Ever hear of an “Alternative Investments IRA”? It’s not an IRA account type, like a Roth IRA, but rather a new approach to investing. It generally refers to Self-Directed IRAs in which you place your retirement money in alternative investments—those investments that aren’t typically offered through traditional brokers. Alternative investments like real estate and precious metals are certainly valid to hold within an IRA if you follow the rules, but they’re “alternative” investments because they require that you step away from the mainstream path to retirement and carve your own way. Here’s what you need to know about Self-Directed IRAs—and how to forge your own path.
Know the Secrets of the Self-Directed IRA
To understand how to use an Alternative Investments IRA, start with the basics of what Self-Directed IRAs actually are. A Self-Directed IRA is not fundamentally different from a traditional IRA or Roth IRA in terms of tax benefits or contribution limits. It’s instead a different approach to your retirement account. Instead of being limited to stocks, bonds, and mutual funds, you’ll work with a Self-Directed IRA administration firm who allows you to invest in the full gamut of alternative investments available to you.
Why Invest in an “Alternative Investments” IRA?
For many investors, the appeal of alternative investments all about getting more control over their retirement portfolio. With a standard IRA, you might be locked into market fluctuations or investment choices offered by a custodian. Not fun. But with a Self-Directed IRA, you can pursue unique opportunities that align more closely with your expertise or interests. For instance, someone with a background in real estate might feel more comfortable investing in rental properties than in the stock market. By using an Alternative Investments IRA, they can use their expertise and even their simple enjoyment of real estate investing while building a retirement nest egg.
What are Some Concerns with Alternative Investments IRAs?
The IRS has strict rules about what you can and can’t do with a Self-Directed IRA, especially when it comes to alternative investments. Certain types of assets—like collectibles and life insurance—are prohibited. That’s why you’ll have to be mindful of what are known as prohibited transactions.
A prohibited transaction occurs when you interact with your Self-Directed IRA in a way that personally benefits you outside of the tax-protected account. For example, if you invest in real estate using your Self-Directed IRA, you wouldn’t live in that house yourself—this would create an immediate benefit for you outside of the retirement account.
What Are Other Ways of Investing with Alternative Investments IRAs?
One of the most popular choices within an Alternative Investments IRA is precious metals. Investors often seek out physical gold or silver because they want to hedge against inflation. Holding precious metals in an IRA is entirely possible, but there are additional requirements for making sure that you’re holding legitimate silver and gold and not collectibles. The metals must meet a certain standard of purity, for example. And they have to be kept in an approved depository, not in your home or safe. These investments are often referred to as a “Gold IRA” or “Precious Metals IRA.”
Real estate, precious metals, private loans, and private companies are all part of the range of alternative investments available. And using investments this way can help you attain a different kind of risk profile than you might have imagined otherwise possible in a Self-Directed IRA. But you have to work with someone who knows how to help you build this IRA. We recommend reaching out to us here at Turnkey IRA by dialing 844-8876-IRA (472).
