Roth IRA

Retiring soon? You need a self managed IRA. Self managed IRAs, or what can be sometimes be called self directed IRAS, are by far the best management vehicle for soon to be retirees, or for that matter anyone who plans to retire in the future, and that’s all of us.

Retiring in the future is going to be a problem for those who want to retire comfortably. As the population ages and the tax base shrinks relative to those needing retirement pensions, pressure on government funds for retirees is going to grow. Those smart enough to recognize the problem need to act now, and a self directed IRA, preferably invested in real estate, is the best way to do it.

How serious is the problem for future retirees? A recent Social Security Administrations trustee report has found that by 2040 social security will not be able to meet full retirement benefits. Scary isn’t it?

An IRA, or an Individual Retirement Account, is a vehicle to direct money into a fund that is set up to provide for your retirement. And anyone serious about their retirement needs to plan and invest wisely for it, right now.

Why would you do that through a self managed IRA? Why not just save up for your retirement?

The answer is all to do with tax. The government has graciously allowed us all substantial tax benefits for planning for our retirement through an Individual Retirement Account.

Why would the government give you tax benefits for planning for your retirement? To encourage people to self fund their own retirement to take pressure off limited future public funds. I won’t go into all the tax benefits that attach to IRAs, except to say that if you’re serious about a comfortable retirement you simply must have your own IRA to help you plan and invest for your retirement. For more details on the tax advantages talk to your financial advisor.

Of course many people already have their own Individual Retirement Account. Problem is that these are set up through the banks and trustees and investment companies, which of course direct your IRA retirement funds into their own products. And the investment returns on these products are not spectacular. You won’t set yourself up with a comfortable pension on 6% or 8% return on investment.

Most IRA custodians only allow investments in a narrow range of investment vehicles like stocks, mutual funds, bonds and CDs.

However those in the know recognize that a self managed IRA is a far better vehicle to maximize returns on your retirement funds. If you rollover your current IRA into a self directed IRA you have full control over how, and where, your future retirement funds are invested, and far more potential to maximize your investment returns. And so to maximise your comfort level in retirement.

A self directed IRA custodian will allow you a much wider range of investments, and these include real estate.

Why would you want to invest your IRA into real estate, particularly in 2008 when the real estate market is in meltdown?

Firstly because real estate is always the best long term wealth creation tool, especially when it’s tax advantaged. It’s solid and less volatile than any other investment, and so allows you to borrow safely. Mortgages over real estate are much easier to obtain than, say, a loan to buy shares. Even in 2008.

And what about the current state of the property market? Why would anyone with a self managed IRA want to invest in real estate right now?

Because, like in any market, there are always fantastic opportunities available if you know where to look and how to invest. Not all real estate is a disaster, and there are some very good advisers with spectacular real estate investment opportunities available, even now.

One in particular offering no money down real estate investing opportunities to ordinary IRA and 401(k) investors (and ordinary credit investors) right now. Guaranteed returns and immediate equity, and backed by a solid investment strategy backed by a US public company with an impeccable record in real estate investing.

So if you’ve been thinking about your retirement, either in the short term or the long term, and either have your own IRA or need to set one up, do it. Set up your own self managed IRA or rollover into one, and get started planning and investing for your retirement, no money down, guaranteed.

You’ll be comfortable in your retirement if you do.

IRAs were created to encourage people to save for their retirement, by offering them a significant tax break.
They are intended for ordinary working people - not, for example, the wealthy (income limits prevent them from participating),
or trust fund kids too lazy to get a job (contributions have to be made from salary, not from investments or other income).

The rules for eligibility and contribution limits change every year.
You can (and should) get the official rules from IRS Publication 590;
but to help make things clear, here is a quick and user-friendly (but not official!) summary:

IRA Contribution Limits

To summarize how all of the rules work:

1. If your status is Married Filing Separately you are effectively locked out due to an extremely restrictive limit.
   (The rationale: the government doesn’t want to give you a tax break in case your spouse is high-income.
   The exception: if you and your spouse lived apart for the whole year, you get the same limits [and same bummer lifestyle] as a Single filer.)
2. If your status is anything else, then your contribution limit is (using 2008 numbers):
   

   $5000 if your income is low enough (and $6000 if you’re 50 or older) zero (that is, you can’t contribute at all) if your income is too high a sliding scale somewhere in between, if your income is somewhere in between “low enough” and “too high”

3. In case you have multiple IRAs, the limit is the total you are allowed to contribute to all of them
4. And in all cases, your total contributions can’t be greater than your reported salary income.

If you don’t qualify…

If your income is too high to make a Roth IRA contribution, you may still be eligible for a traditional deductible IRA
if neither you nor your spouse is covered by a retirement plan at work.
See IRS Publication 590.
(Look under “Traditional IRAs”.)

Penalties

A Roth IRA is intended to be a retirement account, so penalties apply if you misuse it by withdrawing funds too early.
As a rule, you should plan not to make any withdrawals until at least age 59½ or five years after you make your first contribution, whichever comes later.
This rule does have exceptions: see
IRS Publication 590
for details. (Search for “Qualified Distributions”.)

A Roth IRA is an Individual Retirement Account that provides tax-free growth. As a result, it’s the simplest - and potentially the most effective - sheltered account imaginable.

The Roth Tax Advantage

The government sets a limit on how much you can contribute to a Roth. That limit is $5,000 in 2008.