How Self-Directed IRAs Can Be Used to Invest in Farmland

For investors seeking long-term growth, portfolio diversification, and potential tax advantages, farmland is increasingly being considered part of a modern retirement strategy. Yet, this real asset class remains underutilized in self-directed retirement accounts like Self-Directed IRAs (SDIRAs), which allow for allocations beyond traditional stocks and bonds. Because farmland investments are typically passive, income-generating, and long-term in nature, they may align well with retirement capital.

In this article, we explore the key reasons why farmland is structurally suited to SDIRAs–and what investors should consider before getting started.

Why Farmland Aligns with Retirement Capital

Farmland investments are typically characterized by: 

• Long-term hold periods (often 10+ years)
• Limited liquidity, reinforcing a patient capital approach
• Passive income generation, typically through leases or crop proceeds

For retirement investors–particularly those with a long investment horizon–these characteristics can be a natural fit. While farmland isn’t designed for short-term gains, its potential for inflation-linked appreciation, income stability, and historical downside protection make it appealing within a diversified retirement portfolio.

Case Study: Structurally Suited for SDIRAs

As an illustrative example, consider a hypothetical citrus orchard investment with a 10-year hold period, operated by an experienced farm manager, and designed for long-term returns. While inspired by characteristics of real farmland offerings such as FarmTogether’s Landmark Mandarin Grove, this scenario is entirely hypothetical and does not reflect any specific investment outcome.

Many passive farmland investments share similar structural traits that make them compatible with SDIRA capital:

• Income is generated passively by farmland operations
• Hold period aligns with retirement timelines
• Real assets can offer a hedge against inflation and market volatility

Because SDIRA rules prohibit personal use or active management of IRA-held assets, the passive nature of farmland makes compliance more straightforward—assuming the structure is properly administered through a qualified custodian.

Tax-Efficient in a Retirement Account

One of the key benefits of using an SDIRA is the ability to defer or eliminate taxes on  income and capital gains, depending on the account type: 

• Traditional SDIRA: Contributions are typically tax-deferred, and gains compound without immediate taxation. Taxes are paid upon distribution. 
• Roth SDIRA: Contributions are made post-tax, but qualified distributions–including income and appreciation–are tax-free.

This can be particularly meaningful in asset classes like farmland, where income accrues gradually and capital appreciation builds over time.

Hypothetical Tax Comparison: SDIRA vs. Taxable Account

To illustrate the potential impact of tax treatment over a 10-year hold, consider the following hypothetical: 

In this hypothetical scenario, using a Roth SDIRA to invest in a farmland offering with similar characteristics to Landmark Mandarin Grove yields an almost 20% higher after-tax return.

Why This Matters for SDIRA Investors

Farmland offers a unique combination of long-term growth, income generation, and inflation resilience. When structurally appropriate, these traits make it a strong candidate for retirement capital held in a Self-Directed IRA.For investors looking to diversify beyond public markets while maintaining a patient, tax-advantaged approach, farmland may be worth considering. 

-

Guest post by our partners: CamaPlan.

To learn more about SDIRA custodians and account setup, visit their website or speak with a qualified financial advisor.

-

Disclaimer: All investments involve risk, including the loss of principal. Past performance is not indicative of future results. This content is provided for informational purposes only and does not constitute an offer to buy or sell securities. FarmTogether and CamaPlan do not provide tax, legal, or investment advice. Investors should consult their own advisors before making investment or retirement decisions.