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 investing 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.