Investing with your IRA or old 401(k): the rules physicians can't ignore
Self-directed retirement accounts can expand options beyond public markets—but prohibited transactions and tax traps matter. This page is educational, not advice.
What is a self-directed IRA?
A self-directed IRA (SDIRA) is an individual retirement account held by a custodian that permits investments beyond traditional stocks, bonds, and mutual funds—including real estate, private lending, and certain alternatives.
Eligible accounts: Traditional IRA, Roth IRA, SEP IRA, Solo 401(k), Rollover IRA
What you can and cannot do
| Generally Allowed | Not Allowed |
|---|---|
| Real estate (rental, commercial) | Collectibles (art, antiques) |
| Private lending / notes | Life insurance |
| Certain private equity | S-corp stock |
| LLCs and partnerships | Self-dealing transactions |
Rules depend on structure and custodian. Consult a qualified professional.
Prohibited transactions (read this twice)
A prohibited transaction is improper use of an IRA by the owner, beneficiary, or a disqualified person (family members and related entities). Examples include borrowing from the IRA, selling property to it, or using IRA assets for personal benefit.
Consequence: The IRA can be disqualified entirely, triggering immediate taxation and penalties.
UBIT / UDFI (the tax surprise)
- • Debt-financed real estate can trigger UDFI tax
- • Partnerships can generate UBTI
- • Tax-sheltered accounts can still owe taxes
What retirement accounts are good for
- Tax-deferred or tax-free compounding
- Diversification beyond public markets
- Long time horizon investments
Note: Depreciation benefits are reduced inside tax-sheltered accounts.
Related pages
FAQ
Depends on plan rules; often you need to rollover to an IRA first.
Self-dealing is a prohibited transaction risk. The IRA must operate at arms length.
Sometimes. Structure matters, and UBIT/UDFI risk applies.
Get routed by fit
Informational only. Not an offer to sell securities or a solicitation to buy. Not financial/tax/legal advice. Do not submit PHI or account numbers.