Texas Real Estate Appraisal Company

How to Make Your Retirement Account a Wealth Building Tool

Although there are many Governments and Private sponsored Retirement Plans, four of them are widely popular. A 401(k) Retirement Plan (referring to the section of Internal Revenue Service code) is the foremost. This Retirement Plan is applicable to most of the salaried class of people under any employer. During the term of their employment, the employees can save a part of their earnings without payment of tax, until they are withdrawn. The funds in the 401(k) plan of the employee are managed under participant-directed options of investments like mutual funds, bonds, stocks and money market investments or the mixture of these categories.

A Simple IRA is one type of Simple Individual Retirement Account, provided by an employer. It is simpler and has less costly rules for administration, although very similar to 401 (k) plans. Contribution limits for this type of Retirement Plan are lower than other types.

A Simplified Employee Pension Individual Retirement Account (or SEP IRA) is a slight variation, which small business owners and self-employed persons can adopt. It is more or less similar to other IRA Plans, with the only exception being if the business owner and a self-employed person has employees, all of them can contribute and receive same benefits under a SEP Plan.

A Roth IRA (named after the legislative sponsor – Senator William Roth of Delaware) is an Individual Retirement Account, permitted under the Tax laws of the United States. This differs from many IRA accounts in significant ways.

A Self-directed Individual Retirement Account is an IRA giving complete freedom of decision making on investments to the owner. The assets should be held on behalf of the owner, by a qualified Trustee or Custodian. The Custodian can only regulate the funds, maintain all records, file papers required by IRS, issue client statements etc. but can never compel the owner about the investments to be made.

Importantly the owner can transfer funds from 401(k), IRA, SEP IRA, or Roth IRA to the Self-directed Individual Retirement Account.

There has been a spurt in awareness for Self-directed IRA owners, to invest in Real Estate as a very profitable one, rather than the other modes of Cash Deposits; Company Stocks; Bonds; mutual funds etc. Virtually a Self-directed IRA can be made a wealth building tool for the future for persons in every age group. Particularly so, when the time is ripe that US Real Estate markets carry huge investment of foreclosure properties, in almost all the States of United States, with prices well below their fair market value.

The only prohibition is that the investments made in Real Estate should not be used for buying properties for your personal use. Otherwise you can buy properties for renting or selling to others. All the proceeds of re-selling or rental income will go to your Self-directed IRA Account and will grow as tax-free income, till you attain the age of retirement. In that case you can withdraw the funds and pay tax at the minimum, since you will retire at the lower tax bracket as a senior citizen.

You can borrow money from mortgage lenders for buying properties – open market or foreclosed – based on your Self-directed IRA account. With so many benefits, your Self-directed IRA account can be transformed into a fantastic wealth building tool when used with Real Estate.