Building up cash in a self-directed IRA

5 Replies

I'm just starting to research self directed IRA's. Do they have the same annual investment limits as a regular IRA - about $5500/year? If so, if your plan is to invest in real estate with the money in your IRA, what happens to your money in the meantime while you're building up enough cash to invest?

Could you invest the maximum each year for four years until you have a little over $20,000 saved up and then invest it?  Would it just sit in the account until then, or you do have to invest the money in something?  

With the stock market at all time highs, I'd rather not put money into a traditional IRA and lose it all when the market goes down.


self-directed IRA is still an IRA. It can be Traditional IRA or Roth IRA. The same rules would apply. So if you are considering self-directed Traditional IRA the contributions would be limited to $5,500 per year.

If you need about $20K to get into your first alternative investment then you don't need a self-directed IRA at this time. Simply open free IRA at Vanguard (or any other brokerage or bank) and build it up until you have the sum of money you need to start investing, then rollover your IRA into self-directed and start investing. There is no point paying the fees for self-directed IRA for all these years if you can't invest the money.

P.S. You don't have to invest in stocks while you are waiting, just pick low risk investments. 

@Stephanie Irto

SDIRA rules including contributions, distributions, timeing, etc exactly the same as IRAs at any institution. The only difference is the investments you can choose and the transparency of costs. 

I know at least one SDIRA administrator that doesn't charge any annual fees until you actually make an investment.  Your money could also be joined with an HSA, ESA, and other people's money and not wait 4 years. Wholesaling, discounted notes,and options, etc are some investments smaller accounts make. 

There are many other options dependent on the type of returns you can generate. 

 @Dmitriy Fomichenko idea to use a non SDIRA is good but make sure they actually don't charge you or it is a small charge you can live with. More banks and brokers started charging fees lately. 

@Stephanie Irto

Another option is to open a self-directed IRA with a low cost custodian. Then you can invest in tax liens or pooled promissory notes if you are trying to diversify away from stocks and mutual funds.

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