Most people worry about what will happen after retirement. How will they pay for food, gas, shelter, and the various other expenses that are essential for a comfortable life? How is one to pay for all that when he has stopped receiving a monthly paycheck? Aside from the ubiquitous retirement plans available from many companies, most of which are now on the decline, one can also take the matter of retirement savings into his own hands. This is where an IRA becomes handy.
An IRA or Individual Retirement Account is a type of retirement plan that allows tax advantages for retirement savings. Because the government wants us to save for our old age, taxes are deferred from investments in Individual Retirement Accounts. These investments are typically in the form of mutual funds, stocks, and bonds. However, there are many other IRA investment options to choose from if you want to attempt a nontraditional approach to investing.
Before you toy with the IRA investment choices listed below, however, make sure that you are aware of the risks and rewards of each.
If done right, purchasing real estate is typically a good investment. This might prove a little difficult, though, as you have to have enough money in your Individual Retirement Account to pay for the property itself, the maintenance fees, the taxes, and all other expenses associated with the property. You cannot combine IRA funds with non-IRA funds for this kind of investment. This is why most IRA administrators won’t manage real estate. It might also be difficult to find a lender to help with the purchase, as they are prohibited from touching most IRAs.
It will be wise to remember that you cannot purchase property for personal use using a traditional IRA. To do this, you have to withdraw $10,000 from the IRA for a home purchase. You can only do this if you are buying a home for the first time. This way, you won’t have to pay the penalty; but you will have to pay tax on the income.
This is another IRA investment opportunity that not many people know about. When you purchase a mortgage, you become the banker for that property. A privately-owned mortgage company may pair you with a borrower and manage the paperwork. The borrower receives money from your IRA and the loan is assured by the property.
You don’t profit when the value of the property goes up because, technically, you’re not the owner. But the investment is still lucrative because it is backed by a real asset, unlike interest-based investments like certificates of deposit.
Coins, bullions, collectibles
They don’t pay interest or dividends, but gold and silver coins have been the standard measure of value for millennia. They may not provide income but their value tends to be stable or go up when markets crash or inflation occurs
Precious metal bullions in gold, silver, platinum, and palladium can be purchased with an IRA and stored for a fee by a custodian.
If you’re considering investing in art, wine, antiques, and gems, think again. The IRS bans these so-called “collectibles” and you will be taxed if your traditional Individual Retirement Account invests in them.