by Yolander Prinzel
Everyone knows they need some type of retirement savings account and, as a business owner, one of your best options is a SEP IRA. Unfortunately, many people think that when you put money an IRA you are buying an investment. An IRA is just a type of brokerage account that holds assets for you on a tax-deferred basis. It is not an investment itself. That means you must use the contributions you make to your IRA to buy things like:
Almost anything you can put into a regular brokerage account. One thing you can’t put into an IRA is life insurance.
The next logical question is: What SHOULD I put in my IRA account?
Unfortunately, my crystal ball is at the cleaners so I can’t actually tell you what to put in your IRA and I can’t give you advice anyway because I don’t know you. Your age, financial situation and aversion to risk are all determining factors in whether you choose to fill your IRA with CDs, money market funds and low-risk mutual funds (that scenario would be good for someone over 50 who is risk averse) or with penny stocks, high-risk mutual funds and REITS (younger person, no aversion to risk—although, I think penny stocks are bad business unless you can afford to throw the money away). You really have to deal with your financial planner on these issues.
One bit of wisdom I will give is that, in 2007, before the economy took a rancid, stinking dump, most of the clients I worked with at Raymond James were comfortable with very high-risk portfolios. When everything started falling apart in 2008 and they were losing 30% or more of the value in their portfolios, they suddenly became risk averse. That isn’t really the way this should work. If you are comfortable with risk, you keep buying when the market is down (part of a strategy known as dollar cost averaging). If you suddenly become afraid of losing money when it looks like you actually might then you aren’t new to a fear of risk, you were just ignoring the risks you faced all along.
Yolander Prinzel, ACS is a financial writer as well as a series 7, 66 and 2-15 licensed financial representative with a decade of industry experience. She was the and the Director of Operations for The Compass Agency USA and has also been a trader for . None of her posts are meant to be advisory. Only an advisor with close, personal knowledge of your financial situation can offer advice. You can get her new e-book You’ve Found Your Specialty–Now What? Tips and Tricks to Finding and Scoring Clients and Making a Living Writing What You Know here for just $7.95.