When you establish a traditional IRA with a bank, a
brokerage, or a trust company, you are ordinarily limited to a narrow range of
investment options, such as CDs and publicly traded stocks, bonds, mutual
funds, and ETFs. The IRA custodian will not permit you to invest in alternative
investments such as real estate, precious metals, or cryptocurrency.
A self-directed IRA could be for you if you want to walk on the wild side and invest your retirement money in assets such as real estate or cryptocurrency.
You can invest in almost anything other than collectibles such as art or rare coins, life insurance, or S corporation stock with a self-directed IRA.
Investment options include, but are not limited to, the following:
Aside from the vast array of investment options, a self-directed IRA is the same as a traditional IRA and subject to the same rules. The income the investments in your IRA earn is not taxed until you take distributions, but distributions before age 59 1/2 are subject to a 10 percent penalty unless an exception applies.
You can also have a self-directed Roth IRA for which distributions are tax-free after five years.
But you must avoid self-dealing and other prohibited transactions or your self-directed IRA could lose its tax-advantaged status.
Establishing a self-directed IRA need not be too difficult. You first open an account with a custodian that offers self-directed investments. You can also acquire checkbook control over your self-directed IRA by forming a limited liability company to own all the IRA investments.
Investing in alternative assets such as cryptocurrency is riskier than stocks, bonds, and mutual funds.
When it comes to alternative investments, you need to know what you are doing or have an investment professional you trust to do this for you.
It is best to discuss the potential tax benefits of such accounts with an experienced tax preparer. To schedule an appointment with one of Gold Standard's seasoned tax accountants, click here.
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