What are your investment options in a Roth IRA?
Once you finally put aside enough money to fund your Roth, you face an inevitable question…
What can I invest in?
That’s a great question.
As a general rule, IRS regulations allow you to purchase any of the following for your Roth…
Common Stocks
Certificates of Deposit (CDs)
Exchange Traded Funds (ETFs)
Bonds
Mutual Funds
Money Market Accounts
Savings Accounts
Real Estate Investment Trusts (REITs)
Treasury Inflation Protected Securities (TIPs)
Platinum, Gold, and Silver Coins
Other Liquid Commodities
Meanwhile, the IRS generally forbids you from holding the following valuables…
Collectibles and Memorabilia (art, antiques, baseball cards, stamps, etc.)
Cash Value Life Insurance
Let’s take a more in-depth look at your options…
What You Can Hold In Your Account
Generally speaking, you shouldn’t have a problem holding the following investments in your Roth retirement account:
Common Stocks
Certificates of Deposit (CDs)
Exchange Traded Funds (ETFs)
Bonds
Mutual Funds
Money Market Accounts
Savings Accounts
Real Estate Investment Trusts (REITs)
Treasury Inflation Protected Securities (TIPs)
Platinum, Gold, and Silver Coins
Other Liquid Commodities
Stocks are, of course, the popular pick for most account holders, but that doesn’t mean you’re limited to investing in stocks or mutual funds just because that’s what everyone else is doing.
Instead, invest in what you know.
Trust your intuition.
As long as you have a well-thought out reason for believing one investment is better than another, then don’t worry about what the “experts” say or what your friends think.
That’s the best part about taking control of your own investments…
You alone control your destiny.
That said, you alone succeed or fail on your own as well.
But you do so based on the merit of your own decisions, not someone else’s…
Doesn’t that sound better than trusting your future retirement to some Wall Street investment manager you’ve never met?
What You Can’t Hold In Your Account
Generally speaking, you can NOT use funds in your Roth account to invest in the following:
Collectibles and Memorabilia (art, antiques, baseball cards, stamps, etc.)
Cash Value Life Insurance
Why not?
Well, the IRS answer is quite similar to one parents use on a regular basis…
Because they say so.
There’s no sense in arguing. Those are just the rules of the game.
That said, there’s probably a very good reason.
Most likely, the IRS views these investment options as far less liquid than the investment options that are allowed, meaning the market value is difficult to gauge.
For example, Roth IRA rules as outlined by the IRS, prohibit any account holder from contributing more than $ 6,000 on an annual basis.
So how are they supposed to enforce that rule if people invest in collectibles with subjective values?
Who’s to say a baseball card or a piece of art is worth $ 5,000 and not $ 10,000?
The market simply isn’t liquid enough for the government to confidently assess an accurate value.
As a result, these types of investments are off-limits for your Roth…
About the Author
Britt Gillette is the founder of Your-Roth-IRA.com a personal financial website focused on Roth IRAs. Visit Your-Roth-IRA.com to read more articles about Roth IRA investment options and other Roth IRA tips.