A self-directed IRA is technically no different than any other IRA (or 401k). A self-directed IRA is unique because of the available investment options.
Most IRA custodians only allow approved stocks, bonds, mutual funds and CDs. For a truly self-directed IRA you need a custodian that specializes in self-directed IRAs and allows those types of investments in addition to real estate, notes, private placements, tax lien certificates and much more.
In addition to the tremendous IRA benefits (tax-free profits, tax deductions, asset protection and estate planning), you are able to invest tax-free in investments that you know and understand, which through the power of compounding interest, will create true wealth for you and your family.
While the concept of investing in real estate and other assets in retirement plans has been around for more than 30 years, the concept hasn’t received large attention because most custodians who offer IRAs (banks and brokerage firms) focus on mutual funds and CDs because they have vested financial interests in you selecting those investments from them.
Because the majority custodians focus on stocks and CDs there is a misperception that these are your only investment options for retirement plans, which is not the case.
The IRS does not give guidance on what types investments are allowed in an IRA. Instead, they give a list of items that are not allowed. IRS Publication 590 states what investments are prohibited in IRAs; these investments include artwork, stamps, rugs, antiques and gems. Examples of investments that are allowed:
As long as you follow relevant rules the answer is yes. There are specific rules regarding IRAs, and in particular, self directed IRAs that you should be familiar with to ensure compliance.
There are certain types of transactions that you can not perform through an IRA. Most importantly, the IRS prohibits “self dealing,” which are investments in which you or your family members of lineal descent have prior ownership. For more information, please visit IRA rules and regulations.
Investing with a self-directed IRA isn't much different than investing outside of a self-directed IRA. There are just a few minor differences. Learn more through interactive Self-Directed IRA tutorials about investing with a self-directed IRA custodian.
Self directed IRAs are not for everyone, they are for those who want to create wealth using their knowledge of investments outside of stocks, bonds, and CDs.