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Top 5 Reasons Why Americans are Turning to Self-Directed IRAs

Quest's own Anne Marie Rogers discusses why more and more Americans are investing with Self-Directed IRAs.

Posted on June 21, 2021 by Anne Marie Rogers

americans invest

We’re about half way into a new year and it’s time to get serious about your financial outlook for 2022.  Self-Directed accounts are changing the traditional ways of investing and helping people take more control by giving them more freedom.  I’ve compiled a list of the top 5 things you need to know about Self-Directed IRAs that is sure to change your views on investing and get you on the path to financial freedom this year.  

1. Self-Directed IRAs Allow Investments Beyond the Stock Market 

I can’t tell you how often I’ve been at a networking event chatting with someone about Self-Directed IRAs and they are absolutely blown away by the things they never knew were possible inside of these accounts.  Many Americans believe the myth that stocks, mutual funds and other traditional investments are the only options available to them, as this is typically what the major financial companies offer.  However, Self-Directed IRAs open the Narnia-like door for the curious investor to a secret world of investments, filled with entrepreneurs and real estate investors earning tax-free money.  All jokes aside, Self-Directed IRAs have a lot of mysticism around them that is funny to me, as this has been my world for the last 8 years.  

I’m a big believer in having a variety of investments in your retirement account to hedge your bets and hopefully mitigate the risk of losing your nest egg.  The beauty of Self-Directed IRAs is that you can reach true diversification, by investing in alternative or non-traditional investments, such as a real estate, private companies, oil and gas, promissory notes and much more.  Why not have your foot in both the public and private side?  In addition to having the opportunity to invest in alternative assets, Self-Directed IRAs also give investors the key to their metaphorical investment vehicle on the journey to retirement, allowing the account holder to choose all of their own investments.    

2. There Are 7 Different Accounts You Should Consider for Self-Direction

There are so many different accounts available for alternative investments, including Traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, Individual 401(k)s, Coverdell Education Savings Accounts (ESAs) and Health Savings Accounts (HSAs).  Not only can all of these accounts invest in things like real estate or private companies, but they can also be combined together to purchase a single investment too.  All of the IRAs can be utilized to prepare for retirement and build your nest egg, each with their own unique benefits.  

Traditional IRAs could offer tax deductions for your contributions and could be a good option for where to move an old 401(k) or other plan from a previous job.  Roth IRAs are my personal favorite account, offering the possibility of completely tax-free distributions in retirement.  Employer plans like the SEP, SIMPLE, and Solo 401(k) are great for small business owners, allowing them to make large contributions. A Coverdell ESA is a great tool for building money tax-free to pay for your children’s educational expenses like tuition, books, or school supplies, all the way until they reach age 30.  A Health Savings Account can be invested and grown to pay for health expenses for yourself and your family tax-free.  I love having an HSA because I never have to think twice when medical expenses present themselves, big or small.  An HSA can be used to pay for vision, dental, medications, x-rays, surgeries and so much more, all with the big perk of coming out tax-free.  

3. The Investment Possibilities Are Almost Endless, But Be Sure to Consider the Restrictions 

When real estate investors begin to realize the many incredible investment opportunities that exist in these accounts, I always enjoy watching the wheels turn and hearing “So I can do…” or “Wait, so I can do that too?”  I’m in full Cady Heron, circa 2004 mode like “the limit does not exist.”  Might be showing my age with that reference!  Self-Directed IRAs are great for the do-it-yourselfer type, as they allow you to invest in an almost endless variety of alternative assets. From the basic to the unusual investment, there’s something for everyone here.  At Quest Trust Company, we process around 1,000 investments a month and see our clients investing in a multitude of things, including rental properties, flips, seller financing, apartment complexes, commercial real estate, oil and gas, livestock, shares in all types of private companies and one of the most popular being promissory notes.

However, there are some limitations for IRA investments outlined in the Internal Revenue Code, including investments in life insurance contracts and in “collectibles,” including things like art, antiques, most coins and alcohol collections.  There are also restrictions in regard to the transactions that are permitted when investing your Self-Directed IRA.  Disqualified persons are prohibited from engaging in certain transactions with the account and spoiler alert – you, most of your family and your companies are considered disqualified.  Prohibited transactions include things like buying or selling, lending money, or furnishing goods or services between the account and the disqualified persons, just to name a few of the major transactions to avoid.  For example, I couldn’t direct my Self-Directed IRA to purchase a rental property I already owned personally or have my spouse do the fix-ups on my IRA owned property, as this would be considered a prohibited transaction.  However, I can invest in a rental property I don’t already own and hire a non-family member contractor to fix up the property all day long.  These rules can certainly get complex, which is why we are so focused on not only educating our clients but also in educating our staff to be the best possible resource for Self-Directed IRA education in the industry. 

4. Self-Directed IRAs Can Lend Money, Mutually Benefiting the Lender and Borrower

I’ve heard Self-Directed IRAs sometimes have the nickname of a “real estate IRA,” as this is one of the most common investments people associate with this type of account.  As I mentioned earlier, real estate is really just the tip of the iceberg.  One of the most common investments we see our clients do at Quest is lending money out of their IRAs to other investors.  You might be thinking, “I would never lend my retirement account to someone,” but if you think about it, banks do it all the time.  With the proper due diligence and mutual understanding, private lending can be a great way to passively get involved in real estate without the active management of the toilets, tenants and details that it takes to manage real estate.  It goes without saying what the benefit is to the borrower, but essentially, privately borrowing funds creates your own private bank where you can negotiate the terms of your loan to fit your needs.  Imagine having access to almost an unlimited supply of funds available to you for funding all of your deals.  Sounds pretty enticing, right?  For lenders, imagine being able to have a relatively secure investment, the ability to negotiate the terms of the deal upfront and the peace of mind that you’re perhaps improving the community by lending money to a real estate investor looking to fix up a property.  It’s great to make profit off of an investment, but it’s an even better feeling to make profit and do good at the same time.  That’s the type of investment I can really get behind.

5. Not All Self-Directed IRA Custodians Are Created Equal 

If you think back in the deep recesses of your mind, you might be able to vaguely picture your elementary history teacher writing on the chalkboard and teaching on the Declaration of Independence.  I might be grasping here, I didn’t go to elementary school in the United States – ha! Learned something new about me.  But, undoubtedly you’ve heard that all men (and women) are created equal and we’re all entitled to life, liberty and the pursuit of happiness – a true statement we should all consider more often as we live our day-to-day lives.  But, I’ll get off my soap box and tie this back to Self-Directed IRAs now.  Investors have needs that we, as Self-Directed IRA custodians, have a responsibility to meet.  As more and more Americans declare they’re in search of true financial independence and looking for a means to take control of their own future, it seems that Self-Directed IRAs will continue to rise in popularity.   But for those on the quest to self-direct, look no further than…Quest – see what I did there?  At Quest Trust Company our clients are entitled to specialized service, account fees that are reasonable, funding timeframes in the shortest time possible and education of the highest quality.  If you didn’t already notice, that spelled out SAFE.  So make the SAFE choice and choose Quest Trust Company.  We’re founded by investors, for investors and are constantly shaping our systems, advances and customer service around what the real investor needs.  ​


Anne Marie joined Quest Trust Company in 2013 and currently serves as Sales Officer. After graduating from St. Edward's University, Anne Marie pursued a position as an IRA Specialist and in 2014, received the designation of Certified IRA Services Professional from the Institute of Certified Bankers. In 2020, Anne Marie received the Think Realty Honors Award for Real Estate Investing Services and was featured on the 2021 cover of the Think Realty magazine, as a woman to watch in the industry. Anne Marie is one of the lead female educators at Quest Trust Company, with a passion for making the topic of saving and investing fun and approachable, even for the newest investor on the block. She loves to teach people how to take control of their retirement through her experience at Quest and from personal experience doing her own note investments starting in her early 20s.


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