A Second Home for Your IRA

Did you know second home can help fund your retirement?

A self-directed IRA allows you to put money in a wide variety of investments such as stocks, mutual funds, bonds, T-bills and real estate. Many banks won’t deal with a real estate IRA, so finding a bank that will accommodate a real estate IRA is your first step.

Self-directed IRAs have stringent guidelines that must be met in order to keep the tax-free status of the account.

In the case of a real estate IRA, these guidelines include:

• You must treat the real estate as an investment

   

   

• Rental profits must go to the trustee

   

   

• You, the IRA holder, cannot mange the property

   

   

• The real estate must remain in trust until the you retire

   

   

• If the trustee is directed to sell the real estate, the proceeds have to be reinvested in another retirement account.

The IRS says a second home can be used by the owner for 14 days in a year, or 10 percent of the days rented, and still be considered an investment property.

You can have your cake and retire with it too!

Does this sound like an attractive idea for your retirement? Or would you rather stick to more traditional methods of funding your IRA?

–Editor’s note: Tom Harris is the principal of Colorado Lifestyle Real Estate, which connects second home buyers with the top Realtors in Colorado resort towns. He will be blogging about Colorado’s real estate market for CH&L each week.