Using IRA Dollars for Offshore Investment
Dec 8th, 2007 by Kevin
In the U.S. most people that I know are try to be somewhat diligent these days about saving for retirement typically via a company offered 401k plan, which are offered through a number of financial institutions with a mild selections of mutual funds that are usually categorized in 3 or 4 categories from risk averse to aggressive. As people move from company to company these small pockets of funds usually stay put, or the person may get up the energy to roll them forward into their current plan. The 401k plan is great to help support your savings efforts, and is often supplemented with some type of company match that is part of the advertised compensation package. Great Deal right!
A few years ago, I did some roll over consolidation, and lasts year, I decided to move some of these pockets of retirement assets into a self directed IRA account. From there I started moving some of these assets into some alternative investment vehicles other than mutual funds. When my returns started to increase with these non standard retirement vehicles, I started to think about other things one could do with a self directed IRA. Key words here being ’self directed’ instead of managed by someone else. As it turns out, you can use IRA money for many different investment options outside of mutual funds including many different types of real estate! Interestingly if you were to call your 401k company, talk to your typical financial adviser, or banks that offer IRA’s to individuals who don’t have a company sponsored plan, chances are they will have either no idea what you are talking about, or will suggest to you that you keep you money where it is, which of course makes life easier for the custodian, but not necessarily for you.
In fact the IRS allows a great deal of flexibility when it comes to investing the assets of your retirement account, if you have a self directed IRA. In fact, according to Larry Grossman, a financial adviser who writes for International Living, the rules governing the ownership of real estate are simple…and you can own virtually any kind of real estate in your IRA or other retirement account, including:
- Raw land
- Condos
- Office buildings
- Single-family homes
- Multi-family homes
- Apartment buildings
- Improved land
And this includes non-US real estate! He has written a great synposis of this including a discussion on prohibited transactions, disqualifications, special exemptions, how to own, taking on debt, property management, and some guidance on finding the right custodian. With this knowledge it now opens up a who new set of options to people looking for different ways to build wealth and acquire property for retirement.
I would be interested to hear from others outside of the U.S. if there are similar options in your country? For example I did a google search and it appears that RRSP’s (Canada’s equivalent to a 401k) also allow for real estate investment. I would be interested to hear from those out there both in the US and abroad about their experiences with this!
