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Retirement Funds: Self-Directed IRAs Explored

Are you looking to grow your retirement funds? Of course you are, we all are!

Here is an idea that may benefit some of you who are reading this article.  Take a look at self-directed IRAs.  What is a self-directed IRA?  I am glad you asked.  Here is the simplest definition:

A self-directed IRA is an IRA in which its custodian or administrator allows the IRA account to hold alternative assets rather than just investing in the stock market.  It is that simple. At least the definition is.  There are several intricate details and rules that come along with self-directed IRAs that you should really speak to your tax advisor about.

What can a self-directed IRA invest in?

Yes, I am going to show you the money!  Here is a comprehensive list of the investment opportunities of a self-directed IRA:

Real Estate

  • Homes, apartments and condominiums
  • Commercial properties (retail stores, hotels and office complexes)
  • Trust deed notes, mortgages, and tax liens
  • Raw land and lots
  • Real estate options
  • Other properties (farmland, boat slips, mobile homes, and timber rights)

Private Equity

  • Limited liability companies (LLCs) and Limited partnerships (LPs)
  • Private common stock, preferred stock, options, rights, and warrants
  • Private hedge funds and funds of funds
  • Private and non-exchange traded Real Estate Investment Trusts (REITs)
  • Foreign private equity
  • Exchanged traded funds
  • Convertible notes

Promissory Notes

  • Secured notes (typically real property, mortgages)
  • Secured notes (collateral based notes, mobile homes, equipment, etc)
  • Unsecured notes (bridge or “hard-money” loans)

The Rest

  • Traditional assets (mutual funds and securities)
  • Precious metals (gold, silver)
  • Land and mineral rights
  • Cryptocurrencies
  • Peer-to-Peer Lending

As I stated when defining self-directed IRAs, there are some rules to follow that have been set in place by the IRS.  But if you can navigate the rules, self-directed IRA investing can be rewarding!

Here are three important things to consider when it comes to self-directed IRAs:

  1. You will need to work with an alternative asset custodian to open a self-directed IRA.  Your bank won’t open one because they aren’t one of these custodians.  Your financial planner will probably not want to open one for you so you have to find a custodian.
  2. You will need to work with an accountant and attorney who are familiar with self-directed IRAs.  Not every accountant or lawyer has worked in this area.
  3. Understand that the term “self-directed” means that you have more control over your IRA investment than you would in a Roth or traditional IRA.

I am happy to assist it you need help navigating self-directed IRAs!

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About Frederick Towles

Frederick Towles is an entrepreneur, author and professional coach on personal finance, recognizing, seizing and leveraging opportunities of all kinds. Frederick founded The Towles Group Inc. to address issues that relate to small businesses and individuals – accounting, taxation, asset protection, financial compliance, wealth creation, debt management and business management. He also founded Unlimited Expectations Inc. which provides tools for individuals to assist them in the areas of opportunity recognition, leadership and personal finance. Through the tools and services offered by these companies people are positioned to operate their lives and their businesses at optimal capacity.

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