A Guide to Investing From Within an IRA

Investing from within an IRA must follow certain tax guidelines and rules or the status of the account could be jeopardized.  But, don’t worry, it’s not that difficult.  You just need to get a little education first.

Many people are turning to self directed investing from within an IRA, because bankers and brokers do not provide all of the options for diversification.  Real estate investments, for example, can be highly profitable and grow your retirement wealth quickly, but most trustees do not offer the option.

Stocks and certificates of deposit are fine, but you need more, particularly right now.  If you are getting closer to retirement age, you need to do something quickly.  The rate of returns on your traditional investment types may not be keeping up with inflation.

Let’s look at some of the rules that cover investing from within an IRA.  You may have more options than you thought.

First there are investment types that are not allowed.  They are things that are not easily liquidated or cannot easily be appraised.  They include things like antiques, stamp collections, tiffany lamps, Persian rugs, fur coats and other tangible goods.

But there is a long list of things that are options for investing from within an IRA.  The better companies offer the option of commercial and residential real estate, mortgage notes, tax liens and more.

There are also some prohibited transactions.  For example, you cannot borrow money from the account.  If you are a first time homebuyer, you may be able to make a penalty free withdrawal for the down payment, but otherwise, withdrawals from a traditional account are taxed as regular income.

With a Roth account, you can withdrawal up to the amount that you have contributed, once a seasoning period has passed.  Currently that period is five years.

You cannot use the account as collateral on a loan, but you can hold a mortgage within the account.  So, if you are doing some real estate investing from within an IRA, you could borrow money to buy the property, but income from the property would be subject to Unrelated Business Income Tax or UBIT.

You cannot sell something to the account.  For example, you could not direct your trustee to purchase the house you are living in.  That would be considered self-dealing.

There are also certain “disqualified” persons that you could not buy from or allow to benefit directly or indirectly from investing from within an IRA.  Disqualified people include your descendents, their spouses, your parents, grandparents, great grandparents, your account custodian and of course “you”.

Some of the things that could be considered indirectly beneficial include renting office space from a building held by the account or taking a vacation in an investment property owned by the account. 

There is much more to learn about investing from within an IRA.  It’s a good idea to get as much information as you can, before you begin.  But, choosing real estate might be the right choice for your future.  

W. Conley is an advocate of IRA investing in Real Estate as a means of diversifying your portfolio, while maximizing returns. He has successfully invested in Real Estate and has seen fantastic returns on his investments, all of which was done using a proven system. You can read more about the benefits of IRA investing by going to http://www.iloc-ira-site.com

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