Getting Started with a Self-Directed IRA

    With a self-directed investing account, you choose the investments. 

    self-directed IRA (Individual Retirement Account) is defined by the type of investments owned within the plan. It is not a special retirement account. Any IRA can self-direct for greater diversification and control in an investment portfolio.
    What makes it self-directed is that YOU direct your retirement money into investments that you choose.
    Owners of these accounts are allowed the freedom and control of choosing their own investments instead of allowing another party to make these decisions for them. The massive amount of alternative investments available for self-directed plans provide the opportunity for diversity and potential gains that may perform better than traditional stocks, bonds, and mutual funds.
    When you self-direct, all income and gains in an IRA are tax-deferred until you take a distribution. With a Roth IRA, all income and gains to the account are tax-free.
    HubSpot Video
    What Assets Can I Invest in Using Retirement Funds?


    Accredited investor status is needed for many of these investment options. 

    • Hedge Funds
    • Venture Capital
    • Angel Investing
    • Closely Held LLC
    • Private Equity


    Couple looking at a beautiful house to buy


    An investment you can see, touch and maybe even drive by every once in awhile.

    • Commercial buildings
    • Residential rental properties
    • Real estate syndications
    • REITs
    • Raw Land



    When you want to leverage tax benefits by investing IRA dollars the same way you invest other funds.

    • Trading accounts (future/forex)
    • Metals (Gold, silver)
    • Cryptocurrency
    • Lending from your retirement account
    • Private Stock

    What Kind of Retirement Accounts Qualify for Self-Direction

    Traditional IRA

    Traditional IRAs are the most common retirement plans. Anyone with earned income can use a Traditional IRA. Account owners can contribute pre-tax dollars towards retirement. Taxes are due when you take a distribution upon retirement. You can make contributions of up to $6,000 yearly. Those who are 50 or older can make a catch-up allowance of an extra $1,000. Contributions may be tax-deductible, and earnings grow tax-deferred.

    Traditional IRA Benefits

    • Tax-deductible contributions
    • Tax-deferred earnings
    • Only pay taxes on withdrawn funds
    • RMDs begin at age 72
    • Can invest in any permissible alternative asset to build retirement wealth

    Who Is Eligible for a Traditional IRA?

    • Anyone with taxable compensation received during the given year.
    • Individuals under the age of 72 at year’s end.
    • Married individuals (under 72) who earned income during the year can open their IRAs.
    • Bonus: If married and filing jointly, only one of you has to meet the compensation requirement. The employed spouse can contribute to the account on behalf of the unemployed spouse.
    • Traditional IRA account holders who want more control over their investment decisions. They can transfer their existing funds to a self-directed account at Midland. They can also move funds from an old employer 401(k) into a self-directed plan.

    2023 Traditional IRA Contribution Limits

    Annual Contribution: $6,500
    Catch-Up Contribution: $1,000



    Roth IRAs are a favored plan for eligible individuals who can make post-tax contributions of up to $6,000 yearly. They present unique savings and distribution terms not available in other plans. Eligibility depends on two factors. One, you must have earned income. Two, your modified adjusted gross income (AGI) cannot exceed the limits set for Roth IRAs.

    Unlike a Traditional IRA, you pay taxes on contributions upfront. So, when you are eligible to take a distribution, you don’t pay taxes. The catch-up contribution of $1,000 applies to those 50 or older. Contributions are not tax-deductible. But, after five years from the account setup date, all earnings grow tax-free. You can take withdrawals without any penalty at the age of 59 1/2.

    Roth IRA Benefits

    • Post-tax contributions
    • Tax-deferred earnings
    • Roth conversions from Traditional IRAs
    • No RMDs (Required Minimum Distributions)
    • Can invest in any permissible alternative asset to build retirement wealth

    Who Is Eligible for a Roth IRA?

    • Anyone with taxable compensation received during the given year.
    • Those whose modified adjusted gross income (AGI) is within Roth limits.

    2023 Roth IRA Contribution Limits

    Annual Contribution: $6,500
    Catch-Up Contribution: $1,000




    Simplified Employee Pension (SEP) plans are great for small businesses. SEP IRAs allow self-employed, partners, or corporation owners a low-cost, easy way to provide retirement benefits for employees. Employers can make discretionary, tax-deductible contributions of up to 25% of each employee’s compensation or the maximum of $61,000 in 2022. Start providing tax-deferred retirement benefits to yourself and your employees today!

    SEP IRA Benefits

    • Flexible employer and employee tax-deductible contributions
    • Minimal start-up and facilitation fees
    • RMDs (required minimum distributions) begin at age 72
    • Flexible employer contributions
    • Existing IRA or employer-sponsored plan can rollover or transfer into self-direction
    • Can invest in any permissible alternative asset to build retirement wealth

    Who Is Eligible for a SEP IRA?

    • Anyone 21 or older with at least $550 in taxable compensation.
    • Employees who have worked three out of five years for an employer.
    • Employers are also considered employees. Consult with a CPA or financial advisor for specific contribution guidelines.

    2023 SEP Contribution Limits

    Annual Contributions: 25% of net earnings up to $66,000


    Simple IRA

    SIMPLE IRAs tailor to small businesses with fewer than 100 employees. Employees may choose to defer a pre-taxed portion of their compensation into the plan. Employees include self-employed individuals. Contribution limits for employees under 50 are $14,000 and $17,000 for those 50 and older. Employers can match this contribution to up to 3% of employee compensation.

    SIMPLE IRA Benefits

    • Low start-up and facilitation costs
    • RMDs (required minimum distributions) begin at age 72
    • Employee salary deferral of up to $14,000
    • Employer match between 1% - 3% of employee deferral
    • Can invest in any permissible alternative asset to build retirement wealth

    Who Is Eligible for a SIMPLE IRA?

    • Self-employed individuals and/or small businesses with fewer than 100 employees in the previous year who do not sponsor any other retirement plan.

    2023 SIMPLE IRA Contribution Limits

    Employee under 50 Salary Deferral: $15,500

    Salary Deferral Catch-Up Contribution: $3,500

    Employer Matching Contribution: Between 1% - 3% of employee’s deferral
    Employer Non-Elective Contribution: 2% of employee’s compensation


    Education Savings Account (ESA)

    Coverdell Education Savings Accounts (ESAs) allow tax-advantaged savings benefits for a child's education. These funds pay for qualified educational expenses such as tuition, books, and uniforms. A self-directed ESA provides the ability to invest in alternative assets to build capital towards education. You can rollover or transfer funds from an existing ESA into a self-directed plan.

    Education Savings Account (ESA) Benefits

    • No need to make yearly contributions
    • Contributions are not tax-deductible
    • Earnings grow on a tax-free basis if they are less than the account holder’s annual adjusted gross income
    • Qualified expenses for educational purposes
    • Exceptions are available for individuals with special needs
    • Can invest in any permissible alternative asset to build retirement wealth

    Who Is Eligible for an Education Savings Account (ESA)?

    To qualify, you do not need earned income. But, the account's beneficiary must either be under the age of 18 or an individual with special needs. You must also open an ESA with a cash deposit.

    2023 Education Savings Account (ESA) Contributions

    Annual Contribution (Per Beneficiary): $2,000


    Health Savings Account (HSA)

    These tax-advantaged accounts allow individuals and families to save for qualified medical expenses. Self-directed HSAs enable plan owners to buy alternative investments. This gives them the potential to increase their capital in the account. Alternative assets include real estate, precious metals, oil and gas options, and more.

    Health Savings Account (HSA) Benefits

    • Tax-free earnings and withdrawals
    • Funds pay for qualified medical expenses
    • No loss of funds if you change health care plans
    • Funds in the account continue to grow until needed
    • No yearly distributions required
    • Can invest in any permissible alternative asset to build retirement wealth

    Who Is Eligible for a Health Savings Account (HSA)?

    • Have a current plan with a high deductible
    • Not have other healthcare coverage, including Medicare
    • Not a dependent on another person’s tax return

    2022 Health Savings Account (HSA) Contributions

    Individual HSA Account: $3,850
    Family HSA Account: $7,750
    Additional Catch-Up Provision: $1,000


    Important IRS Rules To Keep in Mind

    IRA Holders May Not:

    • Checkmark Borrow money from their IRA
    • Checkmark Sell, exchange, or lease a property to their IRA
    • Checkmark Receive payment for managing property in their IRA
    • Checkmark Use their IRA as security for a loan
    • Checkmark Transfer plan income or assets to a disqualified person
    • Checkmark Lend money to a disqualified person
    • Checkmark Extend credit on their IRA to disqualified persons
    • Checkmark Furnish goods, services, or facilities to disqualified persons
    • Checkmark Allow fiduciaries to use the plan's income or assets for their own interest
    • Buy anything classified as life insurance or collectibles.

    Disqualified Persons Include:

    • The IRA holder and his/her spouse
    • The IRA holder’s lineal descendants, ascendants, and their spouses
    • Investment advisors and managers
    • Corporations, trusts, partnerships, or estates in which the IRA holder owns a 50 percent or greater interest
    • Anyone providing services to the IRA, such as the trustee or custodian

    Prohibited Investment Types:

    • Checkmark Life insurance
    • Artwork
    • Rugs
    • Antiques
    • Gems
    • Stamps
    • Checkmark Alcoholic beverages
    • Checkmark Metals (certain Government minted gold/silver/palladium/platinum are permitted)

    Self-Directed IRAs Explained Simply.

    A college student worked as an intern for us one summer. She passed her first training session's exam and provided this response to our final question: "How would you explain what a self-directed IRA is?"


    "Self-directed IRAs are like ice cream blizzards with different toppings mixed in. Here's how it works: when you order one of those, you pick the kind of ice cream you want and then you pick what you want to have added in. In a self-directed retirement account, the type of retirement account - Traditional, Roth, etc- is like the flavor of ice cream - it's the chocolate or vanilla. The things you put IN the account - real estate, private stocks or loans - are like the choices of cookies and candies for the blizzard. So a self-directed IRA isn't a TYPE of retirement account like a Roth, etc; it's a retirement account directed by an investor's wishes. Because they want it the way they want it, just like a blizzard."

    If you've got questions, we've got answers.
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