Pros and Cons of Rolling a Traditional IRA into a Self-Directed IRA

Ready to think differently about retirement? Unfortunately, it takes more than thinking differently. You also need a plan on paper. If you want more freedom in the way you choose assets in your retirement account, you’ll need a Self-Directed IRA. And for many people, the best way to get started isn’t always to start a new account, but to roll an existing IRA with a traditional brokerage into a Self-Directed IRA. Just one question: is it right for you? To answer that question, let’s break it down into the pros and cons.

Pro: More Control in Self-Directed IRAs

One of the biggest advantages of making the switch is control. Self-Directed IRAs let you choose from a wide range of assets you won’t usually find at a brokerage. Real estate, private lending, startups, precious metals, and tax liens are all possibilities when the account is set up correctly. That sense of choice can make retirement planning feel more intentional. You’re working with investments that match your interests, instead of staying boxed into a narrow set of options.

Once you’ve got a Self-Directed IRA, you’re free to call the shots. You might make decisions based on your investing knowledge, gravitating towards assets you know. It can be empowering to feel like you’re shaping your retirement path rather than following a preset menu of options.

Pro: Tax Advantages with a Self-Directed IRA

Another pro is that rolling into a Self-Directed IRA doesn’t change the core tax benefits of your Traditional IRA. The account still grows tax-deferred. You still avoid taxes on gains each year. And when you eventually take distributions in retirement, they’re taxed the same way they’d be from a regular Traditional IRA. You’re not losing anything in the exchange. You’re just gaining access to a landscape of potential asset classes that’s wider than in the typical employer-sponsored plan.

More choices mean you can pursue alternative assets without sacrificing the protections you’re accustomed to. That combination can be appealing if you want diversification that goes beyond stocks and mutual funds. It’s a way to keep the long-term power of compounding intact while exploring different ways to grow your money.

Pro: Portfolio Diversification

Rolling over can also help reduce concentration risk. Many people end up with retirement accounts that mirror the stock market almost exactly. While there’s nothing wrong with traditional assets, relying on only one category can feel limiting. A Self-Directed IRA opens the door to assets that don’t move in lockstep with market headlines.

This kind of diversification doesn’t guarantee better results. But it can create a more balanced foundation for long-term planning. When different parts of your portfolio behave differently, the ups and downs can feel easier to manage. That sense of balance can make a big difference during unpredictable economic cycles.

Cons to Consider when Using a Self-Directed IRA

Now for the cons:

Rolling a Traditional IRA into a Self-Directed IRA can open new doors, but it helps to know whether it fits your mindset and goals.  Interested in learning more about Self-Directed IRAs?  Contact us at 866-7500-IRA (472) for a free consultation or download our free guide.