Best self-directed IRAs

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Published on October 29, 2024 | 5 min read

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If you’re looking to use your retirement account to get in on the alternative investments boom, you’ll need to open a special kind of account known as a self-directed IRA, or SDIRA. These accounts allow investors to hold assets such as real estate, precious metals, private equity and cryptocurrency. But be sure to watch out for high fees and other risks before opening an account.

These are some of the best self-directed IRA companies to consider.

What is a self-directed IRA?

A self-directed IRA is a type of IRA held by a custodian that allows investors to purchase certain investments that aren’t permitted in a traditional IRA. These investments include alternatives such as real estate, private equity, precious metals, cryptocurrencies, tax liens and more.

They often come with greater risks than more traditional investments, such as stocks, bonds, mutual funds and exchange-traded funds (ETFs). They’re typically less liquid and may come with higher fees. Only experienced investors should consider investing directly in alternatives through a self-directed IRA.

Top self-directed IRAs

IRA Financial

IRA Financial was founded in 2010 but has quickly grown in popularity, with more than 24,000 clients who have invested over $3.2 billion in alternative assets, according to the company. Investors will find one of the simplest pricing plans in the industry for its basic self-directed IRA, with no setup fee and an annual cost of $460.

You also won’t pay transaction fees or fees based on the amount of assets you have with the firm, which is often the case at many other SDIRA providers. You can use a traditional or Roth IRA to get started, as well as a SEP IRA, SIMPLE IRA, education savings account or a health savings account (HSA).

If you’re interested in self-directed IRAs, IRA Financial is a great place to get started.

Rocket Dollar

Rocket Dollar is another solid option for those looking to open a self-directed IRA. The company keeps fees fairly simple with a one-time setup fee of $360 for the self-directed IRA and then a $30 per month subscription fee. Other accounts, such as the solo 401(k), come with a higher setup fee of $600.

You won’t pay fees based on the level of assets you have at Rocket Dollar, however, which could make it a good option for investors who are rolling over large accounts from other providers. The setup and subscription fees also decline when you open additional accounts.

Alto

Alto offers investors a straightforward fee structure based on the amount of assets they have with the firm. You’ll pay $37.50 per quarter if you have less than $30,000 with Alto, but that jumps to $100 per quarter once you’re above the $30,000 mark.

Alto also offers a crypto IRA that is integrated with Coinbase, so you’ll have access to more than 200 cryptocurrencies to trade. However, there is a 1 percent transaction fee on all trades.

Alto provides access to alternative investments through its partners’ platforms. You’ll pay a $10 processing fee for each investment made through one of Alto’s integrated partners and a $75 fee for private investments outside the marketplace or partner platforms.

Equity Trust Company

Equity Trust is one of the most experienced companies when it comes to self-directed IRAs, which it has been offering since 1984. The company offers a variety of different accounts, including traditional and Roth IRAs, SEP and SIMPLE IRAs, solo 401(k)s and more.

You’ll be able to invest in alternative assets, as well as traditional investments such as stocks, bonds and mutual funds, which isn’t possible with all SDIRA custodians.

The fees do come in on the high side, however, and there are many different types. The account application costs $50 ($75 if you submit a paper application), and the annual service costs vary from $249 to $499. You’ll also pay an annual account maintenance fee that varies from $225 to $2,250, depending on the value of your account.

There are additional fees for purchasing and storing precious metals and buying and selling digital assets. If you ever decide to close your account, there’s also a $250 termination fee.

With $52 billion in assets under custody, Equity Trust is an established option, but you can likely find lower fees elsewhere.

uDirect IRA

Investors who choose uDirect IRA will appreciate the relatively low fees and various accounts that are available. You’ll pay a $50 setup fee and an annual fee of just $275, well below that of most other providers. There are some other fees you may encounter, such as storage fees for precious metals and crypto trading fees, but they’re reasonable. There is also a $325 minimum balance requirement.

You can open a number of different self-directed accounts, including traditional and Roth IRAs, SEP and SIMPLE IRAs, HSAs and solo 401(k)s.

The flat fee might make uDirect a good choice for investors with large balances because you won’t be charged based on your account value. The platform’s founder came from the real estate industry, so real estate investors may find that its offering suits their needs best.

Who should open a self-directed IRA

A self-directed IRA may be a good idea for experienced investors who are interested in holding nontraditional investments in their retirement accounts. Alternative investments can be more complex and less liquid, and can come with higher fees compared to traditional assets, so they’re not a great fit for everyone.

It’s also worth noting that many of these so-called alternatives can be accessed through traditional securities, such as mutual funds and ETFs. Real estate investment trusts (REITs) can offer exposure to physical property, while gold ETFs and Bitcoin ETFs offer exposure to precious metals and crypto assets. These funds can be held in traditional IRAs, which are available through most brokers for no annual fee, no transaction costs and limited fund expenses.

Self-directed IRA pitfalls

Many self-directed IRA providers highlight the advantages of investing in alternative assets and the return and diversification benefits that they can provide. But there are also risks to consider before putting too much of your retirement portfolio into alternatives. Here are some to be aware of:

Low liquidity: Alternative investments — such as physical real estate, art and private equity — can be difficult to sell quickly. If you were to have an immediate need during retirement, it would be tough to raise cash by selling one of these assets.
High costs: Self-directed IRAs often come with high annual costs, and the investments may have additional fees that you’ll have to pay. An IRA that holds traditional investments is often available for free through a broker.
Concentration risks: A self-directed IRA could end up with too much exposure to a single asset, increasing the portfolio’s concentration risk. You’ll want to make sure you have other retirement assets besides a self-directed IRA.
Fraud: The Securities and Exchange Commission issued an investor alert about the risks of self-directed IRAs, including fraud. The SEC says to be aware of fake custodians offering to take your money, as well as fraudulent investments being offered through legitimate custodians.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.