IRA ? Go Beyond Stock Market Investments
by Barry Waxller
An individual retirement account is familiar to most when it is referred to by its abbreviation IRA. What most people are not familiar with, however, are the strategies you can use to crank up your return on investment.
If I have an individual retirement account, I have to invest in the stock market. Everyone know this is the way it works, right? Well, the literature and commercials spewed out by investment firms might suggest as much, but it is not true.
Investing in the stock or bond market with your IRA is an in the box strategy. You can make a decent return, but is that really what you want? I doubt it. Leveraging your IRA account to buy homes and condos has much more potential.
Before we go on, I should mention this is not a wealth building strategy that involves loopholes or dubious interpretations of the tax code. The IRS readily approves of such investments.
Section 408 of the tax code states clearly you can invest IRA contribution in a variety of property. The wealthy have used this approach for a long time and more than a few now own big portfolios of commercial property, rental properties and so on through their IRAs.
To buy a home with your IRA, we need to back up a few steps. You cannot open an IRA at your stock broker. Instead, you must open a self-directed IRA. IRAs held by investment firms restrict you to stock marketing investing since that is where they make their money.
As the name suggest, you are in control of the individual retirement account. This means you get to set the parameters of what can be invested in and what cannot so long as it is legal. Homes, condos and so on are legal investments under the tax code.
Whenever dealing with the IRS, it is important to understand there are always some limitations. They are usually so complex that you get a headache trying to read them. In this case, they are not.
Most people use their IRA to purchase secondary properties. The classic example is using the strategy to buy rental properties. Millions of Americans now own second homes, and the IRA strategy is a perfect way to pursue ownership. Heck, you can even buy an RV.
When the actual property is obtained, it will be signed off on by the IRA custodian. Self-directed IRAs have an independent custodian who oversees the account do to IRA rules. After that, you just collect earnings from the property tax free in your account.
To really maximize the strategy, many people will look to a different type of individual retirement account. You guessed it. The Roth. The strategy works the same, but the benefits are better. All distributions for the Roth are tax free, so you can set yourself up for retirement.
The above represents a very simplified look at maximizing your IRA investment with property. That being said, it is one of the outside of the box wealth building strategies that can produce tremendous returns.
Find out how using a self-directed Roth IRA can be used for wealth building at UFCAmerica.com. You can get a unique content version of this article.
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