Self-Directed IRA

The Key Distinctions Between a Regular and a Self-Directed IRA

Many people who save for retirement often don’t know that they’re using what some might call a regular approach to it. What just as many people may not know that there are all sorts of retirement options available to them. The key? Understanding how to access the full range of these options, and what it means to open a “Self-Directed IRA” in the first place, will be important for understanding your full range of possibilities as a retirement investor. To that end, we’ve set about listing the key distinctions between the more old-school approach and what it means to take more control over your retirement financial destiny with a Self-Directed IRA.

What is a “Regular” IRA?

To be clear, there is no account type known as a Regular IRA. This is simply a choice of words to demonstrate how most people approach their IRA. For many people, using a retirement account happens in one of two ways: working directly with a brokerage, from which there are limited options without other arrangements, and working through an employer. For our purposes here, we can consider either approach to be a “regular” approach. In other words, these tend to be pretty popular among the population.

What is a Self-Directed IRA?

Again, a Self-Directed IRA is not a unique account type. For instance, a Roth IRA can be Self-Directed, or it can be just a Roth IRA. A Self-Directed IRA does not stand in contrast to, say, a Traditional IRA. What self-directing means is that you take control of the IRA, typically working through a custodian, to access the full range of decisions and options available to you.

With this kind of approach, you’ll work through a custodian such as a Self-Directed IRA administration firm in most cases. This custodian helps you to carry out the transactions you want to place, such as making a purchase of real estate. With a custodian, the third party can help execute these transactions, prepare the paperwork, and ensure that everything is in proper order.

Why Use a Self-Directed IRA?

Knowing these differences isn’t enough. After all, this is essentially listing how some people go about creating their own retirement plans, but it doesn’t address why. There are perhaps two key elements that convince some investors to go with Self-Directed IRAs.

The first of these elements is to exercise more direct control over what the investor uses within a portfolio. For example, let’s say you wanted to purchase real estate investments within a retirement portfolio. It can be difficult to do that with an account designed only for a limited amount of options, such as what you might get through an employer-sponsored plan. On the other hand, using a Self-Directed IRA opens up all sorts of other possibilities.

And that’s the second element to consider. The IRS specifically prohibits some retirement assets but allows many others within a Self-Directed IRA. This means that if you direct your own account, you can access a wider range of potential retirement assets which may run more in line with what you want to achieve as an investor. That list of asset classes includes real estate, some precious metals, tax liens, private companies, and more.

Using a Self-Directed IRA is an option for investors who want to take more control over their retirement future. But it does require that you know the ropes. That’s why we recommend reading more here at American IRA to get a sense of what an IRA can do. Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at