A self-directed IRA, often shortened to SDIRA, is an individual retirement account that allows the holder to invest in a much broader range of assets than a typical brokerage IRA, including private real estate, private funds, promissory notes, and other alternative investments alongside traditional stocks and bonds. The account itself follows the same basic tax rules as a standard IRA, with contributions, growth, and distributions retaining their traditional or Roth tax treatment, but the custodian holding it permits nontraditional asset types rather than restricting the account to publicly traded securities.
Because the IRA owner directs where the funds are invested, the account requires more active involvement and diligence than a typical retirement account, along with careful attention to rules that govern how the assets can be used. Income and expenses tied to real estate held in an SDIRA generally flow back into the account itself rather than to the owner personally, preserving the account's tax-advantaged status. Investors interested in holding private real estate inside a retirement account typically need to work with a custodian that specializes in administering self-directed accounts.
Further reading: Best Places to Invest $100K in 2026
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