Self-Directed IRA Basics: 
What They Are and How To Open an Account

If you're looking to start investing with a Self-Directed IRA, you're in the right place! 
We can help you learn:

• What is a Self-Directed IRA?
• What benefits does it offer?
• What kind of impact can a Self-Directed IRA have on your retirement portfolio?

Key Points

A Self-Directed IRA is a retirement account held by a custodian that lets you invest in alternative assets such as real estate, private placements, promissory notes, and more.

Self-Directed IRAs give investors the power to diversify their portfolio, invest in what makes sense to them personally, and hedge against the stock market.

Self-Directed IRAs have certain benefits over standard IRAs, including greater asset choice, asset security, flat fees, and more.

There are three simple steps to setting up a Self-Directed IRA: open an account, fund the account, and make an investment.

What is a Self-Directed IRA?

A Self-Directed IRA is much like a standard IRA. It's a retirement account that you contribute funds to, and those funds grow through investments. The difference between a standard IRA and a Self-Directed IRA is in the kind of investments you can make. In a standard IRA, you will be investing in publicly traded products like stocks, bonds, and mutual funds. With a Self-Directed IRA, you can choose almost any type of alternative asset. It's common to use a Self-Directed IRA for real estate, precious metals, and private placements.

What are the Benefits of a Self-Directed IRA?

The Benefits of a Self Directed IRA Infographic: Portfolio Diversification, Hand-On Investing, and Stability.

Are There Different Types of Self-Directed IRAs?

Yes. You can opt for a Self-Directed IRA or choose a Self-Directed IRA with checkbook control.

Self-Directed IRA

A Self-Directed IRA is a retirement account that lets you invest in alternative assets beyond stocks, bonds, and mutual funds through a custodian. The account holder directs the custodian to perform transactions.

Optimized for low-transaction investments, like private placements
Low-cost setup
Simpler setup; setting up an LLC or trust is not required

Self-Directed IRA with Checkbook Control

This type of Self-Directed IRA allows the account holder to perform transactions in real-time. This investing power is achieved through the creation of an entity, such as an IRA LLC or IRA Trust.

Optimized for active investments, like real estate rentals
Make investments by simply sending a check or wire from a designated checking account
Broad Financial, Madison Trust's sister company, will create the entity (LLC or trust) for you to provide a seamless investment experience.
Learn More

What can a Self-Directed IRA Invest in?

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

Real Estate
(Rentals, Commercial Property, Raw Land, etc.)
Private Placements
(Private Equity Funds, Hedge Funds, etc.)
Promissory Notes
(Secured and Unsecured)
Startups and Crowdfunding
And Many More

Got questions? We've got answers!

Contact us and we'll be glad to walk you through your investing options.
Contact Us

Self-Directed IRA vs. Standard IRA: What's the Difference?

One concept that almost all investors and financial advisors can agree on is the importance of diversifying your portfolio. Investing in a variety of assets, including standard investment products (stocks, bonds, and mutual funds) and alternative assets (real estate, cryptocurrency, private placements, promissory notes, etc.) may reduce overall risk. 
But you still may be wondering, "Which IRA is best for me?" Here are some of the basic differences between a 
standard IRA and a Self-Directed IRA to help you decide.

Standard IRA
Self-Directed IRA
Asset Choice
Standard investment products. These can be individual stocks as offered by online trading platforms or aggregated products like mutual funds.
Diverse asset choice. Investors can purchase real estate, shares in a private business, precious metals, and more. Almost any asset can be purchased, except collectibles and life insurance.
Asset Security
No guaranteed security. The value of the IRA will generally rise and fall with the stock market.
No guaranteed security. Some assets, like real estate, tend to retain value, while others can be more volatile.
Standard fee schedules are asset-based. That means a defined percentage of the overall account will be assessed as the annual fee. The larger the account (and the more it grows), the higher the fee charged.
Each Self-Directed IRA company has a different fee structure, but Madison Trust charges a flat annual fee that is not dependent on account value. View Madison Trust’s fee schedule.
IRS Rules
All retirement accounts are subject to the same rules. A standard IRA will normally not run into any potential infractions due to the third-party structure of the investing.
A Self-Directed IRA has the same rules as a standard IRA. However, due to the more hands-on nature of the account, account holders are encouraged to conduct their own due diligence and understand rules like prohibited transactions.
Must be held by a regulated custodian as required by the IRS. Most banks, brokerages, and online trading platforms offer IRAs.
Offered exclusively by regulated custodians who specialize in Self-Directed IRAs.
Standard IRA
Asset Choice
Standard stock market products.
Standard fee schedules are asset-based. That means a defined percentage of the overall account will be assessed as the annual fee.
Account Opening
Depending on the institution chosen, can be done in 15 minutes.
IRS Rules
All retirement accounts are subject to the same rules.
Self Directed IRA
Asset Choice
Diverse asset choice.
Different Self Directed IRA companies have different fee structures. Madison Trust charges a flat annual fee that is not dependent on account value.
Account Opening
Madison’s Self Directed IRA can be opened in 15 minutes. A Checkbook Control Self Directed IRA can take longer to set up due to the establishment of the LLC or Trust.
IRS Rules
A Self Directed IRA has the same rules as a standard IRA.

Setting Up a Self-Directed IRA

The process to set up a Self-Directed IRA at Madison Trust is simple.

Open a Self-Directed IRA

Opening a Self-Directed IRA is easy and can be done online in just a few minutes. 
Fill out your contact information, the type of IRA desired, and how you will be 
funding your IRA to get started.  

Fund Your Account

Fund your account by either transferring from an existing IRA, rolling over a former employer’s plan like a 401(k) or 403(b), or making a contribution.

Make an Investment

Instruct Madison Trust to issue a check or wire to the investment of your choice by completing an Investment Authorization form.

Ready to Get Started? We're Here for You! 

Madison Trust offers Self-Directed IRA services that are easy to get started with! Thanks to our dedicated Self-Directed IRA Specialists, you will be provided with step-by-step guidance from account setup all the way to placing your investment. It's time to start investing in what you believe in with a Madison Trust Self-Directed IRA!
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Self-Directed IRA – FAQs

What are the Fees for a Self-Directed IRA?

The cost to set up a Self-Directed IRA at Madison Trust is $50, and then $95 per quarter to maintain.

How Much Money Can You Put in a Self-Directed IRA?

The contribution limits for a Self-Directed IRA are the same as a standard IRA. If you are younger than 50 years old, you can contribute up to $6,500 in 2023 ($6,000 in 2022). If you are 50 or older, you can contribute up to $7,500 in 2023 ($7,000 in 2022). Contributions for the year prior must be made by the tax filing deadline.

In addition to annual contributions, Self-Directed IRA account holders may also roll over or transfer funds from another retirement account.

What are Prohibited Transactions in a Self-Directed IRA?

A prohibited transaction is an improper transaction between an IRA and a disqualified person. A good rule of thumb is that an IRA may transact with third parties but may not transact with close family members or closely held entities.

When Can You Take Distributions From a Self-Directed IRA? 

If you withdraw funds from a Self-Directed IRA before age 59 ½, you must pay applicable taxes and penalties. Once you reach age 72, you must begin to take required minimum distributions (RMDs). A Self-Directed Roth IRA is exempt from taking lifetime RMDs, since taxes are paid upfront.

If you withdraw funds from a Traditional Self Directed IRA before age 59 ½, you must pay applicable taxes and penalties. Once you reach age 72, you must begin to take required minimum distributions (RMDs). Roth IRAs are exempt from taking lifetime RMDs since taxes are paid upfront.

How Do I Distribute Assets From a Self-Directed IRA?

To make a distribution from a Self-Directed IRA, you should complete a Distribution Request Form that details the distribution type, amount, and frequency of the distribution. If you are distributing an asset, please also submit a third-party certified value (ex: an appraisal, letter from an investment sponsor, CPA-certified valuation, etc.). Depending on the asset, additional documents also may need to be submitted.

After the documents are submitted and approved, Madison Trust will send an assignment of interest to you. This documents the transfer of ownership from your IRA to your personal possession.

How Long Does it Take to Set Up a Self-Directed IRA? 

At Madison Trust, we make Self-Directed IRA setup fast and simple. Fill out our online application in about ten minutes. Then, typically, it takes as little as one or two weeks for your funds to be transferred to your IRA or IRA LLC. 

We will complete your request within a few days. However, the transfer of funds from another custodian depends on that financial institution's processes and procedures.

Our Self-Directed IRA Specialists are here to answer all of your questions.(800) 721-4900

Still unsure which Self-Directed IRA is best for your investment?

Reach out to our team, and we’ll answer any questions you may have.
Corporate Headquarters:
Madison Trust Company
401 East 8th Street • Suite 200
Sioux Falls, SD 57103
Mailing Address:
Madison Administration Company
One Paragon Drive • Suite 275
Montvale, NJ 07645
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Friday: 10:00AM - 4:00PM EST
Saturday/Sunday: Closed
(800) 721-4900
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F: 845-947-1212