go beyond the stock market and invest in alternative assets, you can work with an alternative asset custodian, like PENSCO, and open a traditional IRA, Roth IRA, SIMPLE IRA etc. What you decide to invest in is up to you!