One of the great things about an IRA is that you can hold a number of different investments in the account. While you can hold bonds, stocks, and cash in your IRA, it's also possible to add even more asset classes to your IRA.
When you open a self-directed IRA, you have more options (since you aren't limited by the offerings of a brokerage). You can add real estate to the IRA, as well as certain (not all types of coins can be held in your IRA) gold and silver coins minted by the U.S. Treasury, limited partnerships, mortgages, notes, and even oil and gas royalties. You can also hold your stock options in an IRA.
Right now, there is a lot of interest in diversity, as well as finding ways to shield income from taxes. Putting assets in an IRA is one way to do that while saving up for retirement.
What CAN'T You Put In Your IRA?
Of course, even though many people see IRAs as flexible when it comes to retirement investing, the truth is that you can't just put anything into an IRA — even if you have a self-directed IRA. Some of the assets that can't be held in an IRA include:
- Some derivative positions, such as naked call writing
- Life insurance
However, even with the items that you can put in your IRA, there are often rules. For example, most coins are considered collectibles, and ineligible for an IRA. However, coins that can also be used as currency can be included in your IRA. You can hold American Eagle (gold and silver) and American Gold Buffalo coins in your IRA. It's also possible to hold Canadian Maple Leaf and Austrian Gold Philharmonics coins in your IRA.
And, even though you can hold real estate in your IRA, there are quite a few rules involved, including one that says that you can't hold property that you actively manage in your retirement account.
Should You Put Alternative Assets In Your IRA?
As always, just because you can do something doesn't mean that you should. It can get pretty tricky to make sure that you are doing everything right with these types of assets. Opening a self-directed IRA can help. Additionally, it's also possible to help keep things separate by opening different IRAs for your alternative investments, such as opening a self-directed IRA devoted just to your real estate holdings.
Remember, too, that some alternative investments come with hefty premiums. You might lose some advantage due to the high prices involved with some investments. That means that you could very well end up with real losses (or gains that aren't as great as expected), even though you feel better about your diversity. Carefully consider the regulations, as well as the costs, before you start adding unusual investments to your IRA. In some cases, you might be better off gaining diversity with the help of trusts, funds, and other more standard investments that are not gray areas for the IRS.