IRAs: Frequently Asked Questions

The choice of investments is basically yours.

If you are investing in stocks and bonds, a discount brokerage account is generally considered to be a logical place through which to invest.

Through a "self-directed" IRA, you can even invest in real estate - so long as it is not property for personal use. At least one financial planner suggests that you can invest in a house you use as a rental to non-family members then ultimately take it as a distribution. It is advisable to speak with a professional before making an investment that involves personal use at some point because of the tax pitfalls. If the IRS determines that you violated the self-dealing prohibitions, it could force you to pay income tax on the whole account. If you are younger than 59 ½, you could also be hit with an early withdrawal penalty.

You can also invest in a business, but not if the intent is to employ yourself or most family members. It's not so black and white if you invest in a small percentage of a business and the other owners decide to hire you. Check with a lawyer or accountant before moving forward on this idea.

If you invest in collectibles, the amount invested is considered to be distributed to you in the year in which it is invested. "Collectibles" includes artwork, antiques, rugs, metals, gems, stamps, coins and certain other tangible personal property.

Please share how this information is useful to you. 0 Comments