TODAY financial editor Jean Chatzky explains creative ways to invest money in your IRA, but also points out some of the pitfalls you may face.

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>>> this morning on today money, new ways to think about your ira. mitt romney has gotten attention for holding as much as $1 is00 million in his individual retirement account as well as alternative investments. we have financial editor jean chatzky here to help us sort it out. good morning.

>> good morning.

>> we are getting a window on how the wealthy use their money by looking at a candidate like mitt romney.

>> and the not wealthy. one thing we have seen over the past couple of years as the stock market has fallen out of favor with people is people looking for different things to put in their retirement accounts. one of the nice things about iras is you can put almost anything in there except for life insurance and collectibles like art and antiques.

>> for example?

>> horses, cattle, limited partnerships, things that — stocks that aren’t even traded. and real estate. a lot of people put in real estate. understand, if you want to go with an alternative asset ira you can’t typically do it at a brokerage account. you need a provider set up to deal with the assets and it will cost more. the management fees typically start at several hundred a year, not a few dollars a year.

>> do you have to have somebody to manage them? you’re inferringing there has to be a person designated to manage your fund.

>> you will want a company that specializes in managing them. there is an association called the retirement trust industry association of these sorts of ira custodians to point you in the right direction.

>> when does it make sense to go to something as alternative as these alternative iras.

>> if you have an asset that you think is going to have explosive growth. it might make sense to look at this. one of the benefits of iras is that the assets in the account grow tax-deferred until you have to pull them out at age 70 1/2 or a roth ira grows tax deferred forever because you pay taxes up front. that can be hugely beneficial. there are hitches as well. you’ve got to be careful in these accounts of what we call self dealing which basically means you can derive no benefit from your ira until you pull the investments out. i think the easiest way to think about it is if you bought a vacation property and you put it in your ira. you could not live there. you could not stay there. your family can’t stay there. the proceeds you get from renting the property out has to go right back to the ira and even if you were to need to fix the roof on this vacation place, you can’t do it yourself because the ira — the government might actually look and say, hey, that represents a contribution of more than $5,000 a year and in that case, the whole transaction, the whole account and the tax benefits fall apart.

>> so i’m hearing two things. the point you made made me think there is no way i will want to put a house in my ira and maybe in the olden days, house prices will go up and you felt comfortable. would you — how would you put a house in your ira today?

>> if you were looking at a distressed property. say you got an ira some place else or a 401(k) and you want to roll it over, use the money to buy one of the distressed properties, the key is finding one of these alternative ira custodians who can actually take you through the process and make sure you don’t mess it up. and if you want to do this several times, if you want a vacation property. horses and cattle, separate iras so if you mess up one you don’t mess them all up.

>> interesting information most of us had no idea about. thank you.