Alternative investments have been allowed within IRAs since the 1970s, when they were first introduced, but most companies have focused on stocks, bonds and mutual funds. As the markets continue to fluctuate, more investors are turning to options they can fully control themselves, like self-directed IRAs and solo 401(k)s.
Adam Bergman, a tax attorney and partner at IRA Financial Group in New York and Florida, says that interest in self-directed retirement account options has “exploded in popularity” the past few years. He believes they are getting more notice now because people began looking for alternative ways to invest after the 2008 stock market decline.
So should everyone run out and open up a self-directed account? According to Bergman, self-directed accounts aren’t for everybody. “People need to know what they are doing like for any investment,” he said. People have the opportunity to invest in real estate as part of their accounts, but like any investment, the investors need to know something about buying and selling real estate before they get involved in real estate transactions within their portfolio, otherwise there are many unforeseen pitfalls.
“A self-directed IRA has more investment opportunities, but it also has a lot more opportunities to make bad investments,” Bergman said. “If you are buying things in the non-traditional sense, even gold and silver, make sure you know what you’re buying.”