Self-Directed Roth IRA

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After I graduated college I was told that every year you should max out your Roth IRA. Which is what I did for the first few years of my professional career. After a few years of maxing out my Roth, I wanted to see how I could use that money now, instead of waiting till retirement age. So, when I started my journey to financial freedom I learned about this thing called a Self-Directed Roth IRA. Let’s discuss a Self-Directed Roth IRA and how to take advantage of it.

What is a Self-Directed Roth IRA

So, according to Investopedia, a self-directed individual retirement account (SDIRA) is a type of individual retirement account (IRA) that can hold a variety of alternative investments normally prohibited from regular IRAs. SDIRA is directly managed by the account holder, hence the Self-Directed part.

This type of account is very useful when used properly. But like all things you need to have a good understanding of how it works. That was the biggest thing for me. For years I knew what it was but I didn’t know how to transfer my current Roth to my LLC. I also didn’t know if it was a smart thing to do. I also wasn’t sure if SDIRA was any different from a typical Roth. So, before we go into how to take advantage of SDIRA let’s first discuss the differences between SDIRA and a regular Roth.

Difference between a Self-Directed Roth IRA and a regular Roth IRA

So, now that we know what an SDIRA is and how it works, let’s discuss the actual differences between SDIRA and a regular Roth IRA account. A few minor differences exist and they are definitely important.

The difference between self-directed and other IRAs is solely the types of assets you own in the account. First, a self-directed IRA is a type of traditional or Roth IRA, which means it allows you to save for retirement on a tax-advantaged basis and has the same IRA contribution limits.

Your traditional types of investing are not the only type of assets you can invest in with SDIRA. You will be able to make other types of investments, like real estate and crypto. Which will, yes, also be tax-free.

To break it down with SDIRA you can invest not only in stocks/bonds can also invest in crypto and real estate as well (tax-free). Remember this will still be with after-tax dollars.

Self-Directed Roth IRA

How do I get a Self-Directed Roth IRA?

Now that you know what a Self-Directed Roth is and the difference between that and a Roth IRA. I want to discuss how to get one started. I would like to use a personal story (mine) as an example. The process was a little complicated in the beginning but I’ll try to keep it simple here.

I worked with my assigned retirement tax professional to establish a new Self-Directed Roth IRA. We did this by establishing a new account at a new FDIC and IRS-approved Roth IRA custodian. That new custodian then requested the transfer of my Roth IRA assets from my existing Roth IRA custodian in a tax-free and penalty-free Roth IRA transfer. The new Roth IRA custodian needs the funds transferred to the new custodian.

The new custodian will be able to invest the Roth IRA assets into the new Roth IRA LLC, known as the “checkbook control” structure. The Roth IRA LLC, with me as the manager, would have that control over the retirement fund. This way I can take advantage of traditional and non-traditional methods of investing.

I bet that all sounded kind of complicated. But if you reach out to your current financial institution it will make it relatively easy. It will take some effort of course. So, stay the course and know that if you do your due diligence you will come out on top.


Hopefully, all of this was helpful. I know when I first started all of this it was a little overwhelming. But like I said if you do your due diligence and you have a plan it will all take care of itself. There are many articles out there that will give you all the information you need. That way you can have the confidence to take control of your life and finances. Because you need to understand that just because you earn a lot of money doesn’t mean you’ll ever have that freedom. Sometimes you need to know what to do with your money after you have earned it.

With that said, keep learning and stay focused you will reach financial freedom soon.

Check out these other articles here and here.

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