Self-Directed IRA and 401(K)

What is a Self-Directed IRA?

A self-directed individual retirement account is an individual retirement account which allows alternative investments for retirement savings.

New Mexico Angels provides the following information to our community to increase sources of capital to be invested into desirable and high growth companies.



Key Takeaways:

  • Self-Directed IRAs and 401(k)s provide individuals the freedom to invest in alternative assets (such as private companies), at their own discretion, allowing them the potential to generate higher returns than with traditional public stocks and bonds.
  • Choosing the right custodian is important for individuals to comply with all the rules set by the IRA, to invest their retirement funds fully informed, and to understand the risks of each investment.
  • Having a self-directed retirement account comes with fees.


Self-Directed IRAs and 401Ks

Individuals may be interested in investing some of their retirement savings in alternative assets that have the potential to generate returns more attractive than the traditional stock or bond market investments made by traditional retirement savings accounts.

A self-directed IRA or 401K is an alternative that allows investors to invest in certain assets that traditional IRA and 401K accounts would not allow, such as:

  • Private stock
  • Real estate
  • Limited partnerships
  • Cryptocurrency
  • Commodities
  • Precious metals
  • Crowdfunded assets


How to Set Up a Self-Directed IRA or 401(k)?

The individual needs to find a custodian. Custodians are passive, non-discretionary, financial institutions that hold an individual’s assets that are purchased with their retirement funds. This is done for the IRS to make sure that owners are following contribution limits and other requirements.


Pros and Cons of a Self-Directed IRA or Self-Directed 401(k)



Full Control of your financial outcome (positive or negative) based on the investment decisions you make.

Higher Risk if you invest in alternative assets with high return probability, but higher risk than traditional stocks and bonds as well.

Higher Returns if you invest in assets that appreciate rapidly and in assets that your traditional IRA or 401K.

Fees. Custodians charge annual fees as well as fees for each transaction. Fees vary by custodian depending on the range of services that an individual prefers.

Asset Diversification. A traditional IRA or 401(k) would not allow you to make angel investments in early-stage companies that could become the next unicorn! Additional Rules. The IRA provides a list of rules that individuals must follow with their self-directed IRAs and 401(k). Custodians are good at advising individuals on the limitations of self-directed IRAs and 401(k)s, but the quality of the advice that custodians provide also varies by financial institution.


Interested in learning about Self-Directed IRA and 401(k) custodians established in New Mexico?

     Specialized Trust Company                                                  Horizon Trust Company                 


DISCLAIMER: Above information is provided for EDUCATIONAL PURPOSES ONLY. NM Angels is not an investment bank, a broker dealer, investment clearing-house, or an investment advisor, but rather a forum in which investors may discuss and review investment opportunities. NM Angels is not registered with the Securities Exchange Commission or any state securities commission. Each prospective investor considering company presentations made through the NM Angels platform is responsible for his or her own investment decisions. All investments in entrepreneurial companies involve a high degree of risk, and investors should be able to bear the risk of complete financial loss.