The rules on retirement plans come primarily from 2 places: the US tax code and the Employee Retirement Income Security Act (“ERISA”), which was the 1974 congressional act that made IRAs, 401(k)s and similar plans possible. Generally the rules only specify two kinds of assets as non-permissible investments: Life Insurance on the IRA Owner and Collectibles.
Other than the two excluded investments listed above the rules also restrict investing in the stock of an S corporation. Beyond that the Code does not specifically outline “allowable investments” since the list of possibilities is very long (IRC sections 401 and 408). In no particular order, here are a few of the more popular options for self-directed IRA investing.
- Rental Property
- Life Settlement Contracts
- Tax Liens & Deeds
- Secured & Unsecured Notes
- Real Estate
- Mortgages
- Judgements & Structured Settlements
- Accounts Receivable Factoring
- Commercial Paper
Some IRA Custodians have their own rules about what they will or will not take responsibility for. As a result they may have more limitations than the law. But in terms of the law, the guideline is based on excluded items and not what is permissible.