Which types of investments are restricted in an IRA?

• A. Stocks and bonds
• B. Real estate and collectibles
• C. Life insurance and collectibles
• D. Precious metals only

Answer: (C)

In an IRA, certain types of investments are restricted to ensure that the account focuses on more traditional and regulated forms of investing. Collectibles and life insurance are explicitly prohibited as investments within an IRA.

Collectibles include items like artwork, antiques, stamps, and coins (not including certain coins made of precious metals). This restriction is in place because collectibles are considered less liquid than other investments, and their value can be volatile and not easily verifiable.

Life insurance is also not permissible as a direct investment in an IRA because it does not fit within the guidelines of what constitutes an investment for retirement purposes. This policy helps maintain the structure and tax benefits of the IRA, focusing it on more traditional asset classes.

While other assets such as stocks and bonds are allowed, real estate investments also have certain restrictions but are not entirely prohibited. It's important for anyone investing in an IRA to be aware of these limitations to avoid unnecessary penalties or issues with their account.