Self-Directed IRA Guide


What is a Self-Directed IRA?

A Self-Directed IRA is not significantly different than any other IRA, however a self-directed IRA is unique because of the investment options available and the investing direction comes from you.


Many IRA custodians only allow investing in stocks, bonds, mutual funds and CDs. A self-directed IRA custodian, such as IplanGroup, allows those types of investments in addition to real estate, notes, private placements, tax lien certificates and much more.

What are the potential benefits of a Self-Directed IRA?

You are able to invest your tax-advantaged retirement dollars in investments you know and understand. 

Through the power of compounding interest, this has the potential to create lasting wealth for you and your family.

Why haven’t I heard of a self-directed IRA before?

Self-directed IRAs may seem like a recent phenomenon, but they have been around since the IRA was established in 1974.  Investing in alternatives to stocks, bonds, and mutual funds has always been allowed by the IRS (see IRS Publication 590). Self-Directed IRAs have not received large attention because many custodians who offer IRAs (banks and brokerage firms) typically offer traditional investments.

My CPA/Attorney/Financial Advisor hasn’t heard of a self-directed IRA, what should I do?

A trusted advisor who has not heard of self-directed IRAs is not an entirely uncommon experience.

If your advisor is not familiar with self-directed IRAs, they can contact a Custodian, like IplanGroup for more information.

Can I be assured that self-directed IRAs are allowed under IRA rules?

As long as you follow relevant rules from the IRS the answer is yes.

There are specific rules regarding IRAs, and in particular self-directed IRAs, that you should be familiar with before making any financial decisions.

There are certain types of transactions that you cannot perform through an IRA. For more information, please contact us.

How does a Self-Directed IRA investment work?

Investing in alternative assets with a self-directed IRA can be similar to investing in those same assets outside of an IRA. There are several primary differences and important rules to be aware of, but follow these 5 steps and you could be on your way to your first (or next) self-directed IRA investment.

5 Step Self-Directed IRA Investment Process


1. Identify Your Potential Investment & Perform Due Diligence 

A self-directed IRA gives you the freedom to invest in a wide variety of options, such as real estate, notes, tax liens, precious metals and more. As a self-directed investor, it is important to do your homework and perform due diligence on every investment opportunity you identify. Please consult with your tax attorney or financial professional before making any investment decisions.


2. Request Funds & Direct Your Investment

To initiate an investment, complete a Direction of Investment (DOI) form and provide it to your IRA custodian. The DOI contains instructions and details about the investment, such as the amount to invest, where to send the funds, and if there is documentation that requires signing. Supporting documentation will also be required to verify the investment.


3. The Custodian Processes Your Investment 
Your Custodian processes your Direction of Investment form and sends funds, per your instructions, to complete the investment purchase. After the purchase and closing is final, your IRA owns the asset.


4. Management of the Investment within Your IRA
This step continues as long as your IRA owns the investment. All expenses related to the investment must be paid from the IRA and all income and profits related to the investment must be returned directly back to the IRA. All funds must flow to and from the IRA and, in doing so, are tax-advantaged.


5. Act on Your Exit Strategy & Plan Your Next Steps

The lifecycle and direction of your self-directed IRA investment is up to you. If you plan on selling an asset, complete a Sale Direction of Investment form and include supporting documentation. Your IRA Custodian will process the sale transaction, per your instructions, on your IRA’s behalf. The asset is removed from your IRA in exchange for the proceeds of the sale.You may also distribute cash or assets from your account by completing a Distribution Request form or may elect to hold the asset to pass it on to a beneficiary after death to help create a tax-advantaged legacy. As always, please consult with a tax attorney or other financial professional before making any financial decisions.


Are my Self Directed IRA investments guaranteed?

No, investments held within your self-directed IRA are not guaranteed. Every investment (whether using a self-directed IRA or not) involves risk, including possible loss of principal.

Are self-directed IRAs for everyone?

Self-directed IRAs are not for everyone. They are for people who want true diversity in their portfolio, who want to be in control of their financial future and for those who want to create wealth using their knowledge of investments outside of stocks, bonds, or CDs.

There are many Self Directed IRA Custodians available, You can get started with iPlanGroup by clicking here

Please note: We do not provide tax or legal advice. This guide is for informational purposes only.