Should Investors Still Consider a Self-Directed Traditional IRA?

Is “traditional” always better? Not necessarily. Sometimes, sure. Other times, traditional simply means an old way of doing things. But the specific case of the Self-Directed Traditional IRA is a bit more complicated than these paradigms. There are reasons to contribute to a Traditional IRA, after all, and it will always help retirement investors to at least understand them. Let’s compare a Traditional to a Roth so you know how these different accounts work.

How a Traditional IRA Actually Works

A Self-Directed Traditional IRA uses the same tax structure as any Traditional IRA. You contribute pre-tax dollars, which can lower your taxable income in the year you make the contribution. You pay taxes later, when you take distributions in retirement. Self-direction doesn’t change the tax treatment. It changes how you use the account.

With a Traditional IRA, the account can hold non-traditional assets like real estate, private notes, or other alternatives that meet IRS guidelines. Income generated by those assets flows back into the IRA and stays tax deferred. The same is true for gains when an asset is sold inside the account. That deferral can be meaningful for investors who are focused on growing the account balance over time.

Another important feature is familiarity. Some investors are already comfortable with the Traditional IRA structure and prefer not to convert or rethink their entire retirement approach. A Self-Directed Traditional IRA lets them keep the tax framework they know while expanding what the account can hold.

Comparing a Self-Directed Traditional IRA to a Roth

The biggest contrast between Traditional and Roth IRAs comes down to timing. With a Roth IRA, taxes are paid upfront and qualified distributions come out tax-free later. With a Traditional IRA, taxes are deferred until retirement. Neither approach is universally better. They simply answer different planning questions.

A Traditional IRA can feel appealing to people who expect their taxable income to be lower in retirement than it is today. In that case, deferring taxes may align with how they see their future income. The account also allows for larger balances to grow without immediate tax friction, which can matter when assets generate ongoing income inside the IRA.

Required minimum distributions are another difference. Traditional IRAs have them, while Roth IRAs do not during the original owner’s lifetime. That requirement adds a planning layer, especially when the IRA holds illiquid assets. It doesn’t make the account unusable, but it does mean thinking ahead about cash flow and timing.

Why a Self-Directed Traditional IRA Still Has a Place

For many investors, the appeal of a Traditional IRA isn’t about choosing sides between Traditional and Roth. It’s about flexibility. Some people hold both types of accounts and use them for different purposes. Others start with a Traditional IRA because that’s what they already have from prior contributions or rollovers.

There’s also a practical element. Not every investor wants to convert funds to a Roth and trigger a taxable event right away. Keeping assets in a Self-Directed Traditional IRA can feel like a steadier step, especially when the goal is simply to understand alternative assets inside a retirement account.

A Self-Directed Traditional IRA can still support long-term planning, asset diversification, and yes, even plenty of growth. It just does so with a different tax situation than a Roth IRA.

If you’re weighing whether a Self-Directed Traditional IRA still makes sense for your situation, a conversation can help bring clarity. Interested in learning more about Self-Directed IRAs?  Contact us at 866-7500-IRA (472) for a free consultation or download our free guide.