What Can’t You Invest In With a Self-Directed IRA?

If you’ve been reading AmericanIRA.com, you know that we’ve been telling you all about the investment options available when investing through a Self-Directed IRA.

We tell you about real estate, about precious metals, about private companies and private IRA lending…the list goes on and on. And it’s true. When you have a Self-Directed IRA, there really are a lot of options that can help you build wealth for retirement.

But what can’t you do in a Self-Directed IRA?

For many people, particularly new investors, the idea of using a specific type of account for investing seems a little daunting. There are all of these rules and regulations and new investors don’t want to run the risk of taking a wrong turn somewhere. And that’s understandable. But once you find out what Self-Directed IRAs are all about–and learn your limits–you’ll find that it’s not a very difficult thing at all to make sound, wise investments in the proper way. But first, you’ll have to learn what you can’t do:

Self-Directed IRAs: Know the Prohibited Investments

When learning what kinds of assets you can invest in when you have a Self-Directed IRA, we find that it’s sometime a good idea to simply explain what you can’t invest in, as this helps demonstrate the limits. What’s more, when you see these limits, you’ll start to get a sense as to why these kinds of investments might be prohibited in the first place. Here are some of the most basic limits:

  • Life insurance. Buying life insurance doesn’t really qualify as an “investment” from a practical point of view, even though many people view it that way. Sure, you’re paying money now with the idea of having money for your loved ones later…but that doesn’t mean it’s an investment: it’s still insurance. Life insurance might be a wise purchase, but buying it through your Self-Directed IRA is a well-established no-no.
  • Art and other collectibles. Art can be an investment, to be sure, but it also tends to fall under the category of “collectibles.” The IRS limits investing in tangible personal properties including art, but it’s worth noting that gold and silver do not fall under this limit as they’re not considered to be collectibles. Other precious metals can be prohibited, however.
  • Alcoholic beverages. An investor might purchase wine with the idea that it will increase in value as it becomes more scarce, but a retirement investor can’t do this. But it’s not just wine; other types of alcoholic beverages also fall under this limit. This falls more under personal property and can’t be purchased within a Self-Directed IRA.
  • Using IRA assets as collateral for a loan. Because an IRA is intended to be for retirement, using it as collateral for a loan can be seen as outside the purview of its purpose, resulting in its prohibition.

There are more restrictions to be aware of, as well, and you can find many of them at our restrictions section. These restrictions don’t only extend to the types of investments you can make, but the strategies you use. For example, you can’t stay overnight in a property that you’ve invested in with a Self-Directed IRA.

If you want to know more about the limits–as well as the flexibilities–that come with Self-Directed IRAs, be sure to refer to our restrictions section as linked above. You can also continue to browse AmericanIRA.com, or simply call us at 1-866-7500-IRA(472) to find out more about the limits and freedoms in investing through a Self-Directed IRA.

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