While we typically discuss matters related to regulation crowdfunding on the Vicinity blog, today we are going to look at self-directed IRAs (SDIRAs).

Individual retirement accounts (IRAs) have been a popular choice for individuals looking to save for their golden years. However, traditional IRAs have limitations on the types of investments you can make, which is why more and more investors are turning to SDIRAs as an alternative investment vehicle.

If you’re unfamiliar with self-directed IRAs, you might be wondering what they are and how they differ from traditional IRAs. In this article, we’ll go over the basics of SDIRAs and what investors need to know before opening one. We’ll also provide actionable guidance and resources to help you get started.

What Is a Self-Directed IRA (SDIRA)?

A self-directed IRA is a type of retirement account that gives investors the flexibility to choose their own investment options, including alternative assets such as real estate, private companies, and more. Unlike traditional IRAs that are limited to stocks, bonds, and mutual funds, SDIRAs allow investors to diversify their portfolios and invest in a wider range of assets.

Why Consider a Self-Directed IRA (SDIRA)?

SDIRAs offer investors a number of benefits when compared to traditional retirement accounts, including:

  1. Diversification: With an SDIRA, you have the ability to diversify your portfolio and invest in alternative assets, which can help reduce your overall risk.
  2. Tax Advantages: SDIRAs offer the same tax advantages as traditional IRAs, including tax-deferred growth on your investments and tax-free withdrawals in retirement.
  3. Control: With an SDIRA, you have complete control over your investments, allowing you to make decisions based on your own personal investment strategy.
  4. Increased Investment Opportunities: Traditional IRAs have restrictions on the types of investments you can make, which limits your investment opportunities. With an SDIRA, you have access to a wider range of investment options, including real estate, private equity, and more.
  5. Potential for Higher Returns: By investing in alternative assets, you have the potential to earn higher returns than you would with traditional IRA investments.

What You Need to Know Before Opening a Self-Directed IRA (SDIRA)

Before opening an SDIRA, there are a few things you should consider. Keep these points in mind as you determine if a SDIRA is right for you.

Legal Restrictions

First, it’s important to make sure that you comply with the rules and regulations governing SDIRAs. The Internal Revenue Service (IRS) has strict rules and regulations that must be followed when investing in an SDIRA. 

For example, you cannot use an SDIRA to invest in collectibles, such as art, stamps, or coins. You also cannot invest in life insurance or use the SDIRA to purchase a property you or your family members will use.

Custodian Requirements

Next, as a part of the compliance element of these investment accounts, you must work with a custodian that specializes in self-directed IRAs. The custodian will handle the administrative duties of your SDIRA, including keeping track of your investment transactions, sending you statements, and reporting your investment activity to the IRS.

Due Diligence

When investing in alternative assets with an SDIRA (as with all investments), it’s important to do your due diligence and thoroughly research each investment opportunity. Make sure you understand the risks involved and consult with a financial advisor before making any investment decisions.


Finally, be sure to pay attention to the costs associated with opening this type of investment account. SDIRAs may have higher fees than traditional IRAs, including account setup fees, annual fees, and transaction fees. Make sure you understand the costs associated with your SDIRA before opening one.

How to Open a Self-Directed IRA (SDIRA)

If you’re interested in opening a self-directed IRA, follow these steps:

  1. Choose a Custodian: As mentioned earlier, you must work with a custodian that specializes in self-directed IRAs. Do your research and choose a custodian that offers the investment options you’re looking for and has a good reputation.
  2. Roll Over Funds: If you already have a traditional IRA, you can roll over the funds into your new SDIRA. If you don’t have an IRA, you can make a new contribution to your SDIRA.
  3. Fund Your Account: Once your SDIRA is set up, you can fund your account with either cash or by rolling over funds from an existing IRA.
  4. Make Investments: Once your SDIRA is funded, you can start making investments. Remember to do your due diligence before making any investment decisions.
  5. Monitor Your Investments: Regularly monitor your investments and make any necessary adjustments to your portfolio. Make sure you understand the risks involved with each investment and are comfortable with the potential outcomes.

Self-directed IRAs (SDIRAs) offer investors the flexibility to choose their own investment options, including alternative assets such as real estate, private businesses, and more. With the right resources and guidance, an SDIRA can be a valuable tool for achieving your financial goals.

SDIRAs + Reg CF: Aligning Investments With Values

Self-Directed IRAs (SDIRAs) and Regulation Crowdfunding (Reg CF) can be great complements to local investing. Reg CF allows anyone to invest in businesses and real estate projects through an online platform like Vicinity, while SDIRAs allow investors to use their retirement funds to invest in a variety of assets, including private offerings.

When combined, SDIRAs and Reg CF can provide investors with even more options for investing in local businesses and projects. An investor could use their SDIRA funds to invest in a local development or growing business through a Reg CF platform. This type of investment not only diversifies the investor’s portfolio but also supports the local economy.

Investing in local opportunities through Reg CF platforms allows participants to invest in projects that are important to them and their community. This kind of impact investing is becoming increasingly popular among investors looking to align their investments with their values.

It’s important to remember that investing is inherently risky and may result in loss of capital. Additionally, SDIRA rules and regulations must be followed when making these types of investments. Therefore, it’s important to conduct due diligence and seek relevant expertise and advice before making any investment decisions.
Are you interested in learning more about combining SDIRA investments and Reg CF? Reach out and speak with us today!