Funeral & Estate Planning

Consider the various investment alternatives

Posted March 05, 2014, at 9:50 a.m.
Copley News Service

Many investors are taking more control of their financial future by investing in alternatives to the stock market, including real estate, land, promissory notes, oil and gas.

Sue Jensen of New York grew frustrated after watching her life savings take a hit year after year in the stock market. A couple of years ago, after another year of less-than-desirable returns, she couldn’t take it anymore. She sought a way to further diversify her investments that would not leave her on the sidelines, watching helplessly.

Jensen is just one of many Americans who for years knew only one way to save for retirement. Growing concerned that it wouldn’t yield enough money to live comfortably, Jensen sought out alternatives.

The good news is that there are options. You can diversify your portfolio by investing your retirement savings in assets other than stocks and bonds. As Jensen and many others have discovered, the Internal Revenue Service allows you to invest your retirement funds in an array of assets, including real estate, promissory notes, private placements, and tax liens. The investments are made using a self-directed account such as an IRA.

Self-directed IRA custodians offer options for nearly everyone when it comes to saving for retirement. These options include:

• Individual retirement accounts: IRA, Roth IRA;

• Small-business accounts: SIMPLE IRA, SEP IRA, Solo 401(k), Roth Solo 401(k);

• Accounts that allow you to save for other expenses: Coverdell Education Savings Account, Health Savings Account;

Investing your IRA or other account in alternatives is nothing new. IRS Publication 590 outlines the types of investments allowed in a self-directed IRA, including:

• Real estate, including apartments, single family homes, and duplexes;

• Commercial property, developed or undeveloped land;

• Mortgages/deeds of trust;

• Publicly traded stocks, bonds, mutual funds;

• Private limited partnerships;

• Private stock offerings, private placements;

• Private limited liability companies;

• Secured and unsecured notes;

• Judgments/structured settlements;

• Tax sale certificates;

• Car paper;

• Factoring;

• Accounts receivable;

• Commercial paper;

• Equipment leasing.

You should be aware that not every IRA custodian allows you to self-direct your funds. Only qualified self-directed IRA custodians will allow you to invest your retirement funds in real estate and other alternatives to the stock market.

Jensen has diversified into tax liens and promissory notes. In addition to the profits from those investments, which grow tax-deferred or tax-free in her IRA accounts, she has gained peace of mind in knowing all her retirement “eggs” aren’t in one basket.

Self-directed IRA custodians are passive, which means they cannot give investment advice.

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