Maybe it's because you took a hit in 2000 with the bursting of the tech bubble and the stock market still gives you the jitters, or because you realize that the best investment over the past five years has been real estate and you don't have cash on hand to invest. Whatever the reason, it may be time you for you start looking into investing your IRA (Individual Retirement Account) in real estate and other non-traditional IRA investments.

"But," you say, "what about the penalties for withdrawing money from my IRA?"

Keep in mind that while you can't just run out and withdraw money from your IRA, there are specialists in "self-directed" IRAs that can advise you. If you're interested in this investment strategy, you should seek out a specialist in self-directed IRAs, because many conventional financial planners  -- who often operate on commissions from stocks and bonds -- do not offer self-directed IRA advice. However a growing number of investors are learning that they can invest in real estate and other non-traditional assets with their IRAs.

Purchasing investment real estate with an IRA

Provides individuals with a number of favorable tax benefits from the appreciation and cash flow of the property. In the case of a Roth IRA, the investors don't have concerns about taxation because the Roth IRA is funded with after-tax money, is not taxed while growing, and is tax-free upon distribution (unlike with a traditional IRA, which is funded with pre-tax money and is taxed at the time of distribution). In addition, a Roth IRA has no minimum distribution, so it is up to the investor when (after 591/2 years of age) and how much he or she takes as a distribution. The Roth IRA -- and its assets -- may also be passed on to heirs without taxation.

Also, unlike "1031 exchanges," there are no specific investment timelines or requirements to purchase "like kind" investments when buying real estate with an IRA. Finally, when the property is sold, the IRA prevents any capital gain exposure, since taxation of an IRA does not occur until distribution.

But, and this is a big but, investing in real estate with a Roth or other type of IRA is not something that investors should undertake alone because of the strict rules the IRS has established. Investors interested in this option need to find an advisor who specializes in self-directed IRAs to guide them through the process, much like a traditional financial advisor would for stock and mutual fund investments.