An IRA investment comes in many different forms. Most of us are unfamiliar with them, but they’re all worth considering. IRA investment options are not just limited to stocks, mutual funds, or bonds. These are what we call traditional investments inside your IRA. If you’re searching for the best retirement plans for individuals or the best IRA for retirees, the following options may help you make the best choice.
IRA Investment Options Fit for Every Financial Goal
It has been decades and centuries when precious metals began circulating as part of the monetary system. Considered as a tangible asset, it is said to always have value. It also increases in value during inflation or during a crash in the stock markets. Due to its high demand and rarity, they are valuable resources suitable as a smart option for investments. It was also during 1997 when the IRS allowed investors to purchase precious metals through their IRAs. The following are qualifying precious metals for your IRA investment:
American Eagle coins that are proof and non-proof, non-proof American Gold Buffalo coins, Austrian Gold Philharmonics coins, and Canadian Maple Leaf coins qualify as an IRA investment. Also included are U.S. gold coins in denominations of 1 ounce, a half ounce, quarter ounce, and one-tenth ounce.
The qualifiers for precious metals under silver are American Silver Eagle (proof and non-proof), Australian Koala Silver Coin, Australian Kookaburra Silver Coin, and Silver Canadian Maple Leaf. Also included are Chinese Silver Panda Coins, Austrian Silver Philharmonics Coins, and Mexican Libertad Silver Coin.
For palladium, Canadian Palladium Maple Leaf and Russian Ballerina Palladium made it to the list.
Australia Koala coins, Canadian Maple Leaf coins, Isle of Man Noble coins are qualified under the platinum category. The list also includes American Eagle bullion and proof coins.
Things to Consider
There are several factors to consider when choosing the precious metals for your IRA investment. They are the following:
- There are no payments for dividends or interest.
- Only a few IRA custodians such as banks and mutual funds offer this option.
- The purity of gold should be 99.5% while silver has to be 99.9% pure. The purity required for both platinum and palladium is 99.95%.
- There is a fee when you store them through a custodian, which is the requirement, similar to coins.
- Opening a gold IRA account is not available in some IRA providers.
Another IRA investment which you can use to start up a business is crowdfunding. This is popular among entrepreneurs, startups, and small businesses for fund-raising. However, do take note that investing through crowdfunding is only accessible to the masses. The more accessible it is though, the lesser the costs.
Cryptocurrency is another IRA investment option categorized as property under the IRS Notice 2014-21 in 2014. You may purchase them through Self-Directed IRA accounts. The digital currencies allowed by the IRS for your IRA investment include Bitcoin and Ethereum.
Things to Consider
There is a high resistance for cryptocurrencies when it comes to inflation. Also, its potential to grow increases along with its popularity. This is one good option to diversify your portfolio. There are also no 3rd parties and banks required when it comes to investing in cryptocurrencies since it is unregulated.
4. Energy, Oil, and Gas
This is one environment-friendly investment where you can also earn an attractive ROI (return on investment) at the same time. The list includes biofuel, eco-friendly stocks and bonds, energy-efficient housing, solar energy, water power, and wind energy.
Private businesses perfect for your IRA investment include farms, cattle, and small businesses such as restaurants and cafes. Do take note though the investors, themselves, cannot run the businesses. Also, you and your relatives cannot benefit from your IRA transactions made before the retirement.
6. Private Debt
You can make the private debt as an alternative investment through credit extensions from one entity to another. Also, you can use private debt for your IRA to make or receive a loan. Mortgage notes and trust deeds, notes, promissory notes, and timber deeds qualify as an IRA investment.
Mortgage Notes and Trust Deeds
A deed of trust secures the mortgage notes and trust deeds. Also, the principal and interest payments go to the lending IRA with tax advantages.
Notes, Promissory Notes
For the secured notes, there must be a collateral that backs them up. This will assure the return of a loan and guarantees a no-default. On the one hand, unsecured notes don’t require a collateral and the risks are higher.
This is the same as mortgage notes and trust deeds. You may convert this into income upon IRA withdrawal. There are also no dividends if you will hold this under an IRA. Also, there are no capital gains when it comes to land appreciation or cutting rights. Do take note, however, that you can also purchase the debt and start collecting the interest.
You can use your IRA funds to invest in a private mortgage. You may do this through a loan taken out from a private mortgage company. There also has to be a property that secures the loan. However, you cannot own the property. Thus, you may not benefit from it when its value appreciates. You may also encounter creditworthiness issues for mortgages with rates that are above the market.
8. Public Investments
There are public investments registered under the SEC suitable for an IRA investment. These options can or cannot be traded on the stock exchange. It also has to be under a brokerage account. You may, however, choose the brokerage account you prefer. The public investments suitable inside your IRA are as follows:
- Publicly registered limited partnerships
- Publicly registered limited liability companies
- REITs that are publicly registered
- Exchange-traded stocks, mutual funds, bonds, and other securities
9. Real Estate
Another option to grow your investment nest egg inside your IRA is through real estate investments. You may also invest in physical properties through a Self-Directed IRA. This will allow you to earn profit from rent, appreciation, and house flipping. The physical properties you may include for your IRA investment are apartment buildings, condominiums, and commercial properties. Also on the list are improved land, raw or undeveloped land, and residential property.
Things to Consider
- You and your family cannot live or work on the property.
- Consider using all fees that came directly from IRA for your property. This includes improvement, maintenance, management, and repairs. You also cannot commingle non-IRA funds with your investment in your IRA.
- You cannot use a conventional IRA to purchase a property.
- The maximum allowable IRA withdrawal for a home is $10k.
The additional possibilities included on this list are accounts receivable financing, building bonds, and commercial paper. You can also include equipment leasing and factoring investments.
IRA Investment Rules to Consider
There are specific factors to consider when it comes to making an IRA investment such as collectibles and life insurance. You also cannot make an IRA investment using a real estate for personal use. The same goes for the types of derivative options.
There are taxes for investments that are collectibles under the traditional IRA. You may also have to pay an added tax of 10% for early distributions. The following are the collectibles not allowed by the IRS as an investment:
- Alcoholic beverages
- Any coins categorized as not allowed
This includes all kinds of policies for life insurance such as whole life, universal, variable, and term policies.
Real Estate for Personal Use
The real estate must not be under your name or your spouse’s name. Also, it cannot be under any of your family member’s name whether it is your primary property or a vacation home.
Types of Derivative Options
You cannot make an IRA investment with a derivative trade having investment challenges that are limitless or not defined. This includes naked call and ratio spread.
When choosing the best IRA investment, it is necessary to conduct due diligence. This is most applicable when you opt to invest in a non-traditional way inside your IRA. It is also best to familiarize yourself with all the IRS regulations as not all investments are IRS-approved. However, the more IRA investment options available, the more possibilities you have. This will help you in diversifying your portfolio and maximize your ROI. You can also consider the financial goals you are targeting to know the best investment that suits your needs.
Which IRA investment mentioned do you have now or plan on having? Do share with us your investment choices and experiences in the comments section below.