Lending Club, the peer-to-peer lending community is now offering no-fee retirement accounts. Now your peer lending investments can have a tax-advantaged status through a number of different self-directed IRA accounts. Lending Club investors have earned an average of 9.65% since June 2007. Learn more about peer-to-peer lending.
Lending Club’s No-Fee, Self Directed IRA
You can now invest your lending club notes within one of Lending Club’s self-directed IRAs, administered by EntrustCAMA. A self-directed IRA allows you to invest in things like real estate, precious metals, land, businesses, and debt (e.g. lending club notes). The benefits of self-directed accounts are that they let you diversify by investing in these non-traditional investments. Lending Club offers multiple varieties of self-directed IRAs. You can do a Rollover IRA, or open up a Traditional IRA, Roth IRA, SEP IRA, or Simple IRA.
When Lending Club first rolled out this product the had an annual maintenance fee that you couldn’t avoid. Now they’ve removed those mandatory fees and give you the chance to have a no-fee IRA. To maintain a no-fee status, you need to open the account with $5,000 and keep that balance for a year. Then in your second year, you need to work towards a balance of $10,000 by the end of year two. The annual fee is $100 otherwise.
Consumer Debt in a Retirement Account?
There are those who would argue that you shouldn’t invest in consumer debt for your retirement. They say it’s too risky, and that’ peer lending is unproven. In addition, the IRA was designed for your retirement. I’m a huge fan of IRAs, but only for use with retirement funds. If your peer lending is intended to be non-retirement investing, then you probably shouldn’t place them in an IRA. At the same time, it’s hard to argue with Lending Club annual returns. At a time when stock investing is flat at best, peer lending notes look pretty attractive, if only for a small percentage of your portfolio.
I’m certainly not advocating placing all of your retirement assets into peer lending notes. I look at these Lending Club IRAs like I do the Discover IRA CD I talked about last week. They’re just another option for you to consider for a small piece of your retirement. And their benefits may be what you need. In the case of the CD, it was FDIC Insurance you might be looking for. In this case, it might be a better return. If you already invest with lending club notes, and you consider those funds as a potential help for your retirement, well then it makes sense to put them behind the tax-advantaged wall of an IRA.
You Can Have Multiple IRAs
One fact that many investors are not aware of is that you can have multiple IRAs. So, you can keep your Roth IRA at Vanguard (or wherever you have it) and open up a second IRA with Lending Club. Just remember that your annual contributions are limited to $5,000 annually across all IRAs.