Most people’s retirement portfolios probably look pretty similar — a conservative mix of mutual funds, index funds and bonds. While many 401(k)s and IRAs provide a few options for how aggressively someone’s money will be invested, the ability to choose which assets will fund their retirement is pretty limited.
Traditional retirement funds like IRAs are limited by the IRS as to the securities in which they can invest. Alternative assets like real estate, precious metals and cryptocurrency are out of the question.
Yet a growing number of investors are choosing to roll over a portion of their 401(k) or IRA into a self-directed IRA as a way to take control of their long-term investments.
What Is A Self-Directed IRA?: A self-directed IRA allows you to take control of your retirement account and invest in assets that you feel will provide the greatest long-term gains. This type of IRA even allows you to invest in alternative assets such as precious metals, cryptocurrencies, commodities, limited partnerships, tax lien certificates and real estate.
A custodian or trustee is required to hold the assets of an IRA account for the owners of a self-directed IRA. The custodian will take care of any transactions made, as well as client statements, necessary IRS reports and other relevant records.
Despite certain rules around custody, a self-directed IRA allows you to make your own investment decisions, and certain alternative assets may be worth considering for your retirement portfolio.
Why Invest In Alternative Assets For Retirement?: Not all alternative investments would make an ideal addition to your retirement account, and a self-directed IRA probably doesn’t make sense for everyone.
For anyone that wants to diversify their retirement fund with assets that have little to no correlation with the stock market, alternative assets like real estate can provide an excellent hedge against inflation and provide stable income and growth when the stock market is down.
How To Invest In Alternative Assets With A Self-Directed IRA: Even with a self-directed IRA, the rules are pretty clear on how you can invest your funds. You can’t simply purchase a rental property down the street or buy gold bars that you’ll keep in a safe under your bed. The investments have to be completely passive, meaning you can’t have physical possession or control of the assets.
The cleanest and easiest way to do this is through a real estate investment platform that accepts funds from self-directed IRAs. Two popular options that are available to both accredited and non-accredited investors are Jamestown Invest and Republic Real Estate.
Learn More: You can learn more about investing in alternative assets with a self-directed IRA by attending this webinar at 2 p.m. EST Wednesday, Sept. 29.
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