“Your retirement funds shouldn’t sit idle, they should work smarter. A Self-Directed IRA gives you the power to move beyond Wall Street and invest in what you truly understand.”

Retoro Capital Investments

From someone who has set up self-directed individual retirement accounts (SDIRAs) for myself and alongside our investors, but is not affiliated with any particular SDIRA company, this guide is to help you understand the process behind getting started investing in a broader variety of options that are available with a traditional IRA.

The first time I heard of a "self-directed IRA," I was at a real estate high-pressure sales event, encouraging us to set one up to invest in real estate using their paid education. They didn't mention that we can't use IRA funds to invest in our own deals, that the transactions need to be arm's length with no "self-dealing," they only wanted us to think we had money available to buy expensive courses or become passive partners with them. Despite the "ick factor" of the experience, because I'm not the type to make impulsive decisions, the idea of passively investing with our IRA was intriguing enough to go home and research it.

What I found out was that setting up a self-directed IRA to broaden what we can invest in for a portion of our retirement portfolio beyond publicly traded assets is not difficult to set up, but it does take some time and has several options to understand for which structure is the best fit.

I'm not a financial advisor, I'm not an IRA custodian, I'm just an investor who set up several SDIRAs for my family, and in our fund we are often the first person our investors ask for direction on how to set one up for themselves. None of this is professional advice, just an outline of possibilities that we've encountered personally and within our investor pool.

Whether you've had an initial call with us at Retoro Capital Investments and have decided to invest with us as a passive real estate lending partner, or just want to get the account set up to be ready as you consider various investments, following are some steps and considerations before jumping in.

But First, What is a Self-Directed IRA?

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A self-directed IRA is a retirement account that lets you invest in assets beyond publicly traded stocks and bonds. This includes less liquid and private investments such as real estate, private loans, precious metals, or even cryptocurrencies, giving you more control over where your money goes. Unlike traditional IRAs managed by banks, an SDIRA allows you to direct investments, making it ideal for those who want to diversify and build passive income.

When I first heard about them, I thought ours were self-directed because we could choose which mutual funds we invested in! Oof! I quickly learned that it was our 401(k) which has the least amount of control of any type of IRA. We had old 401(k)s at previous jobs that we had never rolled over to just an IRA, so there was money we could have had more control over, but had never known we needed to move the funds to a different account type.

So, Step 1 is knowing what type of accounts you already have! Roth, traditional, Solo, SEP, through an employer, etc. You can generally roll all of these over that aren't held at a current employer and hold them at a traditional custodian such as Schwab, Fidelity, or even Robinhood.

Step 2 is deciding how much you want to move from traditional custodians to self-directed or "hands-off" custodians. Self-directed custodians do not support public investments, so you'll need to leave stocks, bonds, mutual funds, ETFs, etc, with a traditional or "active" custodian, only moving those funds you want in private market investments.

This flexibility is a game-changer for investors like us, especially when paired with opportunities like Retoro Capital’s 10-12% APR lending. It’s a tool to grow your nest egg tax-deferred or tax-free, depending on whether you choose a Traditional or Roth SDIRA. Understanding this option is the first step toward securing your financial future.

Choosing a Custodian

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IRA custodians or trustees fall into two categories: bank active traditional, or nonbank passive self-directed. There are several hundred custodians to choose from who are registered with the IRS. Most banks have self-directed accounts you can open directly where you already bank. There are also several custodians who specialize as trustees in these types of retirement accounts.

Selecting the right custodian is critical for your SDIRA. We work with your custodian to facilitate transferring your funds from them to us, and we most often partner with DirectedIRA, Inspira Financial, and Equity Trust as well as several banks.

Customer service and fee structure are the two major considerations. The above are well-regarded options, acting as directed custodians who hold legal title to your assets but cannot offer investment advice: they can only advise on whether the transaction is allowed. You should consult with your financial, legal, and tax advisors for advice on the investment itself that you are considering.

To find good options, read reviews and ask for referrals from other investors to gauge reliability. Also, ask the deal sponsor, such as us, which is easiest to work with from a customer service standpoint. Your choice will impact setup ease and long-term management, so take time to research what fits your needs.

Timelines to Expect

The timeline for setting up your SDIRA depends on a few factors. Account opening and initial application review typically take 1-2 weeks, assuming all documents are in order. Funding via rollover can extend this to 2-4 weeks if the prior institution delays processing.

If you’re transferring assets or verifying investments, add another week or two. Overall, expect 2-4 weeks from start to finish for a fully operational SDIRA. Plan ahead to align with investment opportunities like Retoro’s deals, avoiding rushed decisions.

Options and Considerations

Your SDIRA setup offers choices that shape its use. Let’s explore the key options for consideration for setting up your account.

Fee Structures

Custodians offer different fee models. Flat fees, common with DirectedIRA ($225-$2,250 annually) and Inspira Financial ($225 minimum), cover setup ($360-$600) and maintenance, with no transaction costs. Assets under management (AUM) fees (0.1-1% of assets) are less common for SDIRAs but may apply with larger portfolios. Compare these to your portfolio size and activity level, which approach will be more cost-effective?

Legality of Referral Fees

Referral fees are legal if disclosed and compliant with SEC regulations, but custodians like DirectedIRA avoid sales pitches, focusing on education. Check for transparency in any referral program to ensure it doesn’t influence advice. At Retoro, we do not accept any referral fees from providers, but we may occasionally offer discount codes when you use a custodian that we have enjoyed working with in the past. They're not all the same, and we have some we've found that have better customer service than others. Again, when choosing a custodian, be sure to weigh all the factors important to YOU: a discount code should be no more than a small consideration alongside many important options.

Checkbook Control

Checkbook control involves setting up an IRA-owned LLC, letting you set up a company for the SDIRA and manage a checking account directly. Advantages include speed for transactions like real estate purchases and no per-deal fees. Speed is usually only necessary if you are directly funding short-term deals and need access to the capital quickly, such as running your own hard-money lending deals or silent partnering on fast renovations. If your capital will be tied up for more than a year, a checkbook IRA is usually an unnecessary expense, administration hassle, and regulatory risk if IRS rules are breached, such as self-dealing with disqualified persons (e.g., funding your own deals or those of family).

Checkbook control shines in specific scenarios. Imagine buying a rental property at auction and the ability to quickly write a check from the LLC account to close the deal instantly, then deposit rent income back tax-deferred. Or, fund a private loan with a single check, reinvesting interest without custodian delays. You could even purchase gold or crypto quickly, capitalizing on market dips, all managed through the LLC.

These examples highlight the control and speed, but you must track every transaction to avoid IRS scrutiny. This setup suits active investors comfortable with paperwork. This is also where you rely heavily on guidance from your custodian and other financial professionals on allowable transactions, both in purchase and management.

Nearly all custodians will offer this LLC feature, but do not feel pressured into creating this type of account if you don't need it. Responsible custodians should educate you on all your options, but pushing features you may not need to increase your fees should raise red flags.

Administrative Responsibilities

Compliance is a big consideration. You must follow IRS rules (such as no personal benefit from investments), which require careful recordkeeping. Suitability matters too: experienced investors may handle checkbook control, while novices might prefer standard SDIRAs for simplicity. Custodian support, from setup help to ongoing guidance, also varies, so assess their service level.

Deciding the Best Fit

Choosing the right SDIRA setup, fees, level of control of funds, and investment suitability depends on your situation. If you invest frequently, checkbook control saves time and fees. If you prefer simplicity, a standard SDIRA with custodian oversight might be better, especially if you’re new to alternatives and want very passive investments. Assess your risk tolerance carefully as compliance errors can disqualify the IRA, and create your investment "buy box" to include applicable SDIRA fees.

Match this to your lifestyle goals, like retiring early with passive income from Retoro’s lending. A tax advisor or financial planner can tailor the decision, ensuring it fits your retirement plan.

Step-by-Step Setup Process

Setting up an SDIRA involves a clear process with a trusted custodian. Here’s how to get started.

First, open the account by completing an online application with your chosen custodian, such as DirectedIRA or Inspira Financial. You’ll need to provide personal information and designate the account type (Traditional or Roth, SEP, HSA, Solo 401(k), Coverdell, etc). This step typically takes a day to submit, pending review.

Second, fund the account. You can transfer funds via a rollover from an existing 401(k) or IRA, which may take 1-2 weeks depending on the previous provider, or make new contributions up to annual IRS limits ($7,000 for 2025 if under 50, $8,000 if 50+). The custodian will guide you through the paperwork to initiate this. In our first setup, we opted for an LLC, and our traditional custodian liquidated our assets in the amount we requested and mailed a paper check to us that took about 3 weeks to arrive. We then deposited it into the new LLC bank account, and it was put on a 14-day hold. However, our second rollover was much faster because that custodian did a wire transfer. We were planning on 1-2 months for the availability of funds per our previous experience, but we had the money ready to fund in under a week after requesting it. In both cases, our SDIRA custodian worked closely with our traditional custodian to facilitate smooth transfers.

Rest assured that liquidating investments in your IRA won’t trigger tax penalties, as this is a transfer to a different custodian rather than a withdrawal. To avoid a taxable event, follow IRS rules for a direct trustee-to-trustee transfer or rollover: ensure funds move directly without entering your personal name, limit rollovers to one per 12-month period, and complete the process within 60 days. With careful planning and execution, you can avoid taxes and penalties seamlessly.

Third, select your investment direction. Notify the custodian of your intended investments, such as if you are investing with us in our private lending deals. With any investment, you'll submit your subscription agreement and other documents to your custodian for review.

Finally, complete the custodian's documentation. Sign the custodian agreement, provide identification for compliance, and submit any required forms. Take extra care to fill out documents accurately, working with both your custodian and your deal sponsor. This ensures they approve the asset type, which can take a few days, without requiring the repetition of paperwork due to minor errors. This is where great customer service really shines. This final step locks in your funds, ready for action, and transfers them from the custodial trust account or your SDIRA LLC bank account to your sponsor's bank account, usually within a week of your request.

Now you are ready to invest using your retirement funds in a wide variety of assets! Use your new power carefully as you continue to educate yourself on your options to take advantage of private market investing!

Final Thoughts

Again, this is meant as a layperson's guide in plain English, not as financial advice. The details of your experience will vary, as we've seen in our personal transactions as well as with each of our investors. Once you know better what to expect, you can more easily navigate any curveballs in the process.

If you’ve spoken with us, visit partnerwithrci.com to schedule a follow-up call and explore SDIRA integration with our deals. If you’re new, check out custodian websites like DirectedIRA.com or review one of our SDIRA webinars to learn more. If this isn’t for you, just ask to be removed: no pressure. Either way, consult a financial advisor before proceeding to confirm it’s the right move.