A self-directed IRA account allows investments in asset classes and investment vehicles beyond traditional stocks, bonds, cash, mutual funds, and ETFs. This can include investments in medical and related ventures such as healthcare facilities, medical devices, and early-stage pharmaceutical or biotech companies.
There is also a wide range of asset classes available for investment such as:
Your IRA can be a good source of untapped investment funds and investing in these and a host of other alternative investments within a self-directed IRA can make a lot of sense. The ability to keep investment gains as well as income from these investments tax-deferred or tax-free is a great option. Some of these investments may have a period of time where there is a degree of illiquidity, and this timing can work well for those with a number of years until retirement.
The passage of the Jobs Act several years ago served to open many alternative asset classes to a wider range of investors that were previously available only to accredited investors.
For those interested in medical-related investments, there are a number of alternatives you can consider for your self-directed IRA.
Investing in medical-related businesses
Beyond buying the stocks of huge, established companies in medical-related businesses, there are opportunities to invest in private companies whose business ideas and products offer the opportunity for growth. Maybe this is a company you’ve become aware of through your work as a medical professional or an idea that appeals to you.
Mobile imaging companies, medical device makers or investing in companies that perform medical research are all examples of the types of businesses you might consider. Additionally, commercial medical buildings can also be a solid investment.
Some ways to make these types of investments within your IRA could include:
There are numerous crowdfunding platforms that invest in a variety of start-ups and other businesses seeking funding. There are also a number of crowdfunding platforms that focus on medical and healthcare related companies seeking funding.
Crowdfunding is a great way for investors to contribute to start-up ventures, business expansions and other ground floor opportunities. With new regulations in place, all investors can take advantage of crowdfunding investments.
A self-directed IRA can be used to purchase investment real estate, including medical buildings and related facilities. Whether you invest directly or via a private-equity real estate fund, there are many advantages including the fact that any gains on the sale of the property and all rental payments go to your IRA, where they remain tax-deferred (or tax-free in the case of a Roth) until withdrawn.
You will need to ensure that you avoid prohibited transactions, such as purchasing a building that you already own or that is occupied by your medical practice, within the IRA account.
Your self-directed IRA can be used to make loans to companies. Private corporate debentures are a type of debt instrument issued by companies that serve as an unsecured corporate loan. You can make these types of loans to promising medical-related businesses directly or via a pooled fund from your IRA. All interest payments are made to your IRA and retain their tax-deferred (or tax-free) status.
Private equity investments in medical and healthcare related companies can be a viable investment vehicle for your self-directed IRA. Types of private equity investments might include investments in limited liability companies (LLC), limited partnerships (LP) and stock in a C-corporation. These investments can be made directly or via a pooled private entity fund. There are some restrictions on the types of investments you can make.
These are just a few examples of investment ideas via your self-directed IRA for those interested in investing in medical related start-ups, ongoing medical businesses and medical buildings.
What to know when investing via your self-directed IRA
A self-directed IRA offers the opportunity to diversify your retirement investments. This can be a source of funds to allow you to invest in promising ventures in the medical area and elsewhere.
There are some restrictions and issues that you should be aware of:
• It’s important to avoid prohibited transactions. These typically include transactions with disqualified persons which include yourself, your spouse, your children and your parents or grandparents. Family members that include siblings and other relatives may be okay.
• For a real estate property that is directly owned by an IRA, all transactions relating to your IRA investment must be made with funds from the IRA. For example, repairs to a real estate investment purchased with IRA funds must be paid from your IRA, no personal funds can be used.
• Some investments in operating businesses might trigger UBTI (unrelated business taxable income).
Choosing the right custodian
Self-directed IRAs open a new world of investments for your retirement funds. There are some import rules and restrictions to understand. Violating these rules can trigger costly tax consequences that you want to avoid.