Self-Directed IRA Contributions: Rules & Tips

Self-Directed IRA Contribution Rules and Tips


Written by John Rothans

Aug 26, 2020

New to IRAs? Get a quick rundown of IRA contributions—how much and how to make them—and, most importantly, how to make the most of them. Learn about Self-Directed IRA requirements and contribution limits.

How Much Can You Contribute to a Self-Directed IRA?

For 2020, the maximum contribution to a Self-Directed IRA—in the form of a traditional IRA or Roth IRA—is $6,000 if you’re under age 50. If you’re 50 or over, you’re allowed to make an extra $1,000 catch-up contribution. So if you’re at least 50 years old, the maximum contribution to a Self-Directed IRA is $7,000 for 2020.

If you’re self-employed, you can set up a Self-Directed IRA through a SIMPLE IRA or SEP IRA structure.

TIP: Don’t underestimate the power of catch-up contributions. More than a quarter of baby boomers are unaware of their ability to make such contributions, U.S. News & World Report notes.

How Do You Contribute to a Self-Directed IRA?

Brokerage firms offer traditional IRAs and Roth IRAs but typically don’t offer Self-Directed IRAs. Therefore, you’ll probably need to make Self-Directed IRA contributions through an IRS-approved trustee or custodian, such as a bank or a trust company.

A trustee or custodian can help with several aspects of establishing a Self-Directed IRA, such as transferring funds from other retirement accounts that can be applied to your asset acquisition.

TIP: You can also roll over funds from an existing retirement account, like a 401(k), into an IRA with help from a trustee or custodian. This might be an avenue worth exploring if you feel like your 401(k) provider doesn’t offer the asset options you want, or you’d like to take a more hands-on approach to your retirement planning.

What Types of Contributions Can You Make to a Self-Directed IRA?

With a Self-Directed IRA, you can make contributions in categories that go beyond the customary assets found in traditional and Roth IRAs, such as stocks, bonds, mutual funds, and ETFs. Alternative assets that can be put into a Self-Directed IRA include:

  • precious metals
  • real estate
  • tax lien certificates
  • private equity stakes
  • promissory notes
  • cryptocurrencies
  • livestock
  • mineral rights

A Self-Directed IRA that contains precious metals might be called a Precious Metals IRA or Gold IRA.

“Many alternatives have a low correlation to stocks, bonds, or both. This low correlation can be a real asset to investors in times of market volatility as they strive to control the volatility and downside risk of their portfolios,” according to Forbes.

While alternative assets used to be primarily sought after by institutional or high-net-worth asset holders, “they are now moving into the retail mainstream, as individuals—confronted with volatile financial markets and retirement savings gaps—seek different sources of income and returns,” FTAdviser notes.

Some alternative assets are not allowed to be housed in Self-Directed IRAs. These assets include artwork, stamps, rugs, antiques, collectible coins, and life insurance.

TIP: Note that while collectible coins cannot be stored in an IRA, many popular gold and silver bullion coins are IRS-approved for inclusion. These coins include American Eagle bullion coins, American Buffalo bullion coins, Austrian Philharmonic coins, and Canadian Maple Leaf coins, among many others.

What Are the Benefits of a Self-Directed IRA?

First and foremost, a Self-Directed IRA can lend diversification to a portfolio and help smooth out your returns in case of market volatility.

Plus, Forbes notes that Self-Directed IRAs may be an option for people who don’t have immediate liquidity needs since many alternative assets have a longer hold period than traditional securities do. Furthermore, a Self-Directed IRA might deliver higher returns than other assets.

“As with any IRA or retirement account, one benefit [of a Self-Directed IRA] is the potential to grow account balances in a tax-advantaged environment for the future,” John Bowens, retail sales manager for Equity Trust Company in Westlake, Ohio, told U.S. News & World Report.

TIP: You can start contributing to a Self-Directed Precious Metals IRA with help from U.S. Money Reserve. Call today to talk about your retirement goals and learn how your Self-Directed IRA contributions can work harder for you when backed by the power of precious metals.


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