Allowed and Disallowed Investments in a Self-Directed IRA
Self-directed IRAs give you the freedom, flexibility, and choice of how to invest your hard-saved dollars. You can expand and diversify your investment opportunities beyond the stock market into a variety of alternative investments, such as mortgages, notes, real estate, and private placements.
These alternative investment options have been available since 1975, when IRAs were introduced as part of the Employee Retirement Income Security Act of 1974. However, there are some assets that are not allowed.
It comes as a surprise to many investors that there is no list of approved investments for retirement accounts. However, the IRS does have a list of what the law does not allow as an investment in a retirement account.
All IRAs including self-directed IRAs cannot invest in:
Collectibles
This includes any: work of art, rug or antiques, certain metals, gems, stamps and certain coins, alcoholic beverage, and any other tangible personal property that is a "collectible" under IRC Section 408.
Life insurance
Per the Internal Revenue Code 408 (a)(3) for an individual retirement account, an IRA cannot invest in life insurance.
S-Corporations
Trusts that qualify as an IRA are not eligible to be shareholders of an S-Corporation. (See Revenue Ruling 92-73)
