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IRA stands for “I Rely on my own Assets”

February 28, 2010

Okay, so IRA doesn’t really stand for “I Rely on my own Assets” but for the point I am making in this post, it sorta does.  Congress passed the ERISA law in 1974 creating—among other things—IRAs, or Individual Retirement Arrangements, or Accounts. 

Most people think of IRAs as an actual investment, but it’s not.  “IRA” is actually just a label put on an underlying investment to indicate that it gets certain treatment for tax and distribution purposes. The money you put into an IRA goes into one, or more, of four asset classes: Cash, Stocks, Bonds or Real Assets.  Because of marketing, most of us think we have to invest in these through a bank or mutual fund company.  This is not necessarily the case.  You can invest in nearly anything with the funds you save in your IRA—including your own business.

This is called a self-directed IRA. The rules and laws for managing these accounts are convoluted, like most everything Congress does, but with the proper advisers this is an option.  A qualified trustee or custodian must administer the account on your behalf but direction for where the money goes can be completely up to you. 

Before moving forward with a custodian or advisor for your self-directed IRA investments in your business, contact the Securities and Exchange Commission and/or IRS to verify that the individual or firm is a legitimate business entity or professional, based on the advice they have offered to you.

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