Under IRS rules, IRAs can invest in almost anything, with the exception of life insurance, most types of collectibles, and S company shares, i.e. shares in a company that elects to pass on corporate income and losses to shareholders for tax purposes. IRA alternative investments include real estate, private equity, precious metals, start-ups, cryptocurrencies, and more. These assets can potentially build wealth faster than traditional stocks, bonds, and mutual funds. As a self-employed IRA owner, you decide which options to add to your plan and make decisions to invest in what you know and understand.
You can open an IRA yourself through almost any bank, brokerage firm, insurance company, or investment company. In most IRA accounts, you can select individual stocks or from a long list of mutual funds. Or you can leave those decisions to an expert by choosing a low-cost robo-advisor, a computer-based investment manager that does the job for you. Take a look at our top tips for robo-advisors.
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wide range makes the IRA both Roth and traditional IRAs an attractive option for your retirement savings, particularly if you’ve maxed out 401 (k) matching dollars. The list of investment instruments that cannot be placed in an IRA or a qualified plan should not be confused with the list of prohibited transactions that cannot be made with these accounts, such as when you borrow money from an IRA. An IRA investor may be able to use real estate purchased in an IRA if the transaction is carefully structured. The overall theme of the IRA investment rules is that Congress wants IRA money to be used for retirement and invested wisely so that it’s available when it’s needed.
In addition, the IRA owner cannot be held liable for additional recourse to leveraged assets held in the IRA. For security reasons, CPAs should focus on investment vehicles for which there are established markets, such as stocks, mutual funds, bonds, bank deposit certificates, annuities (although these may not be the most appropriate for an IRA, as IRA funds are already tax-protected), real estate, and select coins. An IRA owner who discovers a collectible or antique worth thousands of dollars at a flea market won’t be able to protect the tax on the profit from selling that asset under an IRA or other retirement plans.
