Can I Invest My IRA in Stocks? Rules, Limits, and Pitfalls

Yes, you can invest your IRA in stocks. Both Traditional and Roth IRAs can hold shares of publicly traded companies, and you can buy and sell them through the account the same way you would in a regular brokerage account. The difference is the tax treatment: gains inside the IRA are not taxed as you trade, and in a Roth IRA qualified withdrawals in retirement come out tax-free.¹

Why Stocks Behave Differently Inside an IRA

In a taxable brokerage account, every profitable sale is a taxable event. Inside a Traditional IRA, your earnings and investment gains are not taxed until you take a withdrawal, so you can rebalance, sell winners, and reinvest dividends without a yearly tax bill.² Withdrawals in retirement are taxed as ordinary income.

A Roth IRA works from the other end. You contribute after-tax dollars, so there is no deduction in the year you contribute, but qualified withdrawals in retirement, including all the growth from years of stock trades, come out completely tax-free.¹

Both accounts share one important restriction. Most withdrawals taken before age 59½ carry a 10% additional tax on top of any regular income tax owed.¹ If your plan is to trade stocks and pull the profits out next year, an IRA is the wrong tool.

The Type of IRA That Lets You Buy Stocks

Federal law sets the structure of an IRA, but whether you can trade individual shares depends on where you open the account. The straightforward option is a brokerage IRA at a registered broker-dealer. These accounts come with a trading platform for buying and selling publicly traded shares just like a taxable account.

A self-directed IRA is a second route. A specialized custodian holds the account while you make the investment calls. Self-directed IRAs can hold stocks, though they are more commonly used for alternative assets like real estate or private equity. Every IRA, brokerage or self-directed, must have a qualified custodian or trustee.³ You cannot hold IRA assets in your own name.

If the brokerage fails, the Securities Investor Protection Corporation covers your IRA up to $500,000 in securities and cash, with a $250,000 sublimit for cash.⁴ A Traditional IRA and a Roth IRA at the same firm each get their own $500,000 coverage. SIPC does not cover market losses.

How Much You Can Contribute in 2026

For 2026, the combined limit across all your Traditional and Roth IRAs is $7,500 if you are under 50. If you are 50 or older, you can add a $1,100 catch-up contribution, for a total of $8,600.⁵ These limits apply to new contributions. Rollovers from a 401(k) or another IRA do not count against them.

Roth IRA eligibility also depends on your income. Single filers can make full Roth contributions with modified adjusted gross income below $153,000, with contributions phasing out between $153,000 and $168,000 and eliminated above that. For married couples filing jointly, the phase-out range is $242,000 to $252,000.⁵

Contributing more than your allowed limit triggers a 6% excise tax on the excess for every year it remains in the account.⁶ You can avoid the penalty by withdrawing the excess and any earnings on it before your tax filing deadline.

Opening and Funding the Account

To open an IRA at a brokerage, you provide your Social Security number or Taxpayer Identification Number, date of birth, and employment information so the firm can verify your identity and report to the IRS.⁷ You will pick Traditional or Roth during the application. If you choose the wrong type, you can recharacterize a contribution by moving it to the other IRA before your filing deadline.¹

Name a beneficiary while you are in the application. The beneficiary designation controls who receives the account when you die and overrides what your will says about those assets.⁸ A blank or outdated designation can push the account into probate.

You fund the account before you can buy anything. An electronic bank transfer usually settles in two to three business days. A wire is faster, sometimes same day, with a possible fee. A direct rollover from a 401(k) or another retirement plan moves funds into the IRA without triggering income tax or the early withdrawal penalty.⁹ Once cash is available, you place trades the usual way: ticker, share quantity, and either a market order or a limit order.

What an IRA Cannot Hold

Stocks, bonds, mutual funds, and ETFs are all allowed. Two categories are not. IRA trust funds cannot be invested in life insurance contracts.³ And buying a collectible with IRA funds is treated as a taxable distribution equal to the purchase price. Collectibles include:

Artwork
Rugs and antiques
Metals and gems
Stamps and coins
Alcoholic beverages
Any other tangible personal property the IRS designates³

A narrow exception covers certain U.S.-minted gold, silver, and platinum coins, as well as gold, silver, platinum, or palladium bullion meeting minimum fineness standards, but only if the bullion is held by the IRA trustee rather than by you personally.³

Prohibited Transactions

Federal law draws a hard line between your IRA and your personal finances. A prohibited transaction is self-dealing between you (or certain related parties) and the account: selling your own property to your IRA, borrowing from it, or pledging its assets as collateral for a personal loan. The barred parties include you, your spouse, your parents, your children and their spouses, any fiduciary of the account, and anyone providing services to it.¹⁰ Buying stock in your own closely held company through the IRA would typically qualify.

The consequence is not a small penalty. When a prohibited transaction occurs, the IRA can lose its tax-exempt status entirely, and the full fair market value of the account is treated as a distribution to you as of the first day of the year the violation happened.¹⁰ That means income tax on the whole balance, plus the 10% early withdrawal penalty if you are under 59½.

Two Trading Traps Specific to IRAs

Wash Sales Across Accounts

If you sell a stock at a loss in a taxable brokerage account and buy the same stock, or a substantially identical one, in your IRA within 30 days before or after the sale, the loss is disallowed. In a normal wash sale, the disallowed loss gets added to the cost basis of the replacement shares, so you recover it later. When the replacement shares sit in an IRA, the loss is gone for good.¹¹ If you hold the same stock in both types of account, watch the 30-day window before selling at a loss.

Unrelated Business Taxable Income

Ordinary stock dividends and capital gains inside an IRA do not create a tax bill. Certain investments can. Master limited partnerships and some leveraged funds can generate unrelated business taxable income. If your IRA’s total UBTI hits $1,000 or more in a year, the account has to file Form 990-T and pay tax on that income.¹² Plain-vanilla stock investments almost never trigger this, but check before buying MLPs or leveraged products through the account.

Getting the Money Out

If you hold stocks in a Traditional IRA, required minimum distributions begin at age 73. Under the SECURE 2.0 Act, that age moves to 75 for people born in 1960 or later, effective in 2033.¹³ Your first RMD is due by April 1 of the year after you turn 73, and each subsequent RMD is due by December 31. To meet an RMD from a portfolio of individual stocks, you either sell enough shares to raise the cash or, if your custodian permits, transfer shares in-kind.

Miss the deadline and you owe a 25% excise tax on the shortfall. That drops to 10% if you correct the missed distribution within two years.¹³

Roth IRAs do not require minimum distributions during the original owner’s lifetime, which makes them a good fit for long-term stock holdings you do not plan to sell.¹

1
Internal Revenue Service. Traditional and Roth IRAs
2
Internal Revenue Service. Traditional IRAs
3
Office of the Law Revision Counsel. 26 U.S. Code 408 – Individual Retirement Accounts
4
SIPC. Investors with Multiple Accounts
5
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
6
Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities
7
FINRA. FINRA Rule 4512 – Customer Account Information
8
Internal Revenue Service. Retirement Topics – Beneficiary
9
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
10
Office of the Law Revision Counsel. 26 U.S. Code 4975 – Tax on Prohibited Transactions
11
Internal Revenue Service. Publication 550 – Investment Income and Expenses
12
Internal Revenue Service. IRA Partner Disclosure FAQ
13
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs