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3 Ways to Use a Self-Directed IRA

With different types of IRAs come different types of investment options and opportunities. If you choose to invest in a Roth or traditional IRA, you’ll likely do so through a bank or brokerage firm, which will then offer you a list of possible investments from which you can choose. These options usually include the traditional stocks, bonds, and mutual funds that make up most IRAs. Exchange-Traded Funds and Certificates of Deposit are also popularly offered choices.

Then again, these options may not quite suit all of your needs. For example, you don’t see real estate or precious metals on that list. This is because those types of investments typically have to be made using self-directed IRAs, which are a completely different ball game. Self-directed IRAs are not provided through help of a bank or brokerage firm – they are managed by custodians instead. Your custodian will take your funds and apply them however you choose, as long as the method is legally advisable. This is where a wealth of options opens up for ways that you can use your self-directed IRA.

Here are three ways to use self-directed IRAs that don’t apply to other types of IRAs:

Precious Metals

Since 1997, the IRS has allowed for precious metals to be purchased using IRA funds. This applies to silver, gold, palladium, and platinum, which would then be held for you by a custodian. Similarly, you can purchase silver and gold coins, and the custodian would hold onto those for you as well.

Gold is often purchased in this capacity as a safety net, for when the value of currency is moving too much for comfort. Silver is popular because it holds value as well, but also because it is used in the production of many different goods.

Platinum and palladium are more traditionally used in the creation of catalytic converters, and therefore are valuable among those who wish to invest in manufacturing.

Real Estate/Private Mortgages

You can buy a mortgage and act as the banker for that property with self-directed IRA funds. A private mortgage company can match you to a borrower and then that company would handle the paperwork involved. This would work in the way that the IRA lends to the borrower and the loan is secured by the property itself.

Since you don’t own the property outright, you cannot profit with the rise of the value of the home. However, your funds are secured by a real asset, so that you always have that, which makes this investment less of a risk than some stock market-related investments.

If you want to get involved with real estate purchasing directly, it can be a bit trickier. Remember that you’ll have to have enough in your account to cover all expenses, and there can be no co-mingling of IRA and non-IRA funds.

Interest in a Business/Funding a Start-up

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Using your IRA funds to start a business isn’t quite the same as borrowing from your 401k fund. Instead, it involves raising money by using a self-directed IRA. This involves putting your company’s stock into a retirement plan to protect its capital gains. Self-directed IRAs can be lucrative tools for allowing entrepreneurs to get their start-up…started up. Even better, your friends and family members can invest in your business (and you theirs) using their IRA funds as well. This ensures favorable tax treatment for their capital gains, too. Just make sure of the rules surrounding this kind of investment via the IRS. For example, your friends and family members can invest in your business through their IRA’s, but your parents, children and spouse cannot. Be very careful not to cross the IRS when it comes to their terms.

Aside from starting up a business of your own, you can also buy a business with your self-directed IRA. If you head down this route, your business can be subject to the unrelated business income tax that comes along with it.

Additionally, you can form an LLC through your self-directed IRA. You can invest all of the IRA’s assets into the LLC and make yourself the sole owner of the company – executing investments as the company’s manager. Just be sure you’re following the IRS’s rules and regulations regarding the business prospect and your IRA! Don’t be afraid to consult with a custodian or tax lawyer if you want to be sure you aren’t breaking any rules.

These three methods of investment aren’t all that you can do with a self-directed IRA, they are only the most popular ways it can be used. Consider your favorite method of investment before choosing the IRA that’s right for you. That will help you to decide which IRA best meets your needs.


Joey Eplite


Joey Eplite

Financial Sales Rep, NuView

Direct: 407-708-1847

Toll Free: 877-259-3256




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