Cash Inside Your IRA: Top Ten Investment Options

Is there cash sitting in your IRA? If, like many people, you’re reviewing your investments, it might be time for some new IRA investment options. Here’s a list to use to make sure you review every option before pulling the trigger on your next investment.

1.     Banks

Investing in banks can be a good conservative option because your money is secured. Bank of America offers several accounts for retirees so that they can enjoy guaranteed benefits.  The 30 month term CD for IRAs and money markets are extremely useful for this purpose. While they have middling returns, you can start with a low minimum linvestment and not worry about stock market fluctuation. Additionally, deposits at a bank might entitle you to extra services, such as credit cards (If you are in need of credit help try http://www.consolidatedcredit.org/ ) and loan help.

2.     Currency

The trend to invest in foreign currencies is slowly growing in the US with a sizeable number of people looking at buying foreign currencies due to the opportunities in the FOREX exchange. However, I’d caution people before investing in currencies: While it sounds great, it’s difficult to pick which  currency is expected to increase in value. Always do extensive research so that you don’t end up losing your shirt.

3.     Gold

Hard assets such as gold are hard to argue against. While prices may fluctuate, you own an actual piece of metal, instead of shares of some company. Try to buy from a seller who is willing to buy it back when prices rise. People often buy gold because they believe that prices don’t fluctuate much, but gold prices actually bounce around three times more than the stock market. Gold and other precious metals are good options if you’re willing to hold long term and don’t use a large portion of your portfolio.

4.     Stock

Recession hit the stock market pretty bad with millions of people losing their hard earned money. However, the slump is slowly disappearing with stock exchanges recording big numbers once again. While you never want to bet short term on financial markets, if you have ten years or longer, stocks are a good bet.

5.     Real Estate

Property is a good option to invest in if you don’t need to sell immediately and you have a long time horizon. It is one of those things that does not easily depreciate and can be used for multiple purposes. Focus on property in an area that holds its value well during market downturns. Additionally, remember that you have to look into the future and revisit your property assumptions. Does it make as much sense to hold your real estate investment this year as it did last? That’ll depend on what happens in the area you purchase. This is why some people choose to buy a REIT rather than an actual piece of property. Instead of owning one single investment that’s illiquid, and publicly traded REIT will buy a collection of properties.

6.     Bonds

Bonds are released by the government and different organizations to borrow money from people; in return, investors earn interest on the loan. This gives many bondholders consistent income returns and a fairly safe investment option. There are several kinds of bonds; government bonds are considered safe because they’re backed by the faith and credit of the nation. Corporate bonds are graded based on their current credit rating. If they have bad credit, you can expect high returns but also assume more risk that they may not repay your loan. This means that if you’re buying individual bonds, you should have an understanding of the business.

7.     Business

Often people look at the money sitting in cash in an IRA and think: I should just start a business with this cash! Think again: you’ll pay penalties and tax on this money when you withdraw it. Often, this may be a third or more of your total withdrawal! Also, what if the business fails? Starting a business with IRA cash is rarely, if ever, a good idea.

8.     Financial Institutions

There are many financial institutions that offer several plans for retirees. You can also visit such institutions to see if they offer any account or option that you might be interested in. Watch out for financial advisor interest, though. Make sure and understand how the broker is paid and the fees involved in investing before signing up for any plans.

9.     Mutual Fund – ETF

There are many mutual funds where you can invest your money to receive good returns. A mutual fund pools your money with other investors to buy many investments rather than a single stock, bond or other investment. Exchange traded funds also help investors pool their money with others, while eliminating the manager. This often makes exchange traded funds (ETFs) a less expensive choice. ETFs often have to be bought and sold like stocks, so they’ll often have some fees attached to transactions. Mutual funds usually have more expensive internal fees but can often be purchased without trading costs. These types of funds are called “no load.”

10.Lend it

Very few people do this, even though it can turn out to be a good option, provided you loan money to trustworthy people. You don’t need to turn into a ‘bank’, but you can use the money you have to lend through organizations that offer crowdsource lending. Money in an IRA can’t be easily lent to others, so it’s best to loan money from non-IRA accounts and then focus your IRA on the other choices above.

Make sure you invest the money carefully. The amount you have must be invested in an option that makes the best sense for your goals. Try to stay away from debt so that everything runs smoothly. However, if you are in need of credit help try Consolidated Credit.

Author’s Bio

CJ is a finance specialist who teaches at a university. She is herself at the brim of retirement and has written this article to help others benefit from his research. Additionally, she does not like the idea of loans and says that if you are in need of credit help try Consolidated Credit.

Joe’s Question: Do you have cash sitting in your IRA? Where are you looking to invest? I’m thinking about GNMAs and High Yield Bonds currently. Thoughts?

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