Alternative IRA Investments with a Traditional IRA

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The beauty of self-directed IRA investing lies in the powerful combinations of strategies you can implement. From the various account types to your broad range of alternative investment options, you have ample opportunities to meet your retirement goals while operating within your risk tolerance.

Let’s follow an example timeline for hypothetical real estate and private lending investments to see how they might fit into a Traditional IRA:

  • Age 50 – You’ve managed to build a decent 401(k) over the last few decades. However, as living and healthcare expenses rise and the future of social security becomes more uncertain, you wonder if you’ll have enough once retirement rolls around. With a portfolio situated almost entirely in stocks and mutual funds, a sudden economic downturn can wreak havoc on your retirement prospects as your golden years draw nearer.

  • Age 52 – After a few years of deliberation and with stock market volatility rearing its ugly head, you decide to take your Wall Street profits and apply them toward a real estate IRA. You’ve researched properties and even partnered with your friend on a rental condominium, from which you’ve derived some steady returns. Now you want to put those same strategies to work for your retirement. You roll your 401(k) into a Traditional IRA and find the perfect rental property, but it’s a bit out of your price range. The friend with whom you partnered doesn’t have the capital to join you on this new venture, but your IRA can make up the difference through non-recourse financing. Like an individual, a retirement plan can use debt leverage to acquire income-producing assets and steadily repay the loan with earnings.

  • Age 60 – Having chosen a solid property, offered competitive rent in your market, and qualified your renters, your IRA-owned real estate has outperformed the stock market. You also turn age 59½, which means you can make penalty-free distributions anytime you want (though distributed balances may be taxed as income). You’re yielding consistent retirement income, but the asset itself isn’t losing value in the process.

  • Age 70 – As a Traditional IRA holder at age 70½, you’re no longer able to make contributions and must begin taking required minimum distributions (RMDs) every year. You also decide that it’s time to sell your rental property (hopefully for a nice profit!), but you still have the itch to boost your IRA even further. Just because you can’t contribute doesn’t mean your IRA can’t still make money. As such, you elect to sell the property via owner financing, which effectively allows your self-directed retirement plan to become a private lender instead of a real estate mogul. Just as you established rental terms, you may choose a borrower in accordance with your criteria and make final decisions on the interest rate and loan duration. Once everything is in place, your IRA can continue to earn money through interest; you won’t have to manage your real estate anymore; and you’ll have steady cash flow to satisfy your RMDs.

This scenario is just one of many ways that self-directed investors can make the most of retirement with alternative assets in a Traditional IRA. While New Direction Trust Company does not recommend investments or provide financial advice, we would be happy to discuss your options. Please feel free to give us a call at 877-742-1270 or send us an e-mail at