You may have heard of a self-managed IRA or a self-directed IRA; however, have you actually investigated the possibilities of how it can increase your retirement fund? Converting your existing traditional IRA into a self directed one allows you to invest in Real Estate. This is something you cannot do with a traditional IRA.
The key to making this transition work for you is selecting the right custodian. A good custodian will take care of all the necessary paper work while taking care of your specific wishes involving your investments. It is possible to make this as turnkey as possible. That is the beauty of a self-directed IRA.
Many people do not bother with a self-managed IRA because they feel it is too much work or they just do not know enough about it. By choosing the proper custodian, you will eliminate most of these fears. They are moirÃ© knowledgeable of the rules and regulations governing self directed IRA‘s.
With a traditional IRA, the broker or the bank makes all the decisions. You are at their mercy as far as your investments are concerned. With a self-directed IRA, you get to make the decisions and your custodian carry’s out those wishes. You are in control. A little known program allows a self-managed IRA to be used to purchase real estate as long as it is not for yourself or family members to live in, you must be making a profit off it.
It is everyone’s desire to retire with a good retirement income. Investing in real estate with your self directed IRA allows you to build compounded wealth for you and your family. There is risk in any investment, however real estate is much less than other types of investments. What if you found a company that did all the investing for you. All you did was collect the profits from rental income. What if your real estate investments actually helped turn areas of the country around.
Many people are frustrated at the slow pace their traditional IRA’s and 401k’s are growing. This is usually because it is looked after by a bank or broker. You just have so little control. Don’t you want to take more control of your future instead of relying on someone else? A self directed IRA or self-managed IRA could be the answer to your dreams.
In conclusion, there is so much more to this opportunity that could not possibly be covered in a short article. Look at our website for more information on converting your traditional IRA to a self-directed IRA and investing it in real estate.
A Traditional IRA is a type of Individual Retirement Account that has some very advantageous tax properties for many investors. If you have to ask, you probably need one.
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Deciding whether to invest in a Traditional IRA or a Roth IRA can be a difficult decision, especially if you are unaware of the differences. A Traditional IRA is an approach typically taken with an employer sponsored plan where before-tax dollars are contributed, thus allowing the employee/investor to invest more money over the life of the IRA. However, a Traditional IRA is subject to income tax at the time of withdrawal (typically retirement).
On the other hand, a Roth IRA is funded with after tax dollars, and none of the principal or growth of the fund is subject to taxation at withdrawal. All tax has been paid before money is ever invested, and the government allows for tax free growth. Sounds like the better option, huh? Lets look at example and find out.
Let’s look at 30 years of investing between a Traditional IRA and Roth IRA, assuming the investor gets an 8% return, contributes $200/month to the Traditional IRA, and only $160/month with a Roth IRA (due to an assumed 20% taxation before investing).
Total amount accumulated after 30 years of investing.
The Traditional IRA accumulates approximately $60,000 more than the Roth IRA. But wait Jeffry, the Roth IRA doesn’t get taxed during retirement and the Traditional IRA does, won’t I end up with more if I go with the Roth IRA? Maybe, maybe not.
Typically folks that go into retirement tend to have less income, and less expenses (they have already paid off a mortgage, kids are grown up and gone, etc.). So, assuming the tax bracket declined from 20% before retirement to 10% after retirement, the total after tax dollars you would have with the Traditional IRA would be $268,264.70. The total after tax dollars you would have with the Roth IRA would only be $238,457.51.
That’s a difference of $29,807.19, quite a difference!
Most financial experts advise their clients to contribute to a Traditional IRA for this reason. It usually turns out to be the better financial choice. Of course, this is based on many assumptions, some of which may or may not turn out to be true. It really depends on your situation. If you have an employer sponsored retirement account, chances are likely that it is a traditional IRA, the employer matches it with some money, and of course, this would be the better approach. But if you are military, without a employer sponsored plan, especially if you are in active duty, then a Roth IRA may be of much more value to you. Because you do not get taxed while on active duty, then in essence, your contributions to your Roth IRA are also tax free (even though they still qualify as after tax dollars).
I am a U.S. citizen living in Argentina as a permanent resident, with my wife (dual U.S./Argentinean citizen) and my son (dual as well). Almost all of my income qualifies for the Foreign earned income exclusion. I have about $20,000 in a traditional IRA that I contributed to prior to the move. My question: If I convert this to a Roth IRA, how can I calculate how much penalty I’ll have to pay? I suspect that if I convert less than the standard deduction amount on my tax return, that I won’t have to pay anything, but perhaps I’m missing something. I googled for a little while, but couldn’t find how to calculate this. Maybe i should have just gone directly to IRS website and read the tax code.