self directed IRA investment options

Investing in a self-directed IRA maximizes your earning potential. If you want to acquire assets related to your unique expertise and something that aligns with your values and interests, this type of IRA account offers you greater control and the opportunity to develop a diverse portfolio. 

So, what can you invest in? Here, we’ll explore the best self-directed IRA investment options, how you can benefit and the stocks the IRS prohibits you from investing in. 

Can You Buy Stocks With a Self-Directed IRA? 

One of the most significant benefits of self-directed IRAs is that you can use these funds to purchase stock. Your dividends and any gains on stock sales are also tax-free, making them an excellent addition to your retirement plan. After all, an IRA lets you own an expansive array of assets beyond standard options like bonds, stocks and funds. 

Examples of your expanded list of investment choices include real estate, precious metals, cryptocurrency and royalty interests. Open this kind of IRA account to invest in stocks with these four steps. 

  1. Find a custodian: Create your account with a trustworthy IRA custodian that provides options for alternative investments. 
  2. Select the product you want to buy: Establish the type of stocks you’d like obtain and find a reputable dealer to buy from. 
  3. Complete your transaction: Speak with your custodian for assistance in purchasing your investment. 
  4. Plan your withdrawals: Prepare your financial contributions to any taxes on your withdrawal. 

What Can a Self-Directed IRA Not Invest In? 

While it can be challenging to find a comprehensive list of approved self-directed IRA investment options from the IRS, the agency prohibits specific investment types and situations. These fall into three categories.

  1. Collectibles: IRS guidelines disqualify your IRA if you use it to purchase collectibles such as automobiles, artwork, antiques, alcoholic beverages, precious metals other than palladium or gold or other similar items. 
  2. Life insurance: Life insurance policies are a fixed amount, while IRAs should grow. Life insurance is another disqualified IRA investment type.
  3. S-corporation stock: An IRA or single-member LLC owned by an IRA cannot be a shareholder of an S-corporation. Fortunately, you may use a self-directed 401(k) plan to act as a shareholder of an S-corporation. 

6 Best Self-Directed IRA Investment Options 

Aside from the prohibited transactions, your investment options are vast and offer exciting opportunities to access thriving markets and assets. From private equity to precious metals, here are six self-directed IRA investment options you can get started on. 

1. Real Estate 

investing in real estate

Investing in real estate and related items is a valuable way to leverage your self-directed IRA account. It offers various real-estate options and, depending on your IRA type, your generated income from the real estate may even be tax-free or tax-deferred. Some forms of real estate investments you can make include: 

  • Commercial properties 
  • Rental properties 
  • Leases 
  • Mortgage notes 
  • Offshore properties 
  • Storage spaces 
  • Improved and unimproved land 

2. Private Lending 

Another investment option includes private lending, allowing you to invest in debt-based financial assets or loans such as business loans, personal loans, car financing and mortgage notes. Remember that when you pursue private equity, you must provide a promissory note — a written promise outlining the interest rate and timeline in which you will repay the debt. 

These notes allow you to visualize and establish a steady income stream, whether it is a Roth IRA, where your money grows tax-free, or a conventional IRA, in which you may defer taxes. 

3. Precious Metals 

Precious metals have an inverse relationship with the stock market — when stock prices are high, metal prices are low, and vice versa. This IRA investment option protects you against inflation and currency deflation and helps you diversify your retirement portfolio. 

Various IRAs allow you to invest in gold, palladium, silver and platinum. Of course, the IRS classifies some precious metals as collectibles. Be sure to refer to their guidelines or consult with a professional to ensure the metals you want to obtain are exempt from this list. 

4. Private Equity 

If you want to acquire a privately held property, you may invest in it with your IRA as private equity. This option is a valuable way to fund a cause, people or project you strongly believe in. Privately held companies include businesses of all sizes.

Investing in private equity has a few risks, so you should carefully consider whether your investment will get you higher returns. 

5. Tax Liens and Deeds 

Do you lack the adequate funds to purchase real estate as an IRA investment? Tax liens and deeds are an excellent alternative that allows you to get involved with real estate with relatively low capital requirements and exciting potential returns, without many property ownership responsibilities involved. 

A tax lien is when you purchase the lien on a property when the owner fails to pay property taxes, while a tax deed relates to the purchase of real estate from the county when the owner has too many outstanding property tax bills. The benefit is that the owner will need to pay back your lien amount with interest. If they cannot repay within a given time frame, you will receive the deed for the property. 

6. Cryptocurrency 

Various custodians for self-directed IRAs allow people to incorporate cryptocurrencies like Ethereum and Bitcoin. Since these investment options may be volatile in certain situations, it’s best to be strategic about your approach to receive higher returns. 

Start Investing in a Self-Directed IRA With Accuplan 

start investing in a self-directed IRA

The investment options offered by self-directed IRAs have worthwhile benefits to consider. You may be able to maximize these opportunities when you choose the correct retirement account professionals. At Accuplan Benefits Services, we make it our priority to assist clients in creating self-directed IRA accounts according to IRS compliance rules and regulations. 

Our professionals have spent years in the retirement account industry and helped thousands of investors succeed. To avoid the risk of disqualifying your IRA status, contact our experts at Accuplan today and open up a self-directed IRA with us so we can help you stay informed about the best IRA investment options. 

Our information shouldn’t be relied upon for investment advice but simply for information and educational purposes only. It is not intended to provide, nor should it be relied upon for accounting, legal, tax or investment advice.