What Is a Self-Directed IRA, and How Does It Work? [2025 Guide]

Most IRAs stick to the basics: stocks, bonds, and mutual funds. That’s fine for many investors, but if you’ve ever wanted to add assets like gold, crypto, or even real estate, a regular IRA won’t cut it.

That’s where self-directed IRAs (SDIRAs) come in. They work just like a traditional IRA when it comes to tax benefits, but they open the door to a much wider range of investments. Some focus on gold or crypto, while others let you buy property or other alternative assets.

If you’re new to self-directed IRAs, don’t worry; we’ll walk you through what they are, how they work, and the steps to set one up so you can start building a portfolio that fits your goals.

Table of Contents

1. How does a self-directed IRA work?
   1. SDIRA vs. regular IRA
   2. Common assets
   3. How much can you invest?
2. Who benefits the most?
3. Who shouldn’t get an SDIRA?
4. Steps to open a self-directed IRA
   1. 1. Decide which assets you want
   2. 2. Compare companies
   3. 3. Open an account
   4. 4. Fund your IRA

How does a self-directed IRA work?

SDIRAs let you build your wealth through various investments. They’re similar to regular IRAs but with a few important differences.

SDIRA vs. regular IRA

Regular and SDIRAs let you grow your portfolio while enjoying tax advantages.

Traditional IRAs allow you to make tax-deductible portfolio contributions. You pay taxes when you withdraw from your retirement account.

A nuance to note: Contributions are not tax-deductible if you have an employer-sponsored retirement plan such as a 401(k).

Roth IRAs allow you to enjoy tax-free withdrawals, including on capital gains and dividends, but you don’t get any tax breaks on this year’s contributions.

Nuance here too: Contributions are subject to income limitations, and tax-free withdrawals are subject to certain rules.

SDIRAs have traditional and Roth accounts, and they are subject to the same IRS rules as regular IRAs. The main difference with self-directed IRAs is that you can invest in alternative assets. If you want to diversify your retirement portfolio to include real estate, gold, crypto, or other alternative asset classes, a self-directed IRA might be right for you.

	SDIRA	Regular IRA
Types of IRAs	Traditional, Roth, SEP, SIMPLE, and Solo 401(k)	Traditional, Roth, SEP, SIMPLE, and Solo 401(k)
Tradable assets	Same assets as regular IRAs, plus real estate, precious metals, crypto, notes, private equity, commodities, and other alternative assets	Stocks, mutual funds, ETFs, bonds, annuities, CDs, and money market funds
Costs	More expensive	Less expensive

Some self-directed IRAs offer a basket of asset opportunities, while others focus on a specific asset class.

• For instance, iTrustCapital, one of our team’s picks for the best crypto IRAs, caters to crypto investors because it lets investors choose from more than 70 cryptocurrencies.
• Meanwhile, IRA Financial lets you choose from a broader range of alternative assets, such as tax liens, precious metals, real estate, and private equity.

Common assets

You can invest in a wide variety of alternative assets in a self-directed IRA that aren’t available in a regular IRA. Some investors prefer gold over stocks and bonds because gold is an inflation hedge. This asset also thrives on uncertainty and performed well when President Trump started to apply tariffs at the start of his second term.

If you like gold and want to accumulate it while reducing your tax bill, an American Hartford Gold IRA may be a good option. This top-rated gold IRA provider lets its customers buy IRS-approved gold bullion coins and bars with a fineness of 0.995 or higher, including American Eagles and other select coins. The company stores your gold on your behalf in an IRS-approved insurance depository of your choice.

Crypto is a highly liquid asset you’ll find in a growing number of IRAs. However, you can also invest in various illiquid assets, like real estate, hedge funds, and small businesses.

How much can you invest in a self-directed IRA?

The IRS sets limits for how much you can invest in a self-directed IRA each year. Right now, you can invest $7,000 per year in a self-directed IRA. However, there are two ways you might be able to exceed the $7,000 threshold:

1. If you are 50 years or older, you can make a $1,000 catch-up contribution on top of your $7,000 contribution. It’s best to capitalize on this extra contribution if you can because you’ll enjoy tax benefits on more of your salary.
2. The IRS raises the contribution limit. That agency regularly boosts the annual contribution limits for all IRAs.

If you qualify for a solo 401(k), your limits are higher. For 2025, you can contribute up to $23,500 per year. Investors age 50 or older can add a standard catch-up contribution of $7,500, for a total of $31,000. (These limits are for employee contributions only.)

While IRAs limit how much you can contribute each year, there’s no cap on how much you can roll over or transfer from another retirement account. Your opening balance can be far larger than the annual contribution limit.

With a self-directed IRA, the minimum you need to open an account depends on the provider and the type of investments you plan to make. Some custodians may let you open an account with a few hundred dollars, while others require several thousand. Keep in mind that setup and annual maintenance fees are common, and the real minimum is often determined by the cost of the asset you want to buy (such as real estate or precious metals).

Who benefits the most from SDIRAs?

If you’re bored with only investing in stocks and bonds, an SDIRA may be a solid resource in your retirement planning. It’s especially useful if you prefer to accumulate alternative assets like real estate, precious metals, and crypto.

Furthermore, gold IRAs have a key advantage over buying your own physical gold. The IRA providers store gold on your behalf, which allows you to focus on asset returns instead of the complexities of storing a physical asset. Reputable gold IRAs are safe and offer extra protection for your assets through their insurance policies.

Some SDIRAs, like the Equity Trust SDIRA, actively help you find hidden investment ideas. This IRA provider has a resource called WealthBridge that lets investors identify and invest in alternative asset ideas. It makes it less of a headache to get positions in private equity and other hard-to-reach investments.

Who shouldn’t get an SDIRA?

A self-directed IRA’s downsides may not be worth it for many investors.

• For instance, most self-directed IRAs have higher fees than regular IRAs: Most crypto IRAs have additional storage fees because they’re responsible for keeping everyone’s crypto safe. For instance, Bitcoin IRA assesses a 1.99% setup fee and a 2% trading fee on buys and sells. Gold IRAs tend to have similar transaction and storage fees.
• These accounts are also a bit more complex and require strict compliance with the IRS guidelines. SDIRAs cannot legally offer investment advice, unlike regular IRA providers, which can leave you with fewer resources to remain compliant with the IRS.
• While SDIRAs allow you to invest in different investments, some may not be liquid. When you need (or are required) to make withdrawals in retirement, valuing and/or withdrawing funds could be difficult
• People who want to own, store, and manage their precious metals and crypto should also look elsewhere. Gold and crypto IRAs must store those assets for you. If you buy gold, you are not allowed to ship the physical metal to your address. Similarly, any crypto you buy in a crypto IRA cannot be added to your personal crypto wallet.

Generally, I recommend more traditional investments and believe they can be used to build a diversified portfolio. A self-directed IRA is suitable for a more experienced investor who understands the asset classes they wish to invest in and the risks associated with holding those assets in an IRA.

Steps to open a self-directed IRA

Opening a self-directed IRA is similar to starting a regular IRA, but with more investment options. Here’s how to get started:

1. Decide which assets you want

Your choice of assets will narrow down providers. For crypto, iTrustCapital lets you trade a wide range of coins (with a 1% transaction fee), while BitIRA stands out for having no setup or maintenance fees. Alto CryptoIRA connects with Coinbase for in-app trading and analysis tools.

For gold, American Hartford Gold is our top pick, offering its Freedom Package with up to $15,000 in free silver for qualifying purchases. If you want more variety, IRA Financial supports metals, crypto, real estate, private equity, and more under one account.

Some investors wish to open a self-directed IRA without fully understanding the risks or potential downsides. There is very little guidance and transparency with some of the investments, so it’s up to the investor to do their own due diligence. Also, make sure the investments in the self-directed IRA are part of a diversified portfolio.

2. Compare companies

Focus on fees and custodians. Priority Gold, for example, charges a $50 setup fee, $125 annual service fee, $100 storage fee, and $35 wire fees. That’s reasonable for larger portfolios. In contrast, iTrustCapital has no annual or setup fees but charges transaction fees on crypto, gold, and silver trades.

Custodians matter, too: Priority Gold works with Strata Trust, iTrustCapital with Fortis Bank, and American Hartford Gold with Equity Trust Company. Always check fee schedules and custodian reviews before committing.

3. Open an account

Applications are usually online, though some providers accept paper forms or phone enrollment. IRA Financial makes setup easy and earns high customer reviews for its support team.

4. Fund your IRA

Link a bank account or roll over funds from an existing IRA. Minimums vary—iTrustCapital requires $1,000, American Hartford Gold $10,000, and IRA Financial has no minimum. Rollovers can also count toward the minimum and let you split funds between a regular and self-directed IRA.