A Self-Directed IRA is a retirement account that allows individuals to make investment decisions and choose from a broader range of assets, including real estate, private equity, and other alternative investments, to grow their retirement savings.
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Last Updated: February 17, 2026
A self-directed IRA, or individual retirement arrangement, can be a valuable tool for investors. But what exactly is it, and how is it different from a standard IRA? This guide explores the need-to-know facts about a self-directed IRA.
A self-directed IRA is a retirement investment account that the account holder manages.
Account holders of self-directed IRAs have greater flexibility in what they can invest in. For example, an individual can use a self-directed IRA to invest in cryptocurrencies. This is one of the benefits of a self-directed IRA.
An investor may open up a self-directed IRA with the bank, but the bank doesn’t manage the account for them. The bank is the “custodian” of the self-directed IRA because it is holding the assets in trust for the investor. The investor and their bank are responsible for different aspects of the account.
The custodian does not manage the fund or pick what to invest in. What’s more, they can’t provide financial advice or even tell the investor whether their allocations are lawful or smart. The bank’s sole job is to maintain custody of the assets on the investor’s behalf, who decides what they’d like to invest in and how to grow their money.
So, what is the difference between a self-directed IRA and a standard retirement account? Three main differences are:
Other than these aspects, self-directed IRAs are similar to other forms of retirement accounts. Most self-directed IRAs need to follow the same rules with the IRS.
Self-directed IRAs allow the account holder to invest in different types of assets. These include:
The custodian may sell these assets directly. If not, the account holder has to buy them from alternative sources and add them to their account. There are special ownership rules for a self-directed IRA owning an LLC or another legal entity. It’s prudent for an investor to do plenty of research if they plan to use their self-directed IRA to invest in a small business.
One self-directed IRA benefit is being able to open an LLC with the IRA.
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A self-directed IRA cannot invest in the following types of assets:
Further, transactions that amount to self-dealing are illegal. The account holder — not the custodian or bank — is responsible for doing the research and making sure that they are compliant.
Investors who are thinking about opening a self-directed IRA would be wise to keep these IRA disadvantages in mind:
Even so, having a self-directed IRA can give an investor freedom and flexibility to take control of their financial future.
A self-directed IRA is an investment account that allows the account holder to invest in assets — like gold and real estate — that can’t be invested in with a standard IRA. The account holder manages the fund and chooses the investments.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. For specific questions about any of these topics, seek the counsel of a licensed professional.
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