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If you’re investing for retirement and want to take advantage of some tax advantages, investing with an IRA is a smart move. But regular IRAs generally limit your investment options to traditional investments like stocks, ETFs, and bonds.
For investors who want to dabble in alternative assets while enjoying the tax advantages of an IRA, you need a self-directed IRA (SDIRA). But there are many self-directed IRA providers, each with different assets, fees and rules available.
That’s why we cover some of the best Self-Directed IRA options you can use to invest in multiple asset classes while maximizing your tax efficiency.
What is a Self-Directed IRA?
A self-directed IRA is an IRA in which the custodian allows you to invest in a wider range of alternative assets than a regular IRA.. This means that you can invest in assets such as artwork, cryptocurrencies, fine wine, real estate and many other alternatives at your discretion. Plus, you still get the same tax benefits as a traditional IRA, along with the same contribution limits.
The selling point of SDIRAs is that you are in full control of your operations and have more options. But that also means you don’t get any investment advice from the custodian. In addition, self-directed IRAs allow you to invest in more volatile assets, such as private equity and other speculative investments. This makes them a better choice for experienced investors who want to explore alternative investments, not new investors who are still building their nest eggs.
The best self-directed IRAs
If you’re ready to diversify into alternative investments within your IRA, the following SDIRA providers are some of the most flexible and cost-effective options you can use.
Alto IRA is one of the most popular alternative IRA options out there, largely due to its low fees and ease of use. It lets you open a Traditional, Roth, or SEP IRA and invest through more than 75 investment partners for categories like:
These investment partners have different investment requirements, but many start between $100 and $1,000. However, some assets are only available to accredited investors.
But HighIts main selling point is its low rates. Their starter plan is only $10 per month, or $100 per year if you pay annually. The other main fee is a $10 fee every time you make a trade with a partner. But for Alto CryptoIRA, the crypto-specific plan, you don’t even pay account fees and only pay a 1% trading fee.
Overall, this simple fee structure helps simplify your life. And Alto also makes opening an account fairly simple, whereas some self-directed IRA providers require you to open an LLC for you to invest. This makes Alto IRA a bit more limited than other companies on our list. However, it shines in ease of use and affordability.
2. Rocket Dollar
If you want even more control over the assets you invest in or invest through a single (401k), Rocket Dollar is one of the best self-directed IRAs out there. It actually creates an LLC for you to invest in and gives you control of the checkbook, meaning making an investment is as quick and easy as writing a check or sending a wire transfer. And it even has a “bring your own deal” option where you can find and invest in your own deals with the help of the Rocket Dollar team.
Like Alto, Rocket Dollar also partners with alternative investment platforms such as cryptocurrency exchanges, renewable energy companies, lending marketplaces and crowdfunding sites.
For pricing, Rocket Dollar has two plans: Silver and Gold. Silver costs $15 per month and has a $350 setup fee, and this plan will work for most investors looking for alternatives. The Gold plan offers LLC setup support, some tax preparation help, and priority support, but costs $30 per month and has a $600 setup fee.
3. Capital trust
Equity Trust is another leading self-directed IRA provider that allows you to invest in a variety of assets including precious metals, crypto, peer-to-peer lending, and real estate. But you can still invest in more traditional securities like mutual funds, stocks and ETFs for a truly diverse portfolio.
This SDIRA provider has also been in business for over 45 years and has $34 billion in assets under management, so it has a proven track record and thousands of clients. In contrast, many newer self-directed IRA companies are very beginner-friendly, but don’t have the same track record or size.
And Equity Trust also lets you open solo 401(k)s, SEP IRAs, and even other tax-advantaged accounts like HSAs. It also uses a fee schedule that varies based on your total account balance. Accounts up to $14,999 pay $225 in annual fees and there is a $50 online application fee. You don’t pay transaction fees like you do with some SDIRA providers.
4. uDirect IRA
uDircect is another self-directed IRA provider that also provides checkbook control like Rocket Dollar. And it is best known for its real estate investment offerings, including individual offerings, land, REITs and real estate notes. It also allows you to invest in other assets as you have control of your checkbook and complete discretion over your account.
If you want low and simple fees, uDirect is also a good option. It charges $275 per year and a one-time $50 setup fee. There is also a minimum account balance of $325. Crypto trades have a 1% fee as Alto up to $10,000, but the fees drop the larger the trades.
You may also pay various storage fees for gold and silver depending on the total value. However, uDirect has a fairly low fee overall, especially for larger account balances.
5. Pacific Premier Trust
With $15 billion in assets under management, Pacific Premier Trust is another big player in the self-directed IRA space. It is actually a division of Pacific Premier Bank, which has over 30 years of experience. And like Rocket Dollar and uDirect, you get control of the checkbook for the most control possible.
The firm focuses somewhat on real estate and private equity, but according to its website, its team has experience with nearly 42,000 alternative assets. And you can still invest in stocks, bonds, and ETFs if you’re short on alternatives.
The main downside to Pacific Premier Trust is that it charges 0.30% annual fees for accounts up to $1 million. But it emphasizes customer service and allows you to work closely with Pacific Premier Trust IRA experts if you need help placing trades and making sure investments are IRA compliant.
Pros and Cons of Self-Directed IRAs
- You can build a diverse portfolio of alternative assets while still benefiting from tax-advantaged accounts.
- The newer SDIRA platforms are very easy to use and have low fees.
- Working with an SDIRA platform can help you avoid potential IRA penalties and prohibited transactions.
- IRAs have prohibited transactions, which can be complex and result in penalties if you make mistakes.
- Many eligible SDIRA investments are more speculative and higher risk than traditional investments.
- You must do your own due diligence.
- SDIRA platforms can be expensive for small portfolios if they have fixed annual fees.
How to Choose the Best Self-Directed IRA
Now that you know several popular SDIRAs that you can invest in, here are some of the most important factors to consider when choosing the right provider for you.
- Rates: Annual management fees can make or break an SDIRA depending on the size of your portfolio. For example, Rocket Dollar’s gold plan at $30/month is high for small accounts, but a steal for larger wallets.
- Account Options: Some SDIRA providers offer a variety of IRAs, 401(k)s, and other types of accounts under one roof.
- Simplicity: Newer companies like Alto make opening, funding, and using your self-directed IRA a breeze. Instead, options like Rocket Dollar take longer to set up, but are more flexible.
- Checkbook control: SDIRAs with checkbook control give you maximum control and accelerate how quickly you can invest.
Methodology: How we select the best SDIRAs
At Investor Junkie, our goal is to help our readers make the best possible financial decisions for their unique situations. This means that the companies on this list did not influence their inclusion or position in the article. Rather, our writers and editors research dozens of options on the market and select the best based on factors such as fees, flexibility, account options, checkbook control and more. We also highlight which SDIRA provider is best for a specific industry or function.
If you’re investing for retirement, we think having a solid portfolio of stocks, ETFs, and other long-term holdings is an excellent idea. And fixed-income investments like bonds, CDs, and dividend stocks can have their place, too.
However, if you already have a well-rounded nest egg, you may want to dabble in alternatives without giving up the tax advantages of an IRA. This is where SDIRAs are extremely useful.
Hopefully, one of the companies on our list offers the solution you’re looking for. Just be sure to keep the fees in mind and always do your due diligence. SDIRAs are not responsible for your investment performance, and many alternatives are riskier and quite illiquid. But if you understand the risks, there’s no reason why alternatives can’t find their place in the SDIRA of your portfolio.