Alternative Assets Find a Home in Self-Directed Retirement Accounts

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With​ ​the​ ​stock​ ​market​ ​soaring, ​​it​ ​might​ ​just​ ​be​ ​the​ ​time​ ​to​ ​look​ ​for​ ​alternative​ ​assets​ ​before​ ​a market​ ​shift.​ ​​ ​That’s​ ​exactly​ ​what’s​ ​happening​ ​in​ ​the​ ​world​ ​of​ self-directed​ ​IRAs.​ ​​

Taking​ ​the reins​ ​of​ ​your​ ​own​ ​financial​ ​future,​ ​investment​ ​performance,​ ​lifestyle​ ​in​ ​retirement,​ ​and​ ​legacy can​ ​be​ ​far​ ​easier​ ​than​ ​many​ ​realize. Alternative​ ​assets​ ​(assets​ ​not​ ​correlated​ ​to​ ​the​ ​stock​ ​market)​ ​fit​ ​hand-in-glove​ ​with​ ​the self-directed​ ​IRA.​ ​​ ​Since​ ​1975​ — when​ Employee Retirement Income Security Act ​(ESRI)​ ​laws​ ​went​ ​into​ ​effect —​ ​investors​ ​can​ ​use​ ​their​ ​IRAs to​ ​invest​ ​outside​ ​of​ ​Wall​ ​Street.

Those​ ​with​ ​existing​ ​retirement​ ​accounts​ ​can​ ​roll​ ​their​ ​accounts​ ​over​ ​into​ ​self-directed​ ​variations. Individuals​ ​just​ ​starting​ ​out​ ​​can​ ​choose​ ​from​ ​several​ ​types​ ​of​ ​self-directed​ ​individual retirement​ ​accounts​ ​(SDIRA’s)​ ​which​ ​can​ ​be​ ​set​ ​up​ ​at​ ​any​ ​time.​ ​This​ ​includes​ ​salaried​ ​workers, small​ ​business​ ​owners,​ ​independent​ ​entrepreneurs,​ ​and​ ​spouses.​

​Self-employed​ ​people​ ​can​ ​also use​ ​a​ ​Solo​ ​401k​ ​if​ ​they​ ​have​ ​no​ ​other​ ​full​-​time​ ​employees. The​ ​option​ ​to​ ​use​ ​SDIRA’s​ ​has​ ​gained​ ​increasing​ ​attention​ ​in​ ​the​ ​media​ ​from​ ​Bankrate​ ​to​ ​Fox Business​ ​to​ ​Forbes​ ​and​ ​beyond.

​This​ ​traction​ ​has​ ​been​ ​compounded​ ​as​ ​investment​ ​promoters​ ​and registered​ ​investment​ ​advisors​ ​(RIAs)​ ​have​ ​caught​ ​on​ ​to​ ​how​ ​much​ ​more​ ​attractive​ ​their opportunities​ ​are​ ​if​ ​clients​ ​are​ ​using​ ​tax​ ​protected​ ​accounts.​ ​It​ ​can​ ​potentially​ ​bolt​ ​on​ ​an additional​ ​20 percent or more​ ​in​ ​net​ ​returns,​ ​which​ ​is​ ​compounded​ ​every​ ​year.

With​ ​the​ ​assistance​ ​of​ ​a​ ​reputable​ ​IRA​ ​administrator,​ ​such​ ​as​ ​uDirect​ ​IRA​ ​Services,​ ​individuals can​ ​select​ ​from​ ​a​ ​much​ ​broader​ ​range​ ​of​ ​investment​ ​options —​ ​either​ ​leveraging​ ​professional​ ​advisors and​ ​asset​ ​management​ ​or​ ​invest​ing ​directly​ ​to​ ​slash​ ​fees​ ​and​ ​retain​ ​more​ ​of​ ​their​ ​gains —​ ​all​ ​while insulating​ ​themselves​ ​from​ ​the​ ​tax​ ​man,​ ​legally.

Alternative​ ​assets​ ​like​ ​BitCoin​ ​make​ ​news​ ​every​ ​day.​ ​​ ​If​ ​an​ ​IRA​ ​is​ ​going​ ​to​ ​own​ ​BitCoins​ ​it needs​ ​to​ ​use​ ​an​ ​IRA-owned​ ​LLC.​ ​The​ ​IRA-owned​ ​LLC​ ​is​ ​able​ ​to​ ​establish​ ​a​ ​wallet​ ​and​ ​invest that​ ​way.

This​ ​type​ ​of​ ​investing​ ​is​ ​new​ ​and​ ​there​ ​is​ ​not​ ​a​ ​lot​ ​of​ ​legislation​ ​surrounding​ ​it​ ​yet.​ ​The​ ​IRS issued ​IRS​ ​Notice​ ​2014-21​ addressing​ ​the​ ​taxation​ ​of​ ​Bitcoin​ ​and​ ​cryptocurrency.​ ​Investments held​ ​in​ ​an​ ​IRA​ ​are​ ​typically​ ​tax free​ ​or​ ​tax deferred.

Many​ ​SDIRA​ ​custodians​ ​and​ ​administrators​ ​find​ ​this​ ​asset​ ​type​ ​not​ ​to​ ​be​ ​administratively feasible​ ​but​ ​you​ ​don’t​ ​need​ ​a​ ​self-directed​ ​IRA​ ​to​ ​invest​ ​in​ ​publicly traded​ ​assets.​ ​​ ​​You​ ​will​ ​find some​ ​publicly traded​ ​funds​ ​that​ ​include​ ​BitCoin​ ​like​ ​​Bitcoin​ ​Investment​ ​Trust​ ​(GBTC).

Medical​ ​marijuana​ ​is​ ​rising​ ​in​ ​popularity​ ​as​ ​well.​ ​​ ​​​IRAs​ ​are​ ​regulated​ ​by​ ​the​ ​Department​ ​of Treasury​ ​and​ ​the​ ​Department​ ​of​ ​Labor.​ ​​ ​Because​ ​marijuana​ ​is​ ​not​ ​legal​ ​on​ ​a​ ​federal​ ​level​ ​you’ll have​ ​a​ ​harder​ ​time​ ​getting​ ​such​ ​an​ ​asset​ ​into​ ​a​ ​self-directed​ ​IRA. Allowable​ ​investments​ ​at​ ​uDirect​ ​IRA​ ​Services​ ​include​ ​the​ ​following:

  • Residential​ ​real​ ​estate,​ ​including:​ ​apartments,​ ​single​ ​family​ ​homes,​ ​and​ ​duplexes
  • Commercial​ ​real​ ​estate
  • Undeveloped​ ​or​ ​raw​ ​land
  • Managed​ ​Futures
  • REITs​ ​(Real​ ​Estate​ ​Investment​ ​Trusts)
  • Real​ ​estate​ ​notes​ ​(mortgages​ ​and​ ​deeds​ ​of​ ​trusts)
  • Promissory​ ​notes
  • Private​ ​limited​ ​partnerships,​ ​limited​ ​liability​ ​companies,​ ​and​ ​C​ ​corporations
  • Tax​ ​lien​ ​certificates
  • Oil​ ​and​ ​gas​ ​investments
  • Private​ ​stock​ ​offerings,​ ​private​ ​placements
  • Judgments/structured​ ​settlements
  • Gold​ ​bullion
  • Car​ ​paper
  • Factoring​ ​investments
  • Accounts​ ​receivable
  • Equipment​ ​leasing

Nationwide​ ​the​ ​vast​ ​majority​ ​of​ ​self-directed​ ​IRA​ ​investments​ ​are​ ​in​ ​real​ ​estate​ ​of​ ​some​ ​sort. We​ ​​see​ ​people​ ​using​ ​their​ ​retirement​ ​savings​ ​to​ ​invest​ ​at​ ​a​ ​grass​ ​roots​ ​level​ ​to​ ​restore​ ​the communities​ ​destroyed​ ​by​ ​natural​ ​disasters.​ ​​ ​Not​ ​everyone​ ​wants​ ​to​ ​stay​ ​put​ ​after​ ​a​ ​hurricane​ ​or earthquake​ ​and​ ​investors​ ​will​ ​be​ ​there​ ​to​ ​help​ ​them​ ​move​ ​on.​ ​​ ​The​ ​disaster​ ​victim​ ​can​ ​start​ ​over, the​ ​investor​ ​can​ ​make​ ​a​ ​profit,​ ​and​ ​people​ ​are​ ​put​ ​to​ ​work​ ​to​ ​rehabilitate​ ​communities.​ ​​ ​This restoration​ ​will​ ​be​ ​fueled​ ​in​ ​part​ ​by​ ​the​ ​retirement​ ​accounts​ ​of​ ​Americans​ ​who​ ​know​ ​how​ ​to​ ​use this​ ​well-established​ ​investing​ ​tool.

Please contact us if you have questions about the underlying data referenced in this article, or would like to have access to that data in the form of custom reports, API or bulk files.

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