Retirement Portfolio

How Does a Self-Directed IRA Work?

Although the concept behind a Self-Directed IRA might sound simple, it doesn’t always look that way from the outside looking in. Sure, it makes sense that an IRA makes it possible for you to invest in a diverse range of retirement assets, from real estate to precious metals. But if you’re interested in setting one up, what does the process actually look like? What can you do to make sure that you go into one with your bearings? With that in mind, let’s explain the basics.

What It Means to Work with a Self-Directed IRA Custodian

One of the most common phrases you’ll hear as you research Self-Directed IRAs is that of the “Self-Directed IRA custodian.” Who is this person, and is the role like the usual job we imagine when we hear the word “custodian”? Not exactly. In this case, a Self-Directed IRA custodian is an administrator who works on behalf of the account, making sure that the paperwork goes through properly. In other words, the custodian is the third party through which you’ll work. This creates separation between your retirement assets and your personal assets, which is an essential boundary for anyone who wants to hold on to the tax-protected status of their retirement assets.

When you work with a Self-Directed IRA custodian, it means you’ll typically sign up with them, then direct them to make buy or sell orders on behalf of the IRA. For example, if you want to buy a bar of gold, you can direct them to do so. The custodian can then make the transaction happen and make sure that you store it properly in an insured approved depository, as per retirement investing rules.

What many people don’t realize is that this relationship is common. With a traditional brokerage, for example, you simply might not see that the brokerage is offering you “custodian-type” services by buying and selling on behalf of your IRA. With a Self-Directed IRA, it’s simply that this role comes to the forefront.

What Can a Self-Directed IRA Custodian Do?

Self-Directing an IRA with a custodian will mean that you should seek out an administration firm capable of offering the kinds of administration with investment classes you want to keep in your portfolio. For example, working with American IRA as your custodian will mean that you can invest in tax liens, real estate, precious metals, and more through your IRA. This isn’t something that you could do with a traditional brokerage, for example, which might limit your investment options to stocks, bonds, and pre-approved funds.

A Self-Directed IRA custodian serves to administer the account, which helps you come tax-time as well. You will have all of the necessary paperwork to execute trades, such as buying or selling, or creating a new asset, such as a loan or a note. When you do this with a well-reputed Self-Directed IRA custodian, you can have confidence that their experience and expertise will help ensure that every aspect of the investment is handled properly.

However, when it comes to investing within an IRA, the decisions are ultimately up to you. A Self-Directed IRA is there to give you the freedom of choosing which assets you put in the account. And that’s where you’ll have to do due diligence, ensuring that you know what you’re getting into before investing. After all, when you call the shots, you also have all of the responsibilities.

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