A Self-Directed Traditional IRA is the oldest, most common type of retirement plan. All you have to do to open one is be an individual with earned income—and if you want to set aside a portion for retirement with tax-deferred dollars, that’s what a Self-Directed Traditional IRA can do. The Self-Directed portion of it helps ensure that you control what goes into the account, choosing from everything from stocks and bonds to real estate as valid, tax-protected assets.

But let’s move beyond the definition and explore how one of the most time-tested styles of retirement investing can work for you.

How a Self-Directed Traditional IRA Works

A Self-Directed Traditional IRA functions like a standard IRA you might find in any brokerage. Contributions are typically tax-deductible, meaning you don’t pay taxes on the money you put in. Instead, the funds grow tax-deferred until you withdraw them in retirement. At that point, distributions are taxed as ordinary income. The key difference is the level of control you have over your investments.

With a Self-Directed Traditional IRA, however, you’re not limited to stocks, bonds, and mutual funds—which a traditional brokerage might want you to invest in. You can instead invest in a wide range of alternative assets, including real estate, private businesses, and precious metals. This flexibility allows you to diversify beyond the stock market, potentially reducing risk while maximizing growth opportunities. However, with greater control comes greater responsibility, as you have to ensure that all investments comply with IRS rules.

Investment Options Beyond Stocks and Bonds

One of the biggest advantages of a Self-Directed Traditional IRA? Those alternative investments are available to you. Real estate, for example, is a popular choice, allowing investors to buy rental properties, commercial buildings, or even raw land. Any income generated by these properties stays within the IRA, growing tax-deferred until withdrawal.

Private lending is another option. Your IRA can issue loans, secured or unsecured, to individuals or businesses. These loans often provide steady interest income, with terms you negotiate directly. You can also invest in private businesses, purchasing shares in startups or established companies that aren’t publicly traded. This approach offers the potential for high returns, though it carries added risk.

Precious metals, such as gold and silver, are another alternative. As long as the metals meet IRS purity standards and are stored in an insured-approved depository, they can be part of your Self-Directed Traditional IRA. Some investors turn to tax liens and trust deeds as well, using their retirement funds to purchase rights to delinquent tax debts or to fund real estate transactions.

Really, the choice is up to you. And that’s part of what makes self-direction so exciting.

Rules and Considerations for a Self-Directed Traditional IRA

While a Self-Directed Traditional IRA gives you more investment options, it also comes with specific rules. The IRS prohibits certain transactions, including self-dealing. That means you can’t use your IRA to buy a vacation home for personal use or lend money to yourself or family members. Violating these rules can result in hefty penalties, including the full distribution of your IRA’s funds.

Custodians play a critical role in managing Self-Directed IRAs. Unlike a typical brokerage account, where the platform handles most transactions, a Self-Directed IRA requires a specialized custodian. This entity ensures your investments comply with IRS regulations but doesn’t provide financial advice. It’s up to you to conduct due diligence on potential investments.

You can get started with a simple phone call—just give us a ring here at American IRA by dialing 866-7500-IRA and we’ll be glad to talk to you about how you can start a self-directed journey today!

A Self-Directed Traditional IRA is the oldest, most common type of retirement plan. All you have to do to open one is be an individual with earned income—and if you want to set aside a portion for retirement with tax-deferred dollars, that’s what a Self-Directed Traditional IRA can do. The Self-Directed portion of it helps ensure that you control what goes into the account, choosing from everything from stocks and bonds to real estate as valid, tax-protected assets.

But let’s move beyond the definition and explore how one of the most time-tested styles of retirement investing can work for you.

How a Self-Directed Traditional IRA Works

A Self-Directed Traditional IRA functions like a standard IRA you might find in any brokerage. Contributions are typically tax-deductible, meaning you don’t pay taxes on the money you put in. Instead, the funds grow tax-deferred until you withdraw them in retirement. At that point, distributions are taxed as ordinary income. The key difference is the level of control you have over your investments.

With a Self-Directed Traditional IRA, however, you’re not limited to stocks, bonds, and mutual funds—which a traditional brokerage might want you to invest in. You can instead invest in a wide range of alternative assets, including real estate, private businesses, and precious metals. This flexibility allows you to diversify beyond the stock market, potentially reducing risk while maximizing growth opportunities. However, with greater control comes greater responsibility, as you have to ensure that all investments comply with IRS rules.

Investment Options Beyond Stocks and Bonds

One of the biggest advantages of a Self-Directed Traditional IRA? Those alternative investments are available to you. Real estate, for example, is a popular choice, allowing investors to buy rental properties, commercial buildings, or even raw land. Any income generated by these properties stays within the IRA, growing tax-deferred until withdrawal.

Private lending is another option. Your IRA can issue loans, secured or unsecured, to individuals or businesses. These loans often provide steady interest income, with terms you negotiate directly. You can also invest in private businesses, purchasing shares in startups or established companies that aren’t publicly traded. This approach offers the potential for high returns, though it carries added risk.

Precious metals, such as gold and silver, are another alternative. As long as the metals meet IRS purity standards and are stored in an insured-approved depository, they can be part of your Self-Directed Traditional IRA. Some investors turn to tax liens and trust deeds as well, using their retirement funds to purchase rights to delinquent tax debts or to fund real estate transactions.

Really, the choice is up to you. And that’s part of what makes self-direction so exciting.

Rules and Considerations for a Self-Directed Traditional IRA

While a Self-Directed Traditional IRA gives you more investment options, it also comes with specific rules. The IRS prohibits certain transactions, including self-dealing. That means you can’t use your IRA to buy a vacation home for personal use or lend money to yourself or family members. Violating these rules can result in hefty penalties, including the full distribution of your IRA’s funds.

Custodians play a critical role in managing Self-Directed IRAs. Unlike a typical brokerage account, where the platform handles most transactions, a Self-Directed IRA requires a specialized custodian. This entity ensures your investments comply with IRS regulations but doesn’t provide financial advice. It’s up to you to conduct due diligence on potential investments.

You can get started with a simple phone call—just give us a ring here at American IRA by dialing 866-7500-IRA and we’ll be glad to talk to you about how you can start a self-directed journey today!

Interested in learning more about Self-Directed IRAs? Contact American IRA, LLC, at 866-7500-IRA (472) for a free consultation. You can also download our free guides or visit us online at www.AmericanIRA.com.