Self-Directed IRA: The 5 Best Providers

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If you have a traditional retirement account with a brokerage, you may be limited to investments that include stocks, bonds, and funds. Financial institutions like Vanguard, Schwab, and Fidelity make the rules about which investments they offer with retirement accounts. 

You can invest in alternative assets by moving your retirement account to a self-directed IRA provider. Then, you’ll have the freedom you need to invest in real estate, gold, peer-to-peer loans, Bitcoin, and startups. All gains in a self-directed IRA are tax-sheltered if you leave the money in the account. 

Here Are The Best Self-Directed IRA Providers:

Merrill Edge

5.0
5/5

DollarFlow rating

FEES

No commissions on transfers of online stock, option trades, and ETFs

SUPPORTS

401(k), traditional IRA, Roth IRA

Main advantage: Real-time transfers to and from Bank of America account, Merrill investments can earn Bank of America Preferred Rewards benefits

Main disadvantage: Best for investors with a substantial retirement account balance

Merrill Edge’s self-directed IRA has a promotional offer of up to $600 in account bonuses for certain new investors. You must fund your Merrill Edge self-directed IRA with at least $20,000 in new assets within 45 days of opening your account to qualify for the lowest $100 bonus tier. Transfers from some other institutions that are also Merrill Edge business units won’t work for this promotion. The list of rules is long, but if you are planning to open a self-directed IRA anyway, it may be worth taking a few minutes to understand whether you can qualify for the bonus. 

Merrill Edge has earned a number of prestigious awards for their investment accounts:

  • Kiplinger’s Best Online Brokers in 2020 for User Experience
  • Institutional Investors’ Best Global Research Firm
  • StockBrokers.com’s 2020 Annual Review Best Overall Client Experience and ESG investing
  • J.D. Power 2019 Outstanding Customer Service Experience for phone support

Alto

4.5
4.5/5

DollarFlow rating

FEES

Up to $2,500 – $9, up to $10,000 – $29, up to $20,000 – $49, up to $50,000 – 99, over $50,000 – $199 + $99 for a single platform partner investment or $199 for two or more platform partner investments + $49 quarterly reporting fee + up to $499 annual reporting free based on the number of investments

SUPPORTS

SEP-IRA, IRA, Roth IRA

Main advantage: Accounts are easy to set up for first-time users

Main disadvantage: Complicated fee structure

With Alto, you can choose a Roth IRA, traditional IRA, or SEP-IRA. You can also choose whether to make direct investments (without Alto’s involvement) or use Alto’s IRA partners. Alto’s partners work with angel investing funds, crypto exchanges, real estate lending companies, and other investment opportunities. Certain investments require you to earn at least $250,000 per year or have a net worth over $1 million. You can also use Alto to invest in private deals like lending money to a friend so they can start a business or buying an investment property. 

If you choose to use Alto to facilitate an investment using your retirement funds, be careful not to accidentally create a taxable event that would cause you to lose the tax-sheltered status of your gains. A tax attorney can help you navigate the process. 

Rocket Dollar

4.0
4/5

DollarFlow rating

FEES

$360 setup fee + $15 per month + applicable investment fees

SUPPORTS

Self-directed solo 401(k), IRA

Main advantage: Low-cost platform

Main disadvantage: This is a new company, started in 2018

After transferring funds, Rocket Dollar sets up an LLC for you that’s owned by your retirement account. When you receive money or spend money, it goes through the LLC’s checkbook. It’s not possible to mix your personal funds and your investment funds. Although having an LLC in charge of investments makes staying compliant with the law simpler, you still have to be careful to follow the rules to the letter. For example, you can’t buy or sell anything that is owned by you or your business. If you need to file a 1099-R or 5500 form, Rocket Dollar helps with that, too. 

You can choose to invest in crowdfunded real estate, cryptocurrencies, precious metals, gold, or other alternative investments. Be sure to research Rocket Dollar’s investment partners before committing a portion of your retirement fund. 

With Rocket Dollar, you have complete control over your retirement accounts with an account checkbook and an account debit card.

Equity Trust Company

4.0
4/5

DollarFlow rating

FEES

Account setup for online application: $50, annual fees vary according to portfolio value and start at $205 

SUPPORTS

401(k) rollover, IRA rollover

Main advantage: Trusted company with a proven track record and wide range of investment options

Main disadvantage: Asset-based fees could be too expensive for an investor with a large portfolio

When you open a self-directed IRA with Equity Trust, you can choose from a number of investment options:

  • Promissory notes and lending
  • Stocks and funds
  • Private equity
  • Real estate
  • Cryptocurrencies
  • Precious metals
  • Foreign currencies

This company is the #1 custodian for real estate investors, so if you are interested in this type of investment, Equity Trust may be a good fit. You can transfer some or all of your assets to a new Equity Trust account. There are no limits on how many transfers you can do each year. 

This company also offers it’s clients access to on-demand educational opportunities to help you learn how to make the right investment choices. 

Strata Trust Company

4.0
4/5

DollarFlow rating

FEES

Account set-up fee: $50, Annual account fee: $95 – $250 depending on investment type

SUPPORTS

Roth, SEP, SIMPLE, and Traditional

Main advantage: Large company with a good track record and a reputation for excellent customer service

Main disadvantage: Small fees can add up fast

Strata Trust Company has over $2 billion in assets under custody. They also have more than 35,000 investors. After choosing your investments, you’ll choose the type of IRA that best meets your needs and then fund your account. The entire process is designed to be easy and straightforward. 

Based in Texas, Strata Trust Company is a subsidiary of Horizon Bank. They attempt to reduce the amount of red tape for their clients, making this type of retirement savings as simple as possible. 

What are the benefits of having a self-directed IRA?

A self-directed IRA allows you to invest in non-traditional areas such as cryptocurrency, real estate, or unsecured loans. Diversifying your retirement investments could help protect you from losses when the market changes. 

Can I roll over my current retirement accounts into a new self-directed IRA?

Yes, but make sure that your new self-directed IRA provider accepts the type of retirement account you want to roll over. 

Can I take money out of my self-directed IRA for personal use?

Yes. You may have to pay income tax and a 10% penalty on the withdrawals unless you use the money for certain things. For example, homebuyers who haven’t owned their primary residence within the past two years can take up to $10,000 from their IRA or certain 401(k) accounts without having to pay a penalty. You can also use retirement accounts to pay for higher education or unreimbursed medical bills totaling more than 7.5%-10% (depending on your age) of your adjusted gross income. You won’t pay taxes or a penalty for an early withdrawal if you become totally and permanently disabled, either. 

How much pre-tax money can I contribute to a self-directed traditional or self-directed Roth IRA?

The contribution limit for 2020 is $6,000. If you are over the age of 50, you can contribute a total of $7,000 per year. If you have a solo 401(k) plan, you can contribute up to 100% of your self-employment income, up to $19,500 if you are under the age of 50. You can make catch-up contributions to bring your total yearly contribution to $26,000 if you are over the age of 50. 

The bottom line

Self-directed IRAs aren’t the best choice for everyone. While you should have a robust retirement funding plan, it’s possible to lose money when you use a self-directed IRA. If you understand the risks and have some investing experience, a self-directed IRA could help you grow your savings much faster than traditional options. Just make sure to do your research before you invest your money. 

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