Ever since the Individual Retirement Account (IRA) became available as a means of saving for a person's retirement, millions of Americans have used this vehicle to systematically save money for this purpose and to be able to use it to enjoy various tax benefits. Annual contributions up to a set limit can be deducted from taxable income, and all appreciation of the value of the account is tax-deferred until such time as funds are withdrawn, typically at retirement.
Traditionally, there have been a limited number of options available for investments that could be made within the IRA regulations. These included cash in IRA certificates of deposit, stocks, bonds, mutual funds, and more recently, exchange-traded funds. Because all of these investments are considered relatively liquid, these types of IRA account investments are offered by most brokerage companies and banks.
Recently changes to the IRS code governing IRA accounts have been made to allow funds to be invested into a variety of more non-traditional options. This allows individuals who wish to invest in these other options to also enjoy the tax benefits.
- Precious Metals — Although people have been gathering and valuing precious metals such as gold and silver since the beginning of time, it was not until recently that they were allowed as investment options for IRA accounts. Investments in metals within an IRA still have some limitations place on them. The only options available are precious metal bullion such as bars and coins, which are valued for the metal content as opposed to being valued as collectibles. Because such investments involve physical holding of the metal, IRA investment requires a custodian to hold and manage the asset, which can result in some extra fees and expenses.
- Real Estate — Another long popular investment option that has only recently become available for IRA investment is real estate. This option includes both residential and commercial properties that can be rented to increase account value. Limitations of this option include that investment into the account owner's personal residence or place of business is not allowed. Again due to the physical and relative non-liquid nature of these investments, they must be placed with a custodian for management.
- Business Investment — A third option that is gaining in popularity in IRA accounts is investment into start-up or existing businesses. By allowing such investment, the account owner can benefit from the long-term growth and appreciation of the business. The major restriction on this option is that neither the account owner nor any of his or her family members can gain any benefit from or be directly involved with the business as either an active manager or employee. The only allowed benefit is the realization of appreciated value at the time of retirement.
While these alternative investment options are exciting and offer additional opportunities, they may not be right for everyone. The best way to determine appropriateness would be speaking with a qualified tax professional or review of IRS publications 509-A and 509-B. To learn more about ira accounts like precious metals ira accounts, contact financial professionals in your area.