Retirement planning is an important step in your financial health, but figuring out how and where to begin can be challenging. Traditional and Roth IRAs are great options, but they often limit your ability to invest your funds exactly how you want.

A self-directed IRA puts the power back in your hands, opening up additional opportunities to grow your wealth. But, with the added flexibility and expanded asset opportunities, you may be wondering where to start or what investments are worth considering.

1. Real estate

Real estate is a popular asset for SDIRA holders who wish to secure a steady contribution. SDIRA funds can be used to purchase a wide range of properties, including single-family and multi-family homes and condos. It can also be used to purchase commercial properties. 

Any income from the property goes directly back into your IRA, meaning the property can’t be used to establish a regular income for everyday use. It’s also important to note that there are regulations regarding what you can and can’t do with the reality you purchased. 

When you purchase a property with IRA funds, it’s purchased in the name of your IRA, not you. Therefore, you cannot live in or run a business out of your property, nor can your family members. For instance, you can’t purchase a property with your SDIRA and then rent it to your siblings.  

That said, real estate is a great long-term investment for an IRA, as you can build lots of equity that can be used for retirement later on. 

2. Crypto

When you have a regular IRA, your investment options are limited to government-backed currency. But if a crypto investment has caught your eye, an SDIRA is the answer. 

To use your self-directed IRA for cryptocurrency, you must first open an LLC and a digital wallet in the name of your IRA account. 

Cryptocurrency is still a growing financial sector and can be quite volatile. As such, it’s important to perform due diligence before investing in any cryptocurrency.  

When you invest in tax liens, earnings come from the interest applied to the lien

3. Private Money lending

You can also leverage your funds to finance private lending agreements. In this scenario, you act as the lender and can set the terms, rates, payment schedule, and conditions. In addition, private money lending arrangements can be made with individuals or businesses, allowing for additional flexibility. 

Like other SDIRA investments, all transactions must come back into your IRA account. All principal payments and any interest must go directly into your account.

4. Promissory Notes

A promissory note is a promise made by a borrower to repay a set sum of money as well as any interest or fees stipulated in their finance agreement. Two primary types of promissory notes are available for investment: secured and unsecured. 

Secured promissory notes refer to loans secured by property; the home or structure generally secures a mortgage. On the other hand, secured promissory notes use other items, like equipment or machinery, for collateral. The promissory note holder can seize the collateral if the borrower fails to pay.

Unsecured promissory notes do not leverage collateral. Therefore, if the borrower fails to pay, the promissory holder can find themself at a loss. As such, these are considered riskier than their secured counterparts. 

5. Precious Metals

Precious metals offer a less volatile investment to add to your retirement portfolio. 

Generally, investors can use their IRA to purchase eligible gold, silver, platinum, and palladium. However, if you’re considering precious metals, you must work with a custodian who understands the limits and requirements of precious metal investments. 

6. Foreign Currency

For investors who have access to keen speculatory skills, foreign currency can prove to be a lucrative investment strategy. However, most mainstream custodians and financial organizations limit foreign currency opportunities.

SDIRAs provide the flexibility required to invest in a foreign exchange. And, since the Forex market spans the globe, you can execute trades twenty-four hours a day, five days a week.

7. Private Equity

Self Directed IRA private equity is when individuals or organizations invest in shares of a private company or entity that isn’t available on the stock exchange. Earnings from these investments grow alongside the company–assuming the company is successful–and don’t become liquid for several years. 

There are three types of private equity investment opportunities:

  • Venture capital investment is an opportunity to use your SDIRA funds to invest in a business in its early or startup phase. 
  • Growth equity opportunities refer to investments intended to provide a mature or established business with an influx of capital.
  • Buyout private equity investments aim to stabilize and grow a company that is currently failing but has promise or potential for future growth. 

To invest in private equity, you must meet the requirements to become an accredited individual or organization. Generally, this means you must have an income of $200,000 ($300,000 with a spouse), a net worth of at least $1 million, and a Series 7, 65, or 83 licenses. 

8. Traditional Stocks, Bonds, and Funds

SDIRAs open the door to investment assets that are out of reach for other IRA account holders, but that doesn’t mean traditional assets aren’t worth considering. You can still use your SDIRA funds to invest in traditional stocks, bonds, mutual funds, and other compound interest investments. Doing so can help you round out your portfolio and build wealth over time. 

SDIRAs offer a comprehensive range of investment options outside the normal regulations of a traditional or Roth IRA. While some of these investments may be more volatile, they also offer a higher reward at retirement in the long run. Be sure to do your due diligence when researching an SDIRA custodian to ensure you have the most flexibility and control over your investments.