Let’s explore two different types of IRAs. The Traditional IRA and the Roth IRA. With a traditional IRA, when you put the money in, you get a tax deduction in the year that you put the money in.
Let’s say you make $52,000 per year. If you put $2,000 in a traditional IRA, your adjusted income is now $50,000…so you get a deduction.
However; when you retire and start pulling that money out for retirement, you will have to pay taxes on that money because you didn’t pay taxes on it when you put it in.
Personally, I have converted all but one of my traditional IRAs to a Roth IRA which they can Self-Direct.
The reason you’d want to convert is if you believe the tax rate in the future will be higher than it is now…then convert. If not, leave it the way it is. If you think taxes are higher now than they will eventually be, then leave it as traditional IRA.
With a Roth IRA, you are taxed on the money before you put it in; therefore, you’re not taxed when you start pulling it out. Because the great USA is in soooo much debt it is inevitable that taxes will be higher in the future. That debt is going to have to be paid by someone…we the American taxpayers.
********************************* 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 !!!
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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).