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IRA Investment Options
When contributing to an IRA, one usually thinks of the investment options of stocks or mutual funds. However, there are many other options, as well as restrictions, for IRA investments. What is allowed and what is restricted is based on liquidity and safety. Funds are meant to be not only available at retirement, but are also meant to provide enough cash flow to permit participants to take required distributions.
Allowable IRA Investments
You may invest in any of the following for your IRA:
- Cash
- Stocks
- Bonds
- Mutual funds
- Certificates of deposit (CDs)
- U.S. Treasury instruments
- Gold coins, such as the American Eagle coin
- Real estate – This includes real estate investment trusts, mutual funds specializing in real estate, and rental property that is not for personal use. Real estate is a very non-traditional type of IRA investment. Title, mortgage and loan structure need to be considered carefully. Before embarking on this type of IRA investment, consult your financial planner.
Non-allowable IRA Investments
You may not invest in any of the following for your IRA:
- Life Insurance – This is not allowed because it does not have inflation-protected returns.
- Collectibles – This includes art, rugs, antiques, metals, guns, gems, stamps, alcoholic beverages, and coins (except gold coins, such as the American Eagle, silver coins, and coins issued by a state).
- Foreign Investments – Investments should be within the continental United States. Investments in American Depository Receipts (ADRs) and domestically sponsored international/global/foreign mutual funds are permissible.
- Self-dealing – This is when the owner of the IRA uses the account for personal enrichment or to satisfy financial goals beyond the intent of the tax laws. An example of self-dealing investment includes stock in a corporation in which the IRA owner is an officer or has a controlling equity position.
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