Choosing Investments For IRA

Whether you recently opened an IRA or have decades of experience with retirement account investing, you likely understand the importance of choosing investments for your IRA. Economic cycles come and go, your needs change, and so do the dates on the calendar. The closer you get to retirement, the more important it is to properly allocate your IRA savings. This IRA investment options cheat sheet will help you choose IRA investments that are in line with your goals.

Bonds : Bonds are interest-bearing investments that may be issued by governments (i.e. the Federal Reserve) or companies in the private sector. Low interest rates make it hard to maintain one’s principle with bond investments if inflation is outpacing the bond rate. When interest rates are at their peak, bonds become more popular. Bonds have timetables for maturing that can vary from 30 days to 30 years.

CDs : CDs are also known as certificates of deposit, and are a standard interest-bearing investment. Bank and IRA CD rates are unofficially tied to the Federal Reserve’s prime lending rate, meaning CDs do not pay very well when interest rates are low. CDs usually require that the investor “lock in” for anywhere from one month to five years to attain the full value of the CD.

Individual Stocks : Individual stocks are shares of publicly-traded companies. These investments gain and lose value according to the company’s performance, public perception and global events. Individual stocks can make dividend payouts each quarter or annually, depending on the company’s performance.

LLCs : LLCs are also known as limited liability corporations and are privately-owned businesses. LLCs owned within retirement accounts do not produce interest or dividends but can produce profits depending on the performance of the company itself.

Money Markets : Money Markets are very similar to CDs except that they usually pay a higher rate of interest, and usually involve much larger account balances. Additionally, many money markets do not put time restrictions on investors. As with CDs and bonds, money markets pay an interest rate similar to that of the Federal Reserve.

Mortgages : Mortgages within retirement accounts allow you, the investor, to act as banker and lender for someone. You are matched with a qualified borrower and you make money when they make mortgage payments.

Mutual Funds : Mutual Funds are akin to a “basket” of stocks that are usually all from one industry or investing arena. Alternatively, many IRA custodians promote “conservative” mutual funds that spread your wealth out to prevent you from losing everything. These are often low-return, but investment brokers also sell “aggressive” mutual funds for investors who are willing to risk more for a chance to get better returns in a shorter time.

Precious Metal Bullion : Precious Metal Bullion is gold, silver or platinum in either bar or coin form. The IRS authorized storage of 24-karat versions of COMEX-approved precious metals in 1997 and this IRA investment option has become very popular over the years, especially among investors with inflation concerns. Precious metals do not pay interest or dividends, and no profits or losses are realized until the investor liquidates.

Proof Coins : Proof Coins are the only collectibles allowed for IRA storage. The U.S. Mint produces American Eagle Proof coins in gold, silver and platinum, and just as is the case with bullion these coins only generate profits and losses once they have been sold.

Real Estate : Real Estate owned by IRA plans is a popular but often complicated IRA investment choice. Neither you, your business or anyone related to you may use the property, which means you’ll be dealing with tenants or leaving the property unoccupied.

The aforementioned 10 IRA investment options are not your only choices, just the most popular ones used by U.S. investors today. Many of these options have special regulations or requisites that must be met in order to qualify under the IRS tax code as a legitimate retirement account investment, so be sure to enlist the help of a qualified tax professional when choosing IRA investment options.

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