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What Investments to Select for an IRA
When saving for retirement, one of the essentials is to open an Individual Retirement Account, more commonly referred to as an IRA. There are four different kinds of IRAs (traditional, Roth, SEP, and SIMPLE). There are unique requirements and rules that apply to each of these. You may or may not be able to fund your IRA with “before tax” dollars but none of the dividends, capital gains, interest or other income will be taxed until you retire and start to withdraw. This provides a huge tax advantage when held for many years. Now the question is what investments to select for an IRA.
What Investments Can You Select for an IRA?
According to Investopedia you can invest in “almost anything” which includes stocks and bonds, mutual funds and annuities, exchange-traded funds (ETFs), unit investment trusts (UITs) and real estate. But, as they note, there are 5 investments you cannot hold in your IRA.
Prohibited investments for an IRA include these:
Life insurance (whole life, universal, term and variable policies are all excluded)
Various derivative positions (many IRA custodians will not allow any but ratio spreads and naked call writing are specifically prohibited by the IRA)
Antiques, collectibles, and artwork
Real estate for personal use (you cannot buy your home with an IRA)
The majority of coins (exceptions are these)
American Eagle coins (proof and non-proof)
American Gold Buffalo coins (non-proof)
American Silver Eagle (proof and non-proof)
Austrian Gold Philharmonics coins
Canadian Maple Leaf coins