You'll pay high fees, self-directed IRAs aren't cheap. In addition to transaction fees, the IRA depositary may also charge you an account opening fee, an annual fee, and a commission for each asset held in your account. These fees can be a disadvantage for someone with a very modest IRA, since they represent a larger percentage of the investment. For larger IRA balances, the fees are worth the perks and opportunities.
The fees charged by self-managed IRAs are usually relatively high. They also vary depending on the depositary of your IRA and the type of investment. Remember that SDIRA providers usually charge a wide range of fees, such as setup fees, administration fees, transaction fees, and annual maintenance fees, depending on the value of your account. If you don't transact regularly, you can accept the lower transactions for a lower annual fee.
Investors with a good understanding of investments in different segments can earn higher returns with self-directed IRAs than with traditional IRAs. If you're looking for more investment options for retirement and control than your current IRA offers, a self-directed IRA might be what you need. The different custodians offer self-managed IRA accounts that can own gold bars, silver bars or even cryptocurrencies such as Bitcoin. Because Romney had a self-directed IRA (also known as SDIRA), he was able to use his IRA to finance venture capital and private equity investments within his retirement account.
While self-directed IRAs may make sense for some savvy investors, they come with greater risks and disadvantages than standard IRAs. You can choose to open a self-directed IRA like a traditional IRA or a Roth IRA, with the same pre-tax and after-tax contribution rules.