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Nw Iowa | Yes rules on investing with your retirement account are quite strict. Boone and Crocket is much smarter that I on this but if I understand you can buy farmland or rental property but cannot farm it yourself or stay in property. It cannot be rented to a direct family member. You cannot take a loan on the property in which you personally sign. Can put a loan on property but property must support loan without a personal guarantee. The idea is that investment stays isolated from your business so you have those funds there for retirement. Same with a recreational property or winter homes. Don't want you to buy something that you are living in, the idea is that you are building ira money for retirement. I suppose if two people wanted to buy farms or homes and rent to each other it may work. I don't think you can even do repairs on your own IRA property.
At the end of the day sounds like you are a big winner to take your companies deal. I am not for sure but not only are you getting the match but I assume on extra dollars invested you are saving more tax so every dollar invested is probably costing you half or less. For instance you invest remaining 58 cents of the dollar but you are in a 25% tax bracket so the government is paying another 14 cents so your out of pocket cost is only 44 cents on every dollar. Pretty hard to beat that deal. If your scared about stock market you could invest half in just straight interest bearing investments to do a hedge to protect your invested dollars as there is now some or close to 3% cds.
I am same as you, a land guy, but some of the high dollar corn years it looked like a no brainer to contribute the max , especially when you were getting in higher brackets. I always figured if government was getting 40% of those dollars it was only costing me 60 cents to put in a dollar. If I hit a rough patch with some losses, the 10% penalty would still be okay, funds would at least be available.
Biggest issue for some guys it that they will be in a higher bracket when they have to start taking it out than when they contributed. Also IRA's wouldn't get basis reset at death so family will pay a ax on them as they withdraw the money. (This last paragraph probably won't pertain to many but might be a consideration to some.)
Once again I am not a tax advisor or anything close so check with your tax person. Biggest issue that I found when I looked into a self invested IRA is that very few traditional investment people want to mess with or understand rules on doing your own investing inside a IRA
Edited by jdironman 1/28/2019 07:22
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401K vs saving for farmland
