by Yieldstreet | Staff
Whether your IRA allows only marketable securities or both marketable securities and private investments is determined by the type of IRA custodian you have. Typically, it comes down to making the choice between large-scale custodians and self-directed IRA administrators.
Large-scale custodians tend to only allow IRA investments in marketable securities as they are in the business of selling them and private investments tend to be cumbersome and require additional paperwork. As allowing IRA owners the option to invest in private investments is not a scalable business model for large-scale custodians, a niche market of self-directed IRA administrators emerged that allow those who want to hold private investments in their IRAs to do so. Here, we take a look at why brokerage firms typically won’t allow your IRA to hold private investments.
Hi I’m Joe, Founder of WealthFlex. Let’s talk about why your brokerage account doesn’t allow you to include private investments in your retirement account.
IRAs that are administered by most large financial services companies only allow you to participate in marketable securities. That generally means stocks, bonds, mutual funds, and other securities traded on exchanges.
There is nothing written in any legislation or tax code that says you can’t invest in things like real estate, private businesses, machinery, private notes, and other alternative assets in IRAs held at brokerages. Interestingly enough, though, marketable securities aren’t mentioned in legislation or tax code either!
While there many things that you can choose to invest in with your IRA, legislation is more explicit about what you can’t invest in, which is life insurance, collectibles, and S-corporations.
Private investments are more cumbersome to custody because they are non-standardized, paper contracts. But more importantly, larger firms that custody 98% of all IRA account assets have found that private investments are not a scalable or profitable business to be involved in. So brokerage IRA accounts just don’t let you buy a private investment because it’s easier for them to run their business and there’s less work involved for them. But with a YieldStreet IRA, you can invest in an array of asset classes. Click the link in the description to find out how!
Learn more about how you can take retirement planning to the next level with a Yieldstreet IRA. Contact us at [email protected] with any questions.
Yieldstreet cannot provide tax advice, so please consult a tax professional for advice specific to your situation.
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