Self-Directed IRA Custodian

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on January 03, 2023

Self-directed IRA custodians are financial institutions that allow retirement investors to choose how they want their IRA funds invested. While most self-directed IRAs use traditional investments such as stocks, bonds, and mutual funds, many investors opt for a more diverse portfolio, often starting with real estate.

Since the mid-2000s, investing in property through a self-directed IRA has become a popular choice for those who prefer to invest in real estate as a retirement investment. The desire to diversify investments is not unique to IRAs or investors with large retirement portfolios.

Diversification was the primary goal of the first self-directed IRAs, which allowed owners to create their own diversified portfolio rather than being limited to investing in a few pre-established options.

Self-directed IRAs were created to give individuals more control over their financial investments, and the concept has been a boon for both large organizations and individual investors alike. Self-directed IRA custodians can help retirement savers grow their money while providing opportunities for diversification along with tax-deferred growth.

While people don't need to use a self-directed IRA custodian, many choose this option because the large investment firms that usually provide IRAs do not allow investors to be as hands-on with their portfolios as they would like.

Self-directed IRAs are designed for investors who want more control over their investments, and the flexibility of a self-directed IRA allows investors to make their own decisions.

How Do You Choose a Good Self-Directed IRA Custodian

When choosing a self-directed IRA custodian, it is important to do your research. Not all firms offer the same services or have the same investment options.

Here are some things you should consider when picking a custodian:


Most custodians charge fees for their services. Make sure to ask about all of the fees that you will be expected to pay. Some firms charge flat fees while others may charge commission on each sale.


Make sure the company has plenty of experience in the field and is well-respected. You can get information about a company's background by searching online for reviews or asking for references from other customers who have used the firm's services.

Investment Options

Some firms offer a wider range of investment options than others. If you have specific interests or want to invest in a certain type of asset, make sure the custodian you choose offers those options.

Customer Service

How accessible and helpful is the custodian's customer service? Make sure you are comfortable with the level of customer service you will receive in case you have any questions or problems.


Make sure the custodian is compliant with all relevant regulations and that they have a good reputation for following the rules. Once you have narrowed down your options, it's important to contact each of the firms and ask questions about their services. Don't be afraid to ask for references from past customers.

Types of Self-Directed IRA Investments

Self-directed IRAs have a number of different investment options that you can choose from, including:

Equipment Leasing

Leasing equipment through your self-directed IRA allows you to finance expensive items without requiring a large amount of cash up front.

Real Estate

Investing in real estate is a popular option for self-directed IRA investors. Real estate can be purchased through a self-directed IRA and offers the potential for tax-deferred growth.

Private Lending

Lending money to individuals or businesses through your self-directed IRA can provide you with healthy returns.

Precious Metals

If you want to invest your IRA into a physical asset, gold and other precious metals are popular options.

Common Self-Directed IRA Mistakes

Prohibited Transactions

One of the biggest mistakes self-directed IRA owners make is engaging in a prohibited transaction with their account. To avoid penalties and taxes, it is important to know what constitutes a prohibited transaction.

Not Staying Diversified

Another common mistake is not staying diversified in one's investments. This can lead to losses if one asset class performs poorly.

Not Keeping Records

It is important to keep good records of all transactions made with your self-directed IRA in order to avoid any penalties or tax implications.

Not Consulting a Professional

Some investors make the mistake of not consulting with a professional before making any decisions about their self-directed IRA. A financial advisor can help you make informed investment choices and avoid costly mistakes.

The Benefits of Using a Self-Directed IRA for Retirement Savings

One of the biggest benefits associated with a self-directed IRA is that it allows for more freedom when making investment decisions.

Self-directed IRAs are not bound by certain rules that can restrict your options with other retirement accounts, which allows you to invest in different types of assets. For example, many traditional retirement accounts do not allow investors to purchase real estate, but a self-directed IRA can. This gives you more opportunities to grow your retirement savings.

Another benefit of a self-directed IRA is that it can offer more tax flexibility. For example, income generated from real estate investments held in a self-directed IRA can be deferred until you retire and begin taking distributions from your account.

Finally, a self-directed IRA offers more flexibility when it comes to the custodian that holds your account. For example, you can choose an institution that is convenient and familiar to you instead of having to work with someone located in another state or who only provides certain investment options.

The Bottom Line 

Self-directed IRAs have a number of benefits including increased freedom in terms of the types of investments you can make, more tax flexibility and a wider range of custodians.

While setting up a self-directed IRA is relatively straightforward, it is important to carefully weigh your options before making any decisions.

Be sure to speak with a financial advisor to get their professional advice before investing.


Self-Directed IRA Custodian FAQs

What is a self-directed IRA custodian?

A self-directed IRA custodian is an institution that holds your self-directed IRA account. They provide administrative and investment support for your account.

How do I set up an account with a self-directed IRA custodian?

Setting up an account with a self-directed IRA custodian is relatively straightforward. You can set up an account online or over the phone with most self-directed IRA providers.

What types of investments can I make with my self directed IRA?

An investor can invest in a number of assets using their self directed IRA, including real estate, precious metals and private lending. A self-directed IRA can also be used to purchase foreign real estate.

What are the common mistakes people make when investing their retirement money in a Self Directed IRA?

When setting up an account, it is important to carefully weigh your options and do your research before making any decisions about how you will invest your funds. Investors should also be aware of the rules that govern retirement accounts, such as the rule that prohibits self-dealing.

What are the benefits associated with using a Self Directed IRA for retirement savings?

Some of the biggest advantages include increased freedom when it comes to investments and more tax flexibility, since you can defer taxes on income generated by real estate until retirement.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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