4 Things Retirement Plans CANNOT Invest In
Self-directing IRAs are a powerful way to build wealth through investing with great tax savings. However, there are a FOUR things IRAs CANNOT invest in.
- Shares in a S-corporation. S-corporations are used for asset protection and income tax sheltering for individuals. And since IRAs are not real people with taxes, imvesting in a S-corp becomes irrelevant.
- Life-insurance. Retirement plans, even though owned by an individual, must always be looked at separate from the account holder, as well as it’s earnings, benefits and ownership. And being that life insurance is for the sole purpose of covering ones life, retirement plan must not be involved. *There is one exception to this rule and that is qualified plans with an incidental benefit rule.
- Antiques/Collectibles (including coins and alcohol). Long story short, let’s just say wine collections were turning into bottle collections.
- Personal Real Estate Residence. I know I know, I say everyday to self-direct your retirement plan into real, and that still holds true. However, just like anything else your retirement plan invests in, you cannot benefit from any assets as the account holder, as are known as a prohibited party. This includes your own personal residence.
*You can however, move into a home that your retirement plan once held, but this can only be done (legally) after you have officially retired. Please see your competent tax professionals and retirement plan TPA (third party administers) on your personal situation. I’ve seen many people buy their dream home in their IRA, and rent it out until they retire and finally move into it themselves. Again, check with your professionals.