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The Rocket Dollar Guide to Self-Directed Retirement Plans
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2 min read

Self-Directed IRA versus a Traditional IRA: What are the Primary Differences?

Rule of Three

People often ask us about the primary differences between “traditional” individual retirement accounts and the Self-Directed IRAs. In the grand scheme of things, there aren’t many differences; what’s emerged over time, however, are the different investment options available for Self-Directed IRAs.


Back in 1974, the Employee Retirement Income Security Act went into effect and established minimum standards for the majority of voluntary private retirement plans. The individual retirement account was born out of ERISA, and while IRAs allow for a variety of investments, plan holders in practice are limited by what the IRA custodian offers.

Since brokerage houses and banks—your typical IRA custodians—only sell stocks, bonds, mutual funds or exchange-traded funds, retirement investors are handcuffed to those limited investment options. Retirement portfolios, therefore, are at the mercy and whim of cyclical stock market swings – and as anyone who follows the news knows, there have been more ups and downs on that ride than there are at Kingda Ka at Six Flags Great Adventure in Jackson, N.J.

In these days of cyclical stock market swings, diversification is the key to building a robust retirement portfolio.


The Self-Directed IRA: Flexibility, Choice, and Checkbook-Level Control

Rocket Dollar’s Self-Directed IRA  offers unparalleled flexibility and choice for retirement investors. Some of the many alternative investment options include:

  • Real estate

  • Cryptocurrency

  • Crowdfunding

  • Peer-to-peer loans

  • Startup equity funding

  • Precious metals and other commodities

The list goes on. While there are certain prohibited transactions as defined by the Internal Revenue Service, retirement investors can choose from a wide range of primary investment assets that appeal to their investment principles. To date, the predominant asset classes for Rocket Dollar Self-Directed retirement investors has been real estate and business startups, though the entire span of alternative asset classes is quite varied and unique. These assets are unavailable through IRAs offered through banks and mutual fund companies such as Fidelity and Vanguard because they can’t be monetized.


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Rocket Dollar: Ballast in Stormy Seas

Rocket Dollar provides flexibility and choice, as well as education about the many ways account holders can take a piece of their retirement savings and invest in alternative assets. And it’s this diversified range of alternatives that provide crucial balance to retirement portfolios since adding any new asset class, whether it’s real estate, cryptocurrency or private equity, changes the behavior and performance of the portfolio.

Some people will always prefer investing their retirement funds into publicly traded stocks because they are easily tracked and investors can see exactly on any given day whether their investment is up or down. Other investors simply don’t trust the stock market and will only invest in real estate. Some of these investors have developed extensive expertise in commercial and residential real estate.

These very different assets have dissimilar relationships in regards to returns and the performance of the public markets, so having a diverse mix of both assets in a retirement portfolio adds crucial ballast to help retirement investors stay afloat during stormy weather.

If just want to buy stocks, bonds and other public investments, you don’t need a Rocket Dollar account; you can open an individual retirement account with any large bank or brokerage house. But if you seek true 21st century diversification, consider opening a Self-Directed IRA. Only through diversification can investors ride the crest of bull and bear waves rather than falling into the troughs.


Learn more about Self‑Directed retirement plans with our ultimate guide.

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