Self Directed IRA Basics

You may have heard the terms Self Directed IRA, Alternative IRA, or Real Estate IRA before, but you are probably wondering: What exactly is a Self Directed IRA? What benefits does it offer? What kind of impact can a Self Directed IRA have on my retirement portfolio?

Self Directed IRA Definition

A Self Directed IRA allows individuals to invest their retirement money into alternative assets such as real estate, private placements, promissory notes, cryptocurrencies, IRA LLCs, and much more.

Why have I never heard of this before?

The concept is a novel one to many, as the majority of Americans hold their IRAs in large brokerage houses. They automatically assume that IRAs can only be invested in stocks, bonds and mutual funds since those are the products offered to them. Brokerage houses do not accommodate alternative investments due to the administrative burden involved and loss in commission.


Portfolio Diversification

Self Directed IRAs allows investors to diversify their retirement portfolios to include assets which are inaccessible in standard IRAs. Self Directed IRA custodians specialize in custodying privately held investments like real estate, private businesses, promissory notes, cryptocurrencies and more, all within a tax-advantaged account.

Hands-On Investing

Self Directed IRAs encourage individuals to invest in what they are familiar with. It provides investors with the power to put money in investments which make sense for them personally. Different people have different strengths and expertise, and it makes sense that their investments should reflect those differences.


With a Self Directed IRA, one can move past the volatility of the stock market, and invest in products with a steadier and more reliable revenue stream, such as rental real estate, secured promissory notes, and tax liens.


IRAs can invest in a broad range of investments, with the exception of Life Insurance and Collectibles.

Some popular Self-Directed investments are:

  • Real Estate (rentals, commercial property, raw land, etc.)
  • Private Placements (Private Equity Funds, Hedge Funds, LLCs, etc.)
  • Promissory Notes (secured and unsecured)
  • Cryptocurrencies
  • IRA LLCs

Prohibited Transactions

IRC Section 4975(a) states that an IRA owner may not take any personal benefit from his or her plan before the age of retirement. Dealings that violate this clause are known as “Prohibited Transactions.”

The formula that defines a prohibited transaction is:
Transaction between “Retirement Plan Asset” + “Disqualified Person” = Prohibited Transaction.

To learn more about how to apply this formula to your particular investment, please click here.

Set-up Process

The process to set up a Self Directed IRA is easy:

  1. Open an account by completing an application online. You will be asked some basic questions, like, “What kind of account are you opening?” and “How are you funding your IRA?”.
  2. Fund the account by either transferring an existing IRA or rolling over a former Employer’s Plan like a 401(k) or 403(b).
  3. Invest the Funds by instructing Madison Trust Company to issue a check or a wire to the investment of your choice.

It’s that simple!

Fees – Setup and Ongoing

The cost to set up a Self Directed IRA with Madison Trust Company is $50, and $90 per quarter to maintain. Please click here to view our fee schedule or click here to learn how Madison Trust’s pricing compares to other Self Directed IRA Custodians.

The Madison Advantage

Madison Trust is at the forefront of the Self-Directed Industry due to its impeccable customer service and sensible fee schedule.

When you call Madison Trust, you will be serviced by a friendly and knowledgeable member of our team. Our staff members undergo CISP training (the most comprehensive IRA training available), allowing them to guide you through complex transactions with care, sensitivity, and precision.  

Our fee schedule is flat rate and easy to understand. The cost to set up a Self Directed IRA is $50, and $90 per quarter to maintain. We do not charge any asset based fees (which would increase as your account value increases). See how our annual fee compares to others in the industry.

Have Questions?

Read our FAQs, or feel free to contact our team directly.

Contact us

Ready to Get Started?

Take control of your investments.

open an account

Getting started is easy


Speak with a specialist

You’ll be asked a few simple questions to make sure that a Self Directed IRA is your best option.


Open an Account

Madison will guide you step-by-step through the process, including any necessary transfers.



Your funds will be invested directly into the asset of your choice.

Get started with a new account