With the recent volatility of the stock market, many investors are looking at alternative investments to diversify their portfolios. Selecting assets that aren’t correlated to the stock market may provide the diversity that many investors desire. The good news is that investors also have the flexibility to invest in alternative investments for retirements by using IRAs.
A self-directed IRA (A self-directed IRA (SDIRA) is when the investor is in charge of making all their own investment decisions and are not usually offered by traditional brokerage firms. They provide investors with a greater opportunity for asset diversification outside of the traditional stocks, bonds, and mutual funds. Self-directed IRAs differ from traditional and Roth IRAs, as SDIRAs can invest in real estate,... More) may be an appealing retirement vehicle for investors with expertise in a specific alternative asset, are seeking to diversify retirement accounts beyond stocks and mutual funds, and who want to take a more active role in managing their own retirement accounts. Combining the tax advantages of an IRA account with the portfolio diversification of CRE investing can be a powerful combination.
Five tips to consider before getting started with your self-directed IRA.
- Use your expertise to select your SDIRA investments
An SDIRA provides investors with the ability to diversify their investments beyond stocks and bonds into alternative investments that they have expertise in. These alternative investments range from real estate, precious metals, startup businesses to digital currencies. You’ll want to select investments that you already understand since you’ll be responsible for making investment decisions.
- Determine whether to set up your SDIRA as a Traditional or Roth IRA
SDIRA is a retirement account where you gain the same tax treatment as you would from a Traditional or Roth IRA when you buy and sell stocks or mutual funds. When you open your SDIRA, you’ll need to decide whether to set it up as a Traditional or Roth IRA depending on your personal situation and investment objectives.1
- Carefully evaluate your options before selecting a qualified custodian
With an SDIRA, the IRA owns the asset, not you personally, and all income and expenses must go through the custodian of the SDIRA.1 This means that investors who want to open a SDIRA account will need to work with a firm who offers SDIRA custodian services and will hold the assets in your SDIRA for you. Qualified custodians are regulated by the state banking commission and can only provide guidance on what is permissible under law, not investment advice. These firms have a range of service offerings and fees so carefully evaluating potential custodians is important.
- Select eligible investments
Because you are self managing your SDIRA, investors are responsible for selecting eligible investments to comply with IRS rules. If you engage in a prohibited transaction, the entire IRA becomes disqualified and is no longer an IRA. This results in a distribution of the IRA to the IRA owner personally with the distribution subject to taxes and penalties.1
- Stay educated on your investments
SDIRA custodians are not allowed to provide you with investment advice so you’ll be expected to select the investments right for you and stay up to date on investment trends. If you plan to include commercial real estate investments in your SDIRA, CrowdStreet has resources to help keep you educated. Visit our learning center for commercial real estate guides and information. We also offer a free ebook that teaches you everything you need to succeed in the new world of online CRE investing.
Ready, Set, Go… on CrowdStreet
If you are an investor who wants to use SDIRA funds for online commercial real estate (CRE) opportunities, CrowdStreet is an excellent option. CrowdStreet offers simple tools for investors to invest in CRE online crowdfunding using SDIRA funds and we are here to support you the whole way.
If you have questions, you can always reach out for help – call (888) 432-7693 or email us at [email protected]
For more information:
Scroll down to the “Can I Invest with My Self-directed IRA Account?” section of our FAQ page. It walks you through 7 steps for investing on the CrowdStreet platform. You can also view our How-To Guide, “What to know about investing through a self-directed IRA” for more information.
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1Is An SDIRA Right For You? Five Things You Should Know, https://www.forbes.com/sites/forbesfinancecouncil/2018/04/03/is-an-sdira-right-for-you-five-things-you-should-know/#2cdbd3dc6578