Author Topic: Regular account or IRA?  (Read 4506 times)

investny

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Regular account or IRA?
« on: July 04, 2014, 04:27:14 PM »
I've been wanting to start investing into LC for sometime but cannot decide whether i should do it in a regular account or IRA. The way i see it here are the major advantages/disadvantages of each

IRA
Advantages:
Money is already locked for a long term so making 3 year loans is not an issue
Tax deferred income
No tax related record keeping headaches

Disadvanages:
Trading on Folio is highly questionable
Transferring money out to another IRA/stock market will be a pain
Possible issues with IRA custodian going out of business


Regular account
Advantages:
Can trade on Folio
After selling on Folio can easily close account and move money into something else

Disadvantages:
Can only write off unpaid loans up to $3000 against regular income
Tax related record keeping a mess especially if selling on Folio
Income gets taxed at highest marginal rate
You have to pay taxes on accrued interest even if it has not been paid to you yet

Anything else that i have missed?

Any recommendations?

Natalie-OBX

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Re: Regular account or IRA?
« Reply #1 on: July 07, 2014, 03:09:26 PM »
Roth IRA, all the way.  If you have the ability to invest for tax free income, DO IT!

--Natalie

Rob L

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Re: Regular account or IRA?
« Reply #2 on: July 07, 2014, 03:56:15 PM »
+1
Of course there's no guarantee the government won't change the rules and tax your Roth someday.
Ouch! Hurts just to think that. Still, going with the Roth if you can seems best.

AnilG

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Re: Regular account or IRA?
« Reply #3 on: July 07, 2014, 04:17:27 PM »
I personally went with Regular Account. Primarily I see p2p lending still not mature enough to be considered part of long term retirement planning strategy.

In addition, liquidating and moving IRA from LC custodian is pain and expensive. As the rules for secondary market trading in IRA are in flux, liquidating the IRA is not easily accomplished, can get expensive because of transfer fees charged multiple times by custodian and/or cash drag from waiting for loans to fully pay or default. LC/Prosper currently subsidizes the annual IRA maintenance fee so that lenders don't have to pay. But I don't know how long this subsidy will continue. The IRA custodian fees are too high otherwise.

Also, my taxes are already complicated enough with K-1s from MLPs and other partnerships, stock options and restricted stocks that adding more tax documents from p2p lending and FOLIOfn trading with regular taxable account is barely noticeable.

I've been wanting to start investing into LC for sometime but cannot decide whether i should do it in a regular account or IRA. The way i see it here are the major advantages/disadvantages of each

IRA
Advantages:
Money is already locked for a long term so making 3 year loans is not an issue
Tax deferred income
No tax related record keeping headaches

Disadvanages:
Trading on Folio is highly questionable
Transferring money out to another IRA/stock market will be a pain
Possible issues with IRA custodian going out of business


Regular account
Advantages:
Can trade on Folio
After selling on Folio can easily close account and move money into something else

Disadvantages:
Can only write off unpaid loans up to $3000 against regular income
Tax related record keeping a mess especially if selling on Folio
Income gets taxed at highest marginal rate
You have to pay taxes on accrued interest even if it has not been paid to you yet

Anything else that i have missed?

Any recommendations?
---
Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
PeerCube https://www.peercube.com

investny

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Re: Regular account or IRA?
« Reply #4 on: June 04, 2015, 02:49:47 AM »
Does LC still prohibit Folio trading for IRA accounts?
Also, what are the current custodial fees for IRA accounts?

kbenson99

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Re: Regular account or IRA?
« Reply #5 on: June 04, 2015, 09:38:53 AM »
Folio note trading is no longer prohibited for IRA accounts.  I inquired from LC before I opened a Roth IRA account 2 months ago and was reassured concerning Folio trading privileges.  I have sold several notes without issue within the IRA account.

craigwbryant

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Re: Regular account or IRA?
« Reply #6 on: June 04, 2015, 12:36:03 PM »
One thing you don't take into account in your pros and cons is liquidity of funds.  Remember, any money you tie up in an IRA you cannot touch until your 59 1/2 years old without paying some pretty stiff penalties.  I agree that taking advantage of tax free growth is great, but liquidity is definitely something to consider.

bobeubanks

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Re: Regular account or IRA?
« Reply #7 on: June 04, 2015, 01:02:39 PM »
Remember, any money you tie up in an IRA you cannot touch until your 59 1/2 years old without paying some pretty stiff penalties.

ROTH IRA contributions can be withdrawn at any time for any reason tax and penalty free.

SEPP can be used to withdraw from a traditional IRA before 59 1/2 without paying penalties.