Many people think that Roth IRA
investing options are limited.
While there are some rules that apply to investing IRA funds,
they are fewer than most people think.
Here, we look at what is against the rules, because there is
really no way to cover everything that you can legally invest in!
If you do not follow the rules and guidelines for Roth IRA
investing, you could be required by law to liquidate the account
immediately. So, it is very important that you and your account
custodian are acquainted with the regulations. But, relax! They
are relatively simple to learn, and we'll go over a few just to
break the ice a little.
When it comes to investing IRA money, there are some prohibited
transactions. For example, you cannot borrow money from it, sell
property to it or use it as security for a loan. Custodians are
not allowed to receive unreasonable compensation for managing
the account either.
The Roth IRA investing rules are the same as those for a
traditional account, except that you are not required to take
distributions from the account after you reach a certain age.
With the traditional account, you are required to take minimum
distributions on a yearly basis after you reach the age of 70
and a half. As we are living longer and many people are
continuing to work well into their seventies, it could be
advantageous to "not" be required to take money out of the
account.
When it comes to investing IRA dollars, there are certain things
that are not allowed. You cannot buy art, rugs, antiques, metal,
gems, stamps, coins, alcoholic beverages or other collectibles.
However, there are exceptions to the "coin" rule. The account
can hold US minted gold, silver and platinum coins or bullion.
One last "no-no" for Roth IRA investing is referred to as
"self-dealing". You could not invest in your own company, if you
are the majority stock holder. You could not buy a home and
allow a close family member to live in it, even if they pay
rent.
Basically, any investment that benefits you or a family member
personally, rather than the retirement account, would be
considered self-dealing. What the government really wants
concerning investing IRA funds is that your retirement will be
secure and easy to liquefy.
If you die, they want the account to be liquid enough that a
beneficiary can get the cash value of the account relatively
quickly. Things like antiques and artwork are hard to liquidate
and it is hard to assign a fair market value to them.
Investing IRA money in real estate, on the other hand, is one of
the many things allowed under the rules. The fair market value
is easy to establish and property can usually be sold quickly,
in the event that the account owner died.
The only Roth IRA investing rules regarding real estate
transactions are those that concern self dealing. The advantages
to the knowledgeable real estate investor include no capital
gains tax, no state taxes on profits and tax-free interest
earned.
If you don't have the knowledge, get some education and look
into the many Roth IRA investing options. When you are ready to
retire, you'll be glad that you did.
By Joe Fazchas is a Real Estate investor as well as owner and
founder of
http://www.ilocadvantage.com/, a company that
partners with private individuals and lending corporations
nationwide for the sole purpose of financing and/or rehabbing
investment properties. All of which is done using a proven
"turn-key" Real Estate system...The ILOC IRA.
