IRA Financial’s Adam Bergman discusses the craziest and unique investments he has seen people make using their retirement funds.
In his most recent podcast, IRA Financial’s Adam Bergman discusses the unique investments he’s seen people make with their retirement funds. Self-directed retirement accounts allow you to invest in almost anything you can think of. No longer are you limited by the products offered by traditional financial institutions.
What Can’t You Invest In?
Generally, a Self-Directed IRA (SDIRA) is not limited in investment choices when opened at the right institution, such as IRA Financial. IRA Financial will never tell you that you can’t make an investment, unless it’s prohibited by the IRS. The IRS only says what you absolutely cannot invest in. Basically, you can’t invest in life insurance (with an IRA), collectibles and an investment that would be deemed a prohibited transaction. A prohibited transaction occurs when you, and not the retirement plan, benefits from the investments. For example, you use your SDIRA to buy a rental property and then live there.
As discussed in the podcast, you also cannot invest in something that is illegal. This might seem obvious, but sometimes investments aren’t black or white. A great example is cannabis. Though some states have legalized marijuana, it’s not yet federally legal. For example, IRA Financial Trust is located in South Dakota and cannot allow an investor to buy stock in a cannabis company. This is true even for a Canadian company, where cannabis is now legal on the federal level.
Listen to this: Cannabis In Your Retirement Account
Unique Investments People Have Made
Here is just a handful of the most unique investments people have made. In some cases, it’s the investment itself, while in others, it’s the locale of the investment.
You can certainly use retirement funds to invest in a business. You can get startup capital for yourself or even invest in a friend’s business. Of course, you have to be mindful of the prohibited transaction rules. This is a very popular investment, and not all that unique. However, it’s where clients have started or funded a business that makes it unique.
Mr. Bergman has seen clients invest in a business in Lebanon, Turkey, India, the Bahamas, Zimbabwe, Mexico, Pakistan, etc. You do need to be aware of the rules of the country you wish to invest in. For example, India has restrictions on foreign ownership. Even though you might have Indian citizenship, your Self-Directed IRA, which is making the investment, does not.
Hard Money Lending
Another popular investment choice is hard money lending (loan). This is when you use retirement funds to loan money and can set a reasonable interest rate. What makes this a unique investment is what the loan is used for.
We’ve seen clients loan money for In Vitro Fertilization (IVF) and to help out with the adoption process. In another podcast, Mr. Bergman discusses how he helped out a friend buy his dream home. Other clients have done the same for their friends. Do you know someone who has been hit hard by severe weather? You can use your SDIRA to lend money to them to help rebuild. There’s nothing like being able to help out a friend in need and make a little money as well!
ICO’s and Cryptocurrencies
Initial Coin Offerings and cryptos have become the next big investment. Five years ago, investing in “digital currency” seemed crazy. While still a risky investment, it’s become more mainstream. Always be careful where and what you invest in. ICO’s outside of the US are not regulated by the SEC and should be looked at suspiciously. There’s still a high risk of fraud with these offerings.
Other Unique Investments
You don’t need to lend money or invest in a business out of country for it to be considered unique. We’ve had a number of clients invest in tangible things right here in the US! One of them being a race car. So long that it’s not considered a collectible, it’s perfectly legal to invest in. Are you a farmer…how bout farmland and livestock? We’ve seen it! Investment clubs are another popular type of investment strategy.
This is just the tip of the iceberg for unique investments you can make using your retirement funds. Obviously, some investments are a lot riskier and more volatile than others. Be sure to do your due diligence when deciding what to invest in. And, be sure to contact IRA Financial to first to set you up for future success!