Many investors do not realize that they can have complete control over the investments in their Individual Retirement Accounts (IRA). Through a self-directed IRA, investors can decide what types of investments they want to hold in their retirement accounts. Self-directed IRAs can be constructed in the traditional or Roth IRA versions depending on an investor’s income level, tax situation, and preference. No longer are investors strictly bound by which investments are chosen for them by investment and mutual fund companies, financial planners, or brokers.
So, what can be held in a self-directed IRA? Almost any type of investment can be held in a self-directed IRA. After establishing a self-directed IRA account through a brokerage firm or a bank, investors can purchase almost any type of investment to be held in a self-directed IRA. For example, an investor can purchase individual shares of stock in public companies, bonds, mutual funds, certificates of deposit, commodities, partnerships, franchisees, and other investments in his or her self-directed IRA individual retirement account. Individuals can even purchase tax liens and real estate as part of a self-directed IRA. Investors also designate whether the investments fall under a traditional IRA or can identify them as part of a Roth IRA class of asset. There is a the ability to purchase a wide range of investments inside a self-directed IRA, and if purchased using a Roth IRA, there is the added benefit of tax free withdraws in retirement as well.
There is very little that an individual cannot invest in with a self-directed IRA. The United States Internal Revenue Service (IRS) does make a few stipulations that are strictly forbidden to be placed inside a self-directed IRA. The IRS expressly excludes investing in life insurance contracts, S Corporations, art, jewelry, and other collectables from within a self-directed IRA.
Many investors do not realize the control they can have over their retirement investments. Investors continue to save for retirement using a traditional or Roth IRA that is invested through a mutual fund company, their bank, or another traditional brokerage firm. With a self-directed IRA, investors have the ability to choose where their money is invested, and they have a wide range of options available to them from the benign individual stocks to the exotic Real Estate Investment Trusts (REITs) and tax liens. Investors are almost only limited with their options by their imaginations.