Introduction to SDIRAs

What is a Self-Directed IRA and How Does SDIRA Investing Work?

What Is an SDIRA?

An SDIRA is commonly referred to as a Self-Directed IRA, Alternative IRA, Real Estate IRA, or Gold IRA. It is an individual retirement account that provides a unique approach to help grow your retirement savings. Like a standard IRA, an SDIRA lets you save for retirement in a tax-advantaged account. Both account types also follow the same IRS rules for contribution limits and distributions.

SDIRAs at a Glance

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Diversification Opportunities

An SDIRA lets you, the account holder, diversify your retirement portfolio with alternative assets such as real estate, private placements, promissory notes, and precious metals.

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Flat-Rate Fees

Madison Trust’s SDIRA fees are among the lowest in the industry and are set at a fixed flat rate regardless of your account’s value.

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Simple Setup and Investing Process

Setting up your Self-Directed IRA is as easy as 1-2-3! (1) Open an account at an SDIRA custodian (2) Fund the account (3) Place the investment.

Exploring SDIRAs

When researching retirement accounts, you may have come across the term “Self-Directed Individual Retirement Account” (SDIRA). An SDIRA is a tax-advantaged retirement account that allows you to invest your retirement funds into alternative assets.

Like most investors, you likely want more information, such as: What is an SDIRA? How does investing from an SDIRA work? What is the difference between an SDIRA and a standard IRA? We’ll explore these answers and more so you can unlock your investing potential.

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What Is the Difference Between an SDIRA and a Standard IRA

An SDIRA differs from a standard IRA because it offers a broader range of investment options. While a standard IRA lets you invest in Wall Street products (stocks, bonds, and mutual funds), an SDIRA allows you to invest in almost any alternative asset. Popular types of investments include real estate, precious metals, and private placements.

Why Have I Never Heard of an SDIRA?

The majority of investors keep their IRAs at brokerage houses that typically only permit investing in stocks, bonds, and mutual funds. To invest in alternative assets, an investor must open a Self-Directed IRA at a custodian that specializes in SDIRAs. SDIRA custodians specialize in holding alternative assets and include banks and trust companies. Once you choose the best SDIRA custodian, you can open an account, contribute to it, and place an investment, just as you would with a standard IRA.

Two businessmen shakings hands to indicate the relationship between a SDIRA custodian and a SDIRA account holder.

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We’re here to assist you at any point of the process, from account setup all the way to placing your investment. 
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What are the Benefits of an SDIRA?

Diversification Opportunities

An SDIRA enables you, the account holder, to diversify your retirement portfolio into assets typically inaccessible in a standard IRA. Alternative assets typically provide a hedge against stock market fluctuations.

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Personalized Investing

An SDIRA lets you invest in assets you know and believe in. Under self-direction, you can invest in assets that help you achieve your retirement goals.


With an SDIRA, you can invest in assets that generally have a more consistent and reliable revenue stream. Popular investments include rental properties, secured promissory notes, and tax liens.

How Does an SDIRA Work?

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Anyone can open an SDIRA. In order to contribute, you must earn taxable income. Whether you have an investment in mind or are starting your search, it is considered best practice to conduct due diligence. You are responsible for understanding how to manage your chosen asset and what its potential profitability is, among other factors that may affect your return on investment.

An SDIRA custodian is responsible for administering the account and holding custody of your IRA’s assets. To invest in an alternative asset, you must set up your account with a Self-Directed IRA custodian. After you open and fund your SDIRA, you will complete the following to place your investment:

Submit an Investment Authorization Form – Once you select an investment, fill out an Investment Authorization Form and submit it to the SDIRA custodian. This form instructs the custodian to place an investment on behalf of your IRA.

Please note that depending on the nature of the asset, certain investments will have more extensive paperwork. For example, real estate investing involves title and deed processing. For more information, visit our “How To” Flowcharts page.

What Are the Types of SDIRAs?

Self-Directed IRA (SDIRA)

Individual Retirement Account to invest in alternative assets beyond Wall Street.

• Best for low-transaction investments

• To invest, instruct Madison Trust to send your IRA funds via check or wire to your investment

• Simple set-up; no LLC or trust is required

Self-Directed IRA with Checkbook Control (Checkbook IRA)

SDIRA that allows you to perform transactions in real-time through the creation of an IRS-compliant entity, such as an LLC or a trust and a dedicated LLC or trust checking account.

• Best for transaction-heavy investments

• Place an investment by simply writing a check or sending a wire directly from your Checkbook IRA’s dedicated checking account

• Broad Financial, MTC’s sister company, will create the entity (LLC or trust) for you

Within the SDIRA structure, you also select the type of IRA based on when you’d like to receive tax benefits. Here are your account options:

Traditional SDIRA

Contributions are pre-tax, funds grow tax-deferred, and you pay taxes upon distributions


Contributions are made with after-tax dollars, allowing for tax-free growth


Simplified Employee Pension IRA

Account ideal for self-employed individuals and small business owners, with higher contribution limits


Savings Incentive Match Plan for Employees IRA

Account ideal for self-employed individuals and small businesses with an employer match component

What Can an SDIRA Invest In?

A Self-Directed IRA can legally invest in almost any asset. The only assets that are off limits are collectibles, life insurance, 
and S-corps. Some of the more popular investments include:

Icon of a tall building to signify investing in real estate with a Self-Directed IRA.
Real Estate
(Rentals, Commercial Property, Raw Land, Private REITs, Residential etc.)
Icon of dollar bill and coins to show that you can invest in private placements with a Self-Directed IRA.
Private Placements
(Private Equity Funds, Hedge Funds, etc.)
Icon of documents with a dollar sign on it to signify that you can invest in promissory notes with a Self-Directed IRA.
Promissory Notes
(Secured and Unsecured)
Stack of bullion to show that you can invest in precious metals with a Self-Directed IRA.
(Gold, Silver, Platinum, and Palladium)
And Many More Alternative Assets

Diversification Beyond Wall Street Awaits

Reach out, and one of our SDIRA Specialists can assist you with getting started on your self-directed investing path.
Get Your Journey Started

How To Set Up an SDIRA

SDIRA Specialists at Madison Trust can walk you through the process of setting up, funding, and placing an investment.
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Open a Self-Directed IRA

Open a Self-Directed IRA with Madison Trust by completing our easy online application.
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Fund Your Account

Fund your Self-Directed IRA by transferring or rolling over all - or a portion of - your funds from an existing retirement account, such as an IRA or 401(k), or by making an initial contribution.​
Investor Standing Holding Check Icon to show placing an investment with a Self-Directed IRA.

Place Your Investment

Instruct Madison Trust to send your IRA funds by writing a check or sending a wire directly to your investment.

What Are the Contribution Limits for an SDIRA?

The IRS dictates the annual contributions limits for an SDIRA, which are the same as those for a standard IRA. As of 2024, the maximum SDIRA contribution is $7,000 ($8,000 if you are age 50+).

Please note that the IRS can change the SDIRA contribution limits yearly.

Investor on a laptop signing a document to convert his Traditional IRA to a Self-Directed IRA.

Can I Roll My 401(k) Into an SDIRA? 
Self-Directed IRA Funding Options

Yes! There are several ways to fund your SDIRA:

A distribution from an existing qualified retirement account, such as a 401(k), deposited into a new SDIRA. A rollover can be direct or indirect.


The movement of funds from an IRA at one financial institution directly into an IRA at another. A transfer is typically a nontaxable event.

Two hands shaking icon to show that you can fund your account via a transfer between IRA custodians.

The deposit of funds into an SDIRA from your personal checking account, savings account, or with a credit card payment.


The conversion of funds from a tax-deferred account (SDIRA Traditional IRA, SDIRA SEP IRA, SDIRA SIMPLE IRA) to a Roth SDIRA. This is a taxable event; it’s considered best practice to consult your tax advisor before conducting a Roth conversion.

Are You Ready to Get Started on Your SDIRA Investing Journey?

Take the first step today and speak with a knowledgeable SDIRA Specialist.
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SDIRA Rules To Keep in Mind

Cancel icon to show that your SDIRA must not partake in a prohibited transaction.

Prohibited Transactions

Any improper transaction between an IRA and a disqualified person.

Prohibited Investments

Collectibles, S-Corps, and life insurance.

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UBIT (Unrelated Business Income Tax) & UDFI (Unrelated Debt Financed Income)

Taxes that are due when your IRA runs an active business or uses a loan to help finance your investment.

Contribution & 
Distribution Rules

The IRS puts maximum limits on contributions. There is also a minimum age to withdraw funds without penalty. If you have a tax-deferred IRA, you must withdraw funds once you turn a certain age.

For more information, please visit Self-Directed IRA Rules.

Common Misconceptions About SDIRAs

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Due to SDIRAs not being widely known, some myths have surfaced such as SDIRAs are more risky, too complicated, or too expensive. In reality, SDIRAs generally produce stable returns, are governed by similar rules as standard IRAs, and have investment options available for various investors. For more information about SDIRA misconceptions, please visit Self-Directed IRA Investment Myths: Busted!

You Have Questions? We Have Answers!

Schedule a call with an SDIRA Specialist today to get your self-directed investing questions answered. Join the thousands of investors who have gained control of their retirement savings with an SDIRA.
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Ready To Get Started?

Reach out, and one of our SDIRA Specialists can assist you with getting started on your self-directed investing path.
Get Your Journey Started

Ready to start investing in your future?

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