What comes to mind for most people when considering their IRA investment options are mutual funds, bonds, stocks, etc. But there are plenty of other choices that most are unaware of.
Listed below are some non-traditional investments that can be included in your IRA. While stocks, mutual funds, bonds and the like are reasonable options to include in your IRA, an extra level of protection can be provided by diversification. Having some tangible investments in your IRA can provide the extra diversification that many investment portfolios are lacking.
You might wish to try a somewhat non-traditional strategy with at the very least several of your IRA properties. Barring retirement that can be provided for by means of many uncommon investments, including property or a privately-held business can really increase your investment returns. Similarly, a component of actual, physical gold coins – as opposed to a gold ETF or stock shares in a gold mining company – may attract you if you’re having anxiety with worrying about an economic disaster or a wild rising cost of living.
One thing to be aware of before venturing outside of the normal investment options with your IRA is that in seeking a higher rate of return, you will also experience an elevated level of risk. The two go hand in hand. The investment options listed below are normally done inside of IRAs that are self-directed. You are going to need to locate a custodian who will manage your account, and it might prove challenging since the normal IRA custodians – such as banks – are going to only be interested in mainstream financial assets that can be traded on electronic exchanges. That rules out the options listed below. So you’ll have to do some legwork, and the best advice is to spend an ample amount of time doing so, don’t just choose the first potential custodian who comes along.
With that being said, here are some unconventional investment options for your IRA that are worth considering:
Central banks around the world hold gold coins and bars inside their vaults for one primary reason: gold has a multi-millenia history of fulfilling the role of tangible money. While paper currencies have come and gone throughout history, gold has intrinsic value that persists throughout time. It’s unique characteristics make it an ideal choice for the role of money. Let’s face it, if central banks are holding tons of gold in their vaults, it probably should play a role in your retirement account as well.
The following coins can be included in your IRA: UNITED STATES gold coins in one-, half-, quarter- and tenth-ounce denominations; as well as silver coins (one ounce) minted by the U.S. Treasury. Specific platinum coins are additionally permitted.
Besides coins, in 1997 and years following the IRS has actually permitted investors to make use of IRA funds to buy precious metals bullion such as gold, silver or platinum bars. Just as it is with gold coins, your investment bullion is stored for you, for a relatively small charge. Your custodian arranges it.
The following metals – in bar/bullion form – can be purchased with an IRA, based on criteria of purity: platinum, gold, palladium and silver.
An exclusive home loan is another IRA financial investment possibility that most people are completely unaware of. When you purchase a home mortgage, you become the lender. A private mortgage broker could locate a debtor on your behalf and deal with the documentation. Your IRA will loan the money directly to the debtor, and the loan will of course be secured by the home.
Since you’re not the property owner, in the event that the value of the property increases, you will not experience any of the profits that come about from appreciation. Even so, the rate of return can be more than what’s provided by bonds or certificates of deposit.
Buying property with your IRA is quite complicated and can be difficult in many ways. You’ll need enough funds in your IRA to pay for all aspects of the property, which include, but are not limited to, taxes, maintenance, utilities, etc. You’re not permitted to commingle non-IRA funds with the money in your IRA, thus the necessity to have enough money already in your IRA to cover all expenses.
There’s one other item regarding having real property in your IRA: using your IRA to buy property for individual use is restricted. There is, however, an exception. You could withdraw $10,000 from an IRA for a house purchase if you legally qualify as a first-time home buyer.
PURCHASING A COMPANY
Let’s say, for hypothetical purposes, that you’ve come across a fantastic business possibility, but don’t have the needed amount of money to buy the business. It’s quite possible that you actually do have the money, the only problem is that it’s tied up inside your IRA. If so, you have the option to buy the company using the money within your IRA.
You could purchase an entire company — or a partial ownership interest in a business — with the money inside your IRA. Shares of stock are just that: an interest in a business. the difference being publicly traded shares versus private shares. It’s very common for portions of a business to be owned inside an IRA, it’s just that most of the time those portions are less than 100% and are traded on a public exchange.
WHAT ‘S NOT PERMITTED
Not every investment option under the sun is permitted as an option for IRA investment. Before doing anything unique, be legally certain it’s allowed by, and therefore legal according to, IRS regulations — lots of financial investments aren’t. A case in point is anything that can be called collectibles. These could be art work, stamps, antiques, gemstones or any type of coins that have collector value aren’t specifically enabled by law. Forget about including a bottle or two of vintage wine in your IRA: liquors are omitted as an IRA investment option.