Ask Terry Questions IRA to Business investment

IRA to Business investment

By Terry Savage on August 17, 2021 | Financial Planning / Retirement

Terry,

I love listening to you on the radio. My questions is this:

I am turning 54 in October. I have been a hotel manager for the past 15 years and I would like to buy a small campground/resort in Wisconsin so I can work for myself. I have a traditional IRA in a mutual fund. I read somewhere that I can create a corporation and roll my IRA over to it to use as a down payment for the business. Is this true, and if so, do I have to start withdrawing funds from my IRA at a certain age and how would that happen if the money is tied up in the business?

Terry Says

There are all kinds of schemes to “help” people turn pre-tax IRA assets into non-traditional uses. BUT, there are always ramifications. You touched on one of them. If you use a “trust company” to purchase other assets as an investment, you are still subject to IRA w2ithdrawal rules. So if your “investment” doesn’t pay cash dividends to cover those RMDs, you would be forced to liquidate the property — likely at just the wrong time, to make those withdrawals.
Also, there are specific rules around personal use of real estate or other investment assets when purchased by an IRA. These are very tricky situations and you could find yourself paying for an attorney to fight the IRS if this is questioned. You don’t “create a corporation” for this purchase; you use a trust company designed for this purpose — and some of them are scams.
I’d suggest you find other money to purchase this property and keep your IRA separate. Sorry if this advice pops the balloon of your dream of self-employment.

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