The IRS code, instead of distinguishing which investments are allowed, identifies which investments are not permitted under these laws. Under both ERISA and IRS Codes, there are only two types of investments excluded: Life Insurance Contracts and Collectibles such as works of art, rugs, jewelry etc. Refer to Internal Revenue Code Section 401 (IRC 408(a) (3)).



How come I haven't known about this?

The securities markets, when the ERISA was passed, were responsible for bringing the IRA and 401(k) to the public. Brokerage houses and banks created a misconception that buying stocks, bonds and mutual funds was all that was allowed through retirement products. This is 100% false! Brokerage houses and banks have a vested interest in having you invest in stocks, bonds and mutual funds-not real estate, businesses and other non-traditional investments. Don't limit your ability to maximize the investment potential because of the lack of knowledge of your financial advisor. There are infact many great brokers who do understand that true diversification occurs when your funds are invested in a variety of different markets.

What are the different retirement funds I can use?

Traditional IRA Roth IRA SEP IRA Keogh 401(k) 403(b) And much more!

It needs to be noted that most employer sponsored plans like 401(k) will not let you roll your account into a new vehicle while you are still employed. Some employers, however, will allow you to roll a portion of your funds. To be certain you will need to contact your current 401(k) provider.

Are there a lot of people who have self-directed IRA accounts?

The self-directed industry is growing very strong and is expected to see around $2 trillion enter the market in the next two years. In the U.S. there are over 45 million IRA holders and less than 4% of those are held in non-traditional assets. This number is expected to grow significantly over the next 5 years as more individuals and their financial advisors attain a greater awareness of self-directed IRAs.

What are the limits to the investments I can make?

You cannot invest in Collectibles or Life Insurance Contracts. There are also certain transactions in which you cannot participate when using IRA funds. These transactions are referred to as "prohibited transactions". Prohibited Transactions are defined in IRC 4975(c)(1) and IRS Publication 590. These transactions were established to maintain that everything the IRA engages in is for the exclusive benefit of the retirement plan. Sometimes professionals refer to these as "self-dealing" transactions. Self-dealing happens when an IRA owner uses their individual retirement funds for their personal benefit instead of benefiting the IRA. If you violate these rules, your entire IRA could loose its tax-deferred or tax-free status. It is important that you work with a competent Retirement Account Facilitator to avoid violating these rules.

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