Disclosure: Our content isn't financial advice. Do your due diligence and speak to your financial advisor before making any investment decision. We may earn money from products reviewed. (Learn more)
A self-directed IRA (or SDIRA) is a type of retirement account that permits a myriad of diversified assets not allowed in other IRAs. In addition, a self-directed IRA is solely managed by you the investor. Although under federal law, you must have a custodian who acts as an administrator over this type of retirement vehicle.
Essentially, the IRS has imposed little restrictions on what you can hold in a self-directed IRA. Unlike other IRAs, this type of retirement vehicle can be used to invest in everything from precious metals and real estate, to commodities. Akin to other IRAs, the only investments not allowed in a self-directed IRA are S corporation stock, collectibles, and insurance investments.
Under IRS rules, self-directed IRAs are subject to the same contribution limits and distribution (withdrawal) limits as traditional and Roth IRAs. For 2024, total contributions to a self-directed IRA are limited to $7,000. For individuals 50 years old and older, the limit is $8,000. Likewise, with other types of retirement accounts, self-directed IRAs have a 10% early-withdrawal penalty on the funds,
Any individual retirement account should be regarded as a long-term investment. Yet, a self-directed IRA provides far greater potential for growth given the types of assets that can be held inside this retirement vehicle.
Self-Directed IRA Rollover Rules & Limitations
Oft times any movement of money from one retirement account to another is deemed a “rollover”. Essentially there are two ways to move money from an existing IRA into a self-directed IRA: either a rollover, or a custodian-to-custodian transfer. However, the IRS has specific definitions for a rollover and a custodian-to-custodian transfer. As per the IRS definition, a rollover occurs when the funds being moved are paid to you directly, and you then deposit the money into the other retirement vehicle.
The IRS has strict regulations and rules pertaining to an IRA Rollover. The guidelines outlined by the IRS for an IRA rollover include having 60 days to deposit the money you have received, in the custodian of your choice. If you are under 59 ½, failing to do so within the 60-day timeframe from initially receiving the funds, will result in a 10% early-withdrawal penalty tax being levied on said funds.
If you receive distributions from a retirement plan and you rollover into another retirement plan, as per the IRS rules there will be no taxation on those funds. In addition, funds can only be rolled over once in a 365-day period from a specific IRA.
The easiest method of moving funds from an existing IRA into a self-directed IRA like a Precious Metals IRA, is via a custodian-to-custodian transfer. Simply open a self-directed IRA with a reputable, IRS-approved IRA custodian. This custodian then directly transfers the funds from the existing IRA into the new self-directed IRA. Thereafter, said custodian will invest the funds as per instructions that you have provided. With a custodian-to-custodian transfer, you never touch the funds and the money transferred is not subject to taxation.
Self-Directed IRA Limits
For 2022, the Internal Revenue Agency (IRS) rules for contribution limits to a self-directed IRA are the “total contributions cannot exceed $6,500 ($7,500 for individuals 50 years old or older), or cannot exceed your taxable compensation for the year, if your compensation was less than this dollar limit”.
Self-Directed IRA Calculator
A self-directed IRA can prove to be an excellent retirement investment choice because it is a tax-advantaged investment vehicle. In addition, this type of retirement vehicle offers tremendous growth potential given the types of assets that can be invested with it, including precious metals.
There are numerous components that contribute to the amount of savings you set aside for retirement. Use this self-directed IRA calculator to determine how much you could potentially save.
Self-Directed IRA Custodians
It is crucial to understand that under federal law if you open a self-directed IRA (including Precious Metals IRAs), you must have a custodian. A custodian is typically a company that deals specifically with this type of retirement account.
If you decide to invest in precious metals through an IRA or elect to rollover funds into a Precious Metals IRA, you first must select a reputable, IRS-approved IRA custodian.
Some of the important elements to look for before selecting an IRS-approved IRA custodian include:
- Pricing
- Quality of the selection of IRA-approved precious metal coins and bars
- Customer Service
Here are our top Precious Metal IRA company reviews so you can get a better understanding of your options and the top companies that operate in the space.
Self-Directed IRA vs. Other Retirement Accounts
The table below compares the various types of retirement plans:
| Plan Type | Sponsorship | Roth Option? | Allows Precious Metals Stocks? | Allows Precious Metals Bullion? | Allows Other Alternative Investments |
|---|---|---|---|---|---|
| Precious Metals IRA | Individual | Yes | Yes | Yes | Yes |
| Traditional IRA | Individual | Yes | Yes | No | No |
| 401(k) | Employer | Yes | Maybe | No | No |
| SEP IRA | Self-employed or Business owner | Yes | Yes | Maybe | Maybe |
| Solo 401(k) | Self-employed | Yes | Yes | Yes | Maybe |
| Simple IRA | Employer | Yes | Yes | Maybe | Maybe |
| Money Purchase Plan | Employer | No | Maybe | No | No |
| Profit Sharing Plan | Employer | No | Maybe | No | No |
| 457(b) | Government or Non-governmental Tax-exempt Employer | Yes | Maybe | No | No |
| SARSEP | Employer | No | Yes | Maybe | Maybe |
| Keogh Plan | Self-Employed or Unincorporated Employer | No | Maybe | No | No |
| Thrift Savings Plan (TSP) | Government or Armed Services Employer | Yes | No | No | No |
| ESOP | Employer | Yes | Maybe | No | No |
| Annuity | Individual | No | Maybe | No | No |
“Maybe” denotes where precious metals investment options are dependent upon the retirement vehicle provider.
Top Precious Metals IRA Companies
Goldco
Goldco is definitely no stranger when it comes to Gold and Silver IRA investments. We like their team’s transparency, their education materials, and dedication to making their clients feel at ease with their investment. If you are thinking of rolling over a retirement account to IRA-approved gold and silver coins, then Goldco should be on your call list! However, if you are looking a for more extensive selection of metal products, including platinum and palladium coins, or other alternative assets you’ll need to look elsewhere. Goldco is a highly rated organization committed to the satisfaction and education of its would-be clients.
Noble Gold
Noble Gold provides its customers with a large selection of coins and bars in IRA-approved gold, silver, palladium, and platinum accounts. We spoke with the management team and appreciated their passion and honesty when it comes to helping investors diversify their portfolios. For most investors, their significant section of rare, collectible coins will not be appropriate (especially for people buying bullion precious metals in IRAs), but these will be of interest to coin collectors.
Ready to Get Started?
If you’re interested in opening an SDIRA, you should do your due diligence first. Give yourself plenty of time to research the top SDIRA providers to compare their fee structures and customer reviews. To get started, read our list of the top self-directed IRA companies today.
Self-Directed IRA FAQs
How does a self-directed IRA work?
A self-directed IRA (or SDIRA) is a type of retirement account that permits a myriad of diversified assets not allowed in other IRAs. In addition, a self-directed IRA is solely managed by you the investor. Although under federal law, you must have a custodian who acts as an administrator over this type of retirement vehicle.
Under IRS rules, self-directed IRAs are subject to the same contribution limits and distribution (withdrawal) limits as traditional and Roth IRAs.
What is the difference between a self-directed IRA and regular IRAs?
The main difference between a self-directed IRA and other retirement accounts is that it can hold a variety of alternative assets not allowed in other IRAs.
Additionally, a self-directed IRA is solely managed by you the investor. It is crucial to understand that under federal law, you must have a custodian who acts as an administrator over this type of retirement account.
Self-Directed Roth IRA?
Similar to a self-directed IRA, investments in a self-directed Roth IRA are solely managed by the investor. Additionally, this type of retirement account is set-up with an IRA custodian and receives the same tax advantages of a regular Roth IRA.
How much can I contribute to a self-directed IRA?
For 2020, the Internal Revenue Agency (IRS) rules for contribution limits to a self-directed IRA are the “total contributions cannot exceed $6,000 ($7,000 for individuals 50 years old or older), or cannot exceed your taxable compensation for the year, if your compensation was less than this dollar limit”.
What are the self-directed IRA rules?
The main rule to keep in mind with a self-directed IRA is that under federal law it is mandatory to use an approved IRA custodian to open this type of retirement account.
Self-directed IRA real estate?
One of the major draws of a self-directed IRA for investors is the option to invest in real estate. Other alternative assets that can be invested in with a self-directed IRA include precious metals like gold or silver, commodities, among other investments.
What are the self-directed IRA real estate rules?
One of the benefits of a self-directed IRA is that it can be used to invest in real estate. However, it is imperative to understand that the property cannot be used by either you or members of your family. As per the self-directed IRA real estate rules, the property can be used solely as an investment.
In addition, property bought with a self-directed IRA must be paid for in cash. Your IRA custodian will walk you through the tax component and other elements involved with using a self-directed IRA to purchase real estate.
What is IRA-approved gold or silver?
The Internal Revenue Agency (IRS) has stringent regulations on what types of gold and silver are permitted in an IRA. Essentially, the criteria include the purity levels of the gold or silver, and where it was minted. It is crucial to understand that only specific bullion coins and bars which meet IRA-approved purity levels are permitted in this type of retirement vehicle. Some examples of bullion coins that are approved by the IRS for investing in an IRA include American Eagles, Canadian Maple Leafs, and Austrian Philharmonic.
It is imperative to understand that the IRS does NOT permit things like collectible coins or numismatics as an IRA account. Any reputable IRA company will only recommend IRA-approved gold and silver bullion coins and bars. Be wary of any Gold IRA company that attempts to push collectible coins or numismatics as an investment option for an IRA - their intentions will be dubious.
What is a Gold IRA Company?
A Gold IRA company is a firm that acts as a custodian for the entirety of the process for setting up Gold IRAs (in addition to other Precious Metals IRAs). The process entails setting up the account, an IRA rollover or custodian-to-custodian transfer, purchasing IRA-approved precious metals, and storing precious metals in an accredited IRS-approved depository. Usually, Gold IRA companies have established relationships with traditional IRA custodians, IRS-approved accredited depositories, and precious metal dealers, which makes the process seamless for clients.
It is crucial to understand that under federal law if you open a self-directed IRA (including a Precious Metals IRA), you must have a custodian.
How do I choose the best Gold IRA company to invest with?
This is solely dependent on your personal preferences. What Gold IRA company you choose is contingent on what components are most important to you, whether it is storage options, ratings, or client services, amongst other factors. Once you have decided on your personal preferences, select numerous companies, then contact them to receive more information pertaining to both the respective firm and products offered.
What is an IRA Rollover?
Sometimes any movement of money from one retirement plan to another is often referred to as a “rollover”. However, the IRS has specific definitions for a rollover and a transfer. As per the IRS definition, a rollover occurs when the funds being moved are paid to you directly, and you then deposit the money into the other retirement vehicle.
What are the IRS rules for an IRA Rollover?
The IRS has strict regulations and rules pertaining to an IRA Rollover. The guidelines outlined by the IRS for an IRA rollover include having 60 days to deposit the money you have received, in the custodian of your choice. If you are under 59 ½, failing to do so within the 60-day timeframe from initially receiving the funds, will result in a 10% early-withdrawal penalty tax being levied on said funds.
If you receive distributions from a retirement plan and you rollover into another retirement plan, as per the IRS rules there will be no taxation on those funds. In addition, funds can only be rolled over once in a 365-day period from a specific IRA.
What are the IRS rules for an IRA Transfer?
In a trustee-to-trustee transfer (as the IRS has deemed it) you request that the original IRA custodian transfers the funds to the new IRA custodian. With a trustee-to-trustee transfer, you never touch the funds and the money transferred is not subject to taxation.
What are the benefits of dedicating 5-20% of your investment portfolio to precious metals like gold or silver bullion?
Investing in precious metals such as gold is an excellent hedge to protect your investment portfolio against economic uncertainties and inflation. A diversification strategy that includes gold (or other precious metals) not only protects your portfolio against market turmoil, but gold also provides significant growth potential. A simple method for diversification is to open a self-directed IRA.
