Allowable Advanced IRA Investments
Statistics have revealed that at the end of 2001, 42% of American households had an IRA account. The total value of these accounts was $2.4 trillion. The wealth in these traditional IRA accounts made up nearly half of all financial assets of the households involved. Due to the downturn in the economy and poor stock market performance in recent years, $5 trillion has been lost. Much of this money was retirement money that was in traditional IRAs. Now, IRA owners are desperately looking for other means to invest their IRA funds. By investing in options other than the typical stocks, bonds and mutual funds, these people have been able to start building their retirement plans again because making money through any investment vehicle is the purpose of any Roth IRA.
Is Real Estate in Your IRA the Solution?
Real estate is one such possible investment. Roth IRA rules and simple IRA rules regarding real estate investments are complex, but the rewards from such investments can be enormous. Many people have a misconception about their IRA retirement account. They believe that these accounts should be offered by an insurance company, a bank or a brokerage house. This is not true. Although the IRA requires a large institution to act as trustee, it should be remembered that the IRA itself is simply a trust that is given tax benefits. These tax benefits are available as long as the trust contains provisions. So basically, an IRA is nothing more than a trust that must meet certain conditions.
IRA accounts must meet specific requirements. All contributions must be in cash. The only exception to this is if a contribution is a transfer from another account. Make sure you know the IRA contribution limits. Currently, a person under the age of 55 can contribute $5,000 per year. Over 55, the limit is $6,000. The trustee of the account must be a bank or other natural person that has demonstrated that it will administer the trust with all the requirements. In no event may any part of the trust funds be invested in a life insurance contract. All interest earned cannot be lost. All assets that are in the account should not be mixed with other assets. The exception to this is when it is a common trust fund or a common investment fund. As long as the requirements are met, the IRA can do everything a trust can.
Your IRA account can be invested in many ways. In addition to stocks and bonds, you can invest in a business start-up, real estate, tax lien certificates, and invest in a limited partnership. These are just some of the ways your funds can be invested. In short, the only things you can’t invest in with IRA funds are life insurance and collectibles.
Now that you know which investments are not allowed, let’s take a look at what is allowed. IRA funds can be invested in deeds of trust, the IRA owner’s mortgage, loans made to private corporations, and real estate. There are many more, but before you take any further steps to invest your IRA funds; it is recommended that you check with your CPA or contact Estate Street Partners to ensure that potential investments are not prohibited.