IRA owners often want to invest in assets other than the usual stocks, bonds, cash, and mutual funds. The tax code does allow for IRAs to invest in most anything except for collectibles, life insurance, and S-corporation stock. So what do those “other assets” make your IRA worth?
If you invest $1,000 in a publicly traded stock it’s simple to determine the value of the investment at any time. You can look it up on your computer, smart phone, or tablet. But investing in real estate, promissory notes, a start-up business, a master limited partnership, an LLC, or any other investment option, it’s not easy to determine its investment value. Typically, the IRA custodian carries the investment on its books as the amount you originally invested. The value doesn’t change from year to year.
What is a 60-day rollover?
A 60-day rollover is the distribution of funds from a qualifying retirement account payable to the account owner who then has 60 days to redeposit the funds into another qualifying retirement account.
1. Do trustee-to-trustee transfers instead. The best way to avoid making a 60-day rollover mistake is to avoid 60-day rollovers! Transfer your funds directly to another retirement account. Not only does a direct transfer avoid any 60-day time problems, but if the rollover is coming from a 401(k) or other qualified plan, it will also avoid the mandatory 20% withholding requirement.
Happy Birthday, IRAs!
January 1, 2015 marks the 40th anniversary of Individual Retirement Accounts (IRAs) in the United States. Born from the passing of the Employee Retirement Income Security Act (ERISA) of 1974, IRAs were created to protect workers’ earned company retirement benefits and transfer them to their own retirement accounts, thus the name Individual Retirement Accounts. IRAs also provided an alternative for Americans to save on their own rather than depending entirely on company pensions to fund their retirements. With fewer lifetime employees and increasing mismanagement or underfunding of pension plans, IRAs shifted the financial responsibility and the risk from the employer to the employed. IRAs have proven to serve as a vehicle to give Americans more control over their retirement savings and have become the ultimate retirement savings vehicle as many retirement contribution plan funds end up in IRAs as rollovers from 401(k), 403(b) and other company plans.