An IRA account is an individual retirement account. There are two major kinds: traditional and Roth. The difference between these two is where the tax burden lies.
A traditional IRA is one where your contributions are made with pre-tax dollars, and contributions to a Roth IRA are made with post-tax dollars. I always recommend a Roth IRA, and the reason is found in the math. When you pull your money back out of a Roth IRA, both the principal and the interest come to you tax-free.
As you know I specialize in real estate. And in real estate there are many types of returns often available from investing in properties, this can mean a huge potential tax savings. This is why so many individuals who are looking to get their money working for them are attracted to me and become Private Money Partners.
Putting after-tax money into your Roth IRA now, allows you to keep 100 percent of the return on your investment without having to pay tax on it when you pull it out at retirement. Let’s say you put $50,000 into a Roth IRA to and use some of it to fund one of my deals. Let’s say it turns into $150,000 between here and retirement. When you turn 59 and a half, you can take that $150,000 out tax-free. You only paid tax on $ 50,000.
A traditional IRA is funded with pre-tax dollars, which allows you to put slightly more in initially, which can cause it to grow more rapidly. But you then have to pay tax on all of your earnings when you pull it out.
Would you rather pay tax on the seed or the crop ???
********************************* If you are reading my blog for the first time, let me inform you that… My company buys single-family houses and I write this blog weekly which is primarily directed to educate 1 group of individuals:
Individuals who are losing their shirt as a result of the “roller coaster” volatility of the stock market and low paying rate of other traditional investments, i.e. people that are looking for an opportunity that’ll provide a secured place to put their money to get it working for them to earn better than average returns.
However, often times, homeowners that need to sell their house, stop by to take a peek because they are curious and wondering how and/or where we get the funding to purchase houses. And if they stick around long enough, they begin to understand why individuals partner with us to provide the funding which empowers us to be able to purchase real estate on a continual basis. Simple, it’s because we teach them a secured way to earn better rates of return than they are currently earning.
So everybody wins. It’s a WIN-WIN-WIN !!!
Request your FREE Education Kit if you are interested in learning how passively investing in real estate may help place you in a better financial position.
Disclaimer: This site is intended for educational purposes only. I am not an accountant, attorney or licensed financial planner. While the information I’m writing here is based on many years of experience buying houses that doesn’t really constitute professional advice (since everyone’s experiences and situations are different).