- Several investment options are available to bank IRA owners. The bank serves as the custodian for your assets, providing Federal Deposit Insurance Corporation (FDIC) insurance on IRA assets. As of 2011, $250,000 FDIC insurance is given to IRAs. This coverage is independent of the $250,000 FDIC insurance provided on non-IRA assets at the bank.
Investment options at the bank include a savings, money market or a certificate of deposit (CD) account. CDs come with various terms, offering higher rates for the promise of keeping assets in the bank longer. There are also non-FDIC-insured products available through your bank, namely a fixed annuity. This insurance product is sold via banks, but it is not a bank product. The fixed annuity works similarly to a CD, offering a fixed rate for the promise of keeping assets in it for a specified period of time, often for five years or more. - Brokerage accounts invest in stocks, bonds, mutual funds and certain type of options. These products include Treasury bonds, municipal bonds, corporate stocks and bonds as well as futures contracts. None of these is insured by the FDIC, which means there is no promise of investment returns, and there is principal risk involved. Each type of investment has its own level of risk and must be examined on its own merit before investing. Should the brokerage firm fail, there is limited covered through the Securities Investor Protection Corporation up to $250,000.
- The Internal Revenue Service allows specialty custodians to offer less commonly sought IRA investments, including real estate, gold and business owner IRAs. Real estate IRAs hold investment property, but you cannot have any personal use or benefit from the property. Family members are also prohibited from using or leasing the property. Gold IRAs buy U.S.-minted bullion or gold coins. Coins must be either 100, 50, 25 or 10 percent gold minted coins or one-ounce silver coins. Business owner IRAs allow you to invest in a new private business with retirement funds. These IRAs are considered specialty IRAs because they are more expensive with higher levels of regulations and restrictions with which the IRA must comply.
- The IRS has a list of prohibited investments. Collectibles, such as artwork, rugs, gems, stamps, antiques and alcoholic beverages, are prohibited. Coins are prohibited with the exception of those allowed in a gold IRA. Personal real estate for residential, business or vacation use is prohibited. No loans are allowed in an IRA, and, therefore, no uncovered short-sales are allowed in brokerage accounts in which you borrow money from the brokerage firm to pay for the transaction. Prohibited transactions are penalized by distributing all or part of the IRA assets, creating a taxable event and loss of the IRA status.
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