Wouldn’t it be cool to invest some of your retirement money on a movie production company? What about an apartment complex or some other non-traditional investment? Well, if you have a self-directed IRA, you’re allowed to as long as you follow some basic rules.
The basic rule is that you can’t benefit from the investment today because that would circumvent the rules governing retirement accounts. This means that you can’t invest in your own company or a company in which you own a majority interest or draw a salary that you can control. You can’t invest in things that you or your family will use, like a home or jewelry, and you can’t invest in artwork. There are more but those are some of the common ones and basically it’s to prevent you from taking money out of a retirement account and using it for the benefit now; if you do break the rule, then it’s all considered a disbursement and you pay taxes and penalties on it. Ouch!
So, what can you invest in? There are forty asset categories ranging from cattle to film companies, from restaurants to railroads, and from cemeteries to startups.
How do you start a self-directed IRA? You can do so by going to your brokerage or your bank and setting up a trust of some kind. They keep the records, for a fee, and handle all the paperwork but are unable to provide any sort of guidance or investment advice. If you want more information, visit your local bank or brokerage and talk with one of their folks, they are the best advisers for how to move forward on it.
Some useful articles: CNN Money, Business Week
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Weekly Roundup – 06/01/07…
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I have found that using self-directed IRA advisors is the only way to go. I tried the banks (several) and as bankers go they are very restrictive and the fees are very high! I used the folks at http://www.myrealestateira.com it is the most comprehensive site on the web. I used mine to buy both real estate properties and notes for cash flow.