Can I Set Up a Self Directed IRA Myself?

Self-directed Individual Retirement Accounts (SDIRAs) allow investors to invest in unconventional assets not typically provided by traditional investment firms or banks – with that comes responsibility and oversight from your own.

IRA owners who fail to abide by all IRS rules could face stiff penalties from them including fines, taxes and transactions prohibited.

How to Set Up a Self-Directed IRA

Self-directed IRAs allow you to invest money without incurring taxes. Funds from an existing IRA or retirement account can also be transferred. Furthermore, you could use a rollover 401(k) transfer or an IRA-to-IRA transfer from previous employers’ plans as an option.

Select a custodian who accepts alternative investments, with experience managing investments for IRAs and can provide turnkey service. Be sure they have high reliability ratings from organizations such as Better Business Bureau (BBB) or industry standards.

A top provider should offer a selection of investment options at competitive fees with clear fee structures that are easily understood. Furthermore, they may even have teams of investment advisors available to assist.

Once you’ve identified an asset to invest in, your SDIRA custodian will facilitate its purchase by opening an LLC that owns it a checking account where checks can be written from to purchase it. When it’s time to take distributions (at age 59 1/2 or age 72) or sell the asset, your custodian will handle that transaction too.


IRS rules stipulate when using a self-directed IRA, including not using the assets personally and dealing with disqualified parties. If these rules are violated, your entire account could be distributed back to you and taxes and penalties would need to be paid on it.

The Securities and Exchange Commission cautions that criminals may use self-directed IRAs to sell fraudulent investments. Some red flags to look out for include investing with unknown firms claiming unrealistically high rates of return.

There are certain things you cannot invest in with your self-directed IRA, including real estate you live in, life insurance policies that cover you personally, collectibles such as artwork or antiques that do not meet certain purity standards, vacation homes or rental properties where you intend to reside – it is best to seek professional advice regarding which assets can be purchased through it.


Self-directed IRAs allow investors more freedom than the traditional IRAs offered by most financial institutions, permitting them to invest in alternative assets like real estate, private placements and precious metals. Due to this additional flexibility, however, investors must take on extra responsibility when investing in these assets, including finding and vetting investment opportunities, making informed decisions and avoiding prohibited transactions.

Investors should remain wary of investments that appear suspicious in a self-directed IRA, such as new companies with no track record, claims of unreasonably high levels of return or lack of third party oversight. NerdWallet advises investors seeking this type of deal or any others considered prohibited transactions to consult with a licensed and impartial investment professional before proceeding with them.

Verifying information in your self-directed IRA’s account statements is also of vital importance, since some assets can be difficult to value. According to the Securities and Exchange Commission’s recommendations, steps should be taken in order to independently confirm prices and asset values as much as possible.


As a self-directed investor, it is critical to conduct thorough due diligence when investing in alternative assets, such as real estate or precious metals. Working with an independent financial advisor who specializes in self-directed IRA investments would also be highly advantageous.

Custodians typically work with trusted dealers for this type of investment, but you should always shop around to find the most cost-effective prices. NerdWallet’s ratings of online brokers and robo-advisors provide an ideal starting point to compare fees and features across platforms.

To invest in a new LLC, simply direct the custodian to add your retirement funds as members (owners) of the company. This gives you checkbook control while opening up an array of investment possibilities such as real estate, private companies and funds, startup equity, notes, cryptocurrency and more. Just beware prohibited transactions such as using property in your IRA for personal use or providing services directly related to its ownership which could incur tax penalties.

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