IRA investment possibilities are nearly endless – in fact, the IRS lists only a few investments that are NOT permitted in a retirement account.

Equity Trust’s National Education Specialist, John Bowens, breaks down prohibited transactions, what you can invest in, and what you can’t invest in with your retirement account.

Individuals can choose to use their retirement accounts to invest in alternative assets such as fix and flips, rental properties, privately-owned companies, cryptocurrency, and more… but find out what you are not permitted to invest in with a self-directed IRA, self-directed Roth IRA, or other tax-advantaged account.

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Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional to determine whether an investment product, plan or strategy is right for you. Investing involves risk, including possible loss of principal….(read more)

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IRAs, or Individual Retirement Accounts, are a popular investment tool that offer tax advantages for individuals looking to save for retirement. However, there are certain restrictions on what you can invest in with an IRA. While IRAs offer a wide range of investment options, there are a few things that are off-limits. Here are some examples of what you can’t invest in with an IRA.

Collectibles: One of the major restrictions on IRAs is that you cannot invest in collectibles. This includes items such as artwork, antiques, stamps, coins, and certain types of precious metals. The reason behind this restriction is to prevent individuals from using their IRA to invest in assets that may have limited or uncertain value over time. This ensures that IRAs are primarily used for long-term retirement savings rather than speculative investments.

Life insurance: Another restriction on IRAs is that you cannot invest in life insurance policies. While life insurance can be an important financial product for protecting your loved ones, it is not considered a suitable investment for retirement savings. The purpose of an IRA is to accumulate funds for retirement, and life insurance policies do not align with this objective.

S-corporations: IRAs are also prohibited from investing in S-corporations. S-corporations are a specific type of business structure that allows for pass-through taxation, where the profits and losses of the business are passed through to the individual shareholders. The main reason behind this restriction is to prevent individuals from using their IRA to gain an unfair tax advantage by investing in a business that they control or have a significant influence over.

Certain types of derivatives and options: While IRAs can invest in a wide variety of securities, there are certain types of derivatives and options that are not allowed. This includes futures contracts, margin accounts, and short selling. These types of investments involve a higher level of risk and complexity, which may not be suitable for retirement savings.

Additionally, there are certain rules and limitations on investing in real estate and private company shares with an IRA. While it is possible to invest in these assets with an IRA, there are specific guidelines and restrictions that must be followed to ensure compliance with the IRS rules. It is important to consult with a financial advisor or tax professional if you are considering investing in these types of assets with your IRA.

In conclusion, while IRAs offer a wide range of investment options, there are certain restrictions on what you can invest in. This includes collectibles, life insurance policies, S-corporations, certain derivatives and options, and there are specific rules and limitations for investing in real estate and private company shares. Understanding these restrictions is crucial when planning your retirement savings strategy. It is always recommended to consult with a financial advisor or tax professional to ensure that you are making informed investment decisions within the guidelines of your IRA.