Investing from Within an IRA Can Allow You to Walk Away a Winner

by Camille Kent

You have many choices for investing from within an IRA. The best choice for you depends on how much risk you are willing to take. Typically, the greater the risk you are willing to take, the higher your returns may be. But, even if you’re a risk-taker, some choices are better than others.

The only investment types that are completely free of risk are bank certificates of deposit and government bonds. They are guaranteed by the federal government, but the returns are low.

When CDs are used for Investing from within an IRA, the rate of return depends on how much you have to invest. For example, if you have $20,000, the best rate you can get right now is 3.2%. If, on the other hand, you have $100,000, you can get a “jumbo� CD and a rate as high as 5.3%.

Banks need money right now, primarily due to the large number of defaults and money lost on foreclosure. So, they are offering higher rates than usual for people with a lot of money to invest.

If you choose government bonds for Investing from within an IRA, you will only earn about what you would with a standard savings account or “money market� account. Right now, that’s an average of 2.44% for a $10,000 retirement account. That’s even lower than the rate of return on a CD.

So, how about the stock market? Well, last week the Dow closed more than 51 points below the previous week. NASDAQ didn’t lose that much ground, but still dropped by nearly 15 points. Car sales were down. GM reported huge losses and the only thing that really increased in value was a barrel of oil.

If you want to be successful and actually have enough money to live on after retirement, you need to take a less than traditional approach to investing from within an IRA. With a self directed account, you can invest in a number of different things that may not have a guaranteed return, but they aren’t that risky, either.

For example, real estate has become an increasingly popular choice for investing from within an IRA. Didn’t know you could use account funds to buy a piece of real property? Lots of people don’t.

Even a lot of self directed trustees don’t offer the option. Most trustees are brokers, so they only now about the stock and money markets. Even many accountants don’t understand the ins and outs of using a retirement account for real estate investments.

The housing market has always been considered a relatively safe place for investments. Property values almost always go up. Not many people are buying right now, but that has to do with the economy and stricter credit rating requirements.

With a little education, there is no limit to the amount of money that a smart investor can earn for his retirement in a year’s time. It is not unheard of to turn $40,000 into $400,000 by choosing real estate for investing from within an IRA. Maybe you should consider the option.

About the Author

Camille Kent is a money management expert who specializes in IRA's.