How to Earn and Accumulate Tax FREE Wealth In Your Self-Directed ROTH IRA We can start by saying: I am not an IRA Expert.
But I utilize a company called Equity Trust Company who employs hundreds of experts.
They are the nation's leading self-directed IRA custodians.
I have my IRA's there, my kids' and my companies', as well as all my private investors' IRAs.
If you're not familiar with the ROTH IRA, it's a new kind of IRA created by the tax payer Relief Act of 1997.
Traditional IRA's are "tax-deferred" accounts that are funded with pre-tax dollars and in most cases you get a deduction for your contributions.
When distributions are taken from the account, those funds are taxed.
Traditional, SEP, SIMPLE and Individual (k) Plans are referred to as "tax-deferred" accounts.
By contrast, a ROTH IRA is a "tax-free" account which is funded with after tax dollars, meaning you do not receive a deduction for contributions.
When distributions are taken, there are no taxes incurred in a tax-free account.
You obviously have to conform to the plan provisions to get this tax-free advantage.
Let's look at some examples using a $100,000.
00 investment so you can start to see how powerful your ROTH can be: After one year, your investment (assuming a 15% gain) is worth normally only $109,750.
00 if taxed at a 35% tax rate ($100K x 15% = $115K -$5250 in taxes).
In your ROTH IRA, after one year, you have $115,000.
00, Now if you do absolutely nothing for 5 years, look at what happens at that 15% rate.
1 Year $115,000 2 Years $133,332 3 Years $154,812 4 Years $179,312 5 Years $207,983 If you already have a traditional IRA, you can still start a ROTH IRA.
The thing to remember is that you can only contribute up to the individual limit (see chart below) per year to any combination of traditional and ROTH.
In other words, you can't do $5,000.
00 to EACH IRA account.
Instead of making this a text book read, please consult the http://www.
trustETC.
com site and your accountant regarding converting traditional to ROTH and respective contribution limits.
IRA Contribution Limits YearAge 49 and belowAge 50 and above 2002-2004 $3,000$3,500 2005 $4,000$4,500 2006-2007 $4,000$5,000 2008 $5,000$6,000 After 2008 the contribution limit will increase in increments of $500 depending on the rates of inflation.
Please also note that you DON'T HAVE TO CONTRIBUTE yearly.
You can open an account with $500.
00 and let it sit in there.
You can then use that money to option a property and have tens of thousands on profit go to your ROTH upon sale of that property.
An important note here is that you don't have to use your ROTH for real estate only.
You can make loans, investments, and control other assets in your self-directed ROTH.
Here's the trick: With your ROTH IRA, when doing real estate, it does not count as a contribution-it counts as an investment just as if you owned a stock.
Here are some ways to feed your IRA using little of it's money: 1)Wholesale properties 2)Buy property and resell it 3)Leas option and cash out of a property 4)Option a property and sell it 5)Operate a start up business and transfer after tax profits to your IRA You can even partner with your own IRA.
You just have to make sure the profit distribution and initial investment matches the ownership interest.
i.
e.
) 50% capital invested = 50% profit split = 50% ownership So here are 6 Steps For Using Your IRA to Buy And Sell Property Or Property Related Assets 1 - Open A ROTH IRA with $500.
00 or more of a transfer of your existing IRA 2 - Contract to buy or option a property (or debt instrument) secured or unsecured by property.
Your IRA custodian must be the buyer or optionee for your benefit.
It would read something like "ETC, For Benefit Of 'Your Name' IRA" 3 - Send the custodian of choice a copy of the completed agreement used to buy or control the asset you're putting in your IRA 4 - Complete a 'Direction of Investment" form and order whatever the applicable money to seller will be.
ETC requires at least $100.
This provides evidence that the transaction is real and you're not receiving a gift.
***To take this partnering idea a little further, you can actually have your IRA and your spouse's IRA partner a deal.
You can also put your kids through college using a Coverdell ESA account.
You'll need to set that up before they turn 18 however.
*** Things you cannot buy in an IRA: 1 - Artwork 2 - Rugs 3 - Your own home or a home of your linear family 4 - A property or entity you currently already control 5 - Alcohol 6 - Stamps 7 - Gems 8 - Metals (exception: some U.
S.
coins) 9 - Antiques Hopefully this idea gets you thinking outside the box of how you can build wealth for now and for the future.
There are powerful tools right at your fingertips.
But I utilize a company called Equity Trust Company who employs hundreds of experts.
They are the nation's leading self-directed IRA custodians.
I have my IRA's there, my kids' and my companies', as well as all my private investors' IRAs.
If you're not familiar with the ROTH IRA, it's a new kind of IRA created by the tax payer Relief Act of 1997.
Traditional IRA's are "tax-deferred" accounts that are funded with pre-tax dollars and in most cases you get a deduction for your contributions.
When distributions are taken from the account, those funds are taxed.
Traditional, SEP, SIMPLE and Individual (k) Plans are referred to as "tax-deferred" accounts.
By contrast, a ROTH IRA is a "tax-free" account which is funded with after tax dollars, meaning you do not receive a deduction for contributions.
When distributions are taken, there are no taxes incurred in a tax-free account.
You obviously have to conform to the plan provisions to get this tax-free advantage.
Let's look at some examples using a $100,000.
00 investment so you can start to see how powerful your ROTH can be: After one year, your investment (assuming a 15% gain) is worth normally only $109,750.
00 if taxed at a 35% tax rate ($100K x 15% = $115K -$5250 in taxes).
In your ROTH IRA, after one year, you have $115,000.
00, Now if you do absolutely nothing for 5 years, look at what happens at that 15% rate.
1 Year $115,000 2 Years $133,332 3 Years $154,812 4 Years $179,312 5 Years $207,983 If you already have a traditional IRA, you can still start a ROTH IRA.
The thing to remember is that you can only contribute up to the individual limit (see chart below) per year to any combination of traditional and ROTH.
In other words, you can't do $5,000.
00 to EACH IRA account.
Instead of making this a text book read, please consult the http://www.
trustETC.
com site and your accountant regarding converting traditional to ROTH and respective contribution limits.
IRA Contribution Limits YearAge 49 and belowAge 50 and above 2002-2004 $3,000$3,500 2005 $4,000$4,500 2006-2007 $4,000$5,000 2008 $5,000$6,000 After 2008 the contribution limit will increase in increments of $500 depending on the rates of inflation.
Please also note that you DON'T HAVE TO CONTRIBUTE yearly.
You can open an account with $500.
00 and let it sit in there.
You can then use that money to option a property and have tens of thousands on profit go to your ROTH upon sale of that property.
An important note here is that you don't have to use your ROTH for real estate only.
You can make loans, investments, and control other assets in your self-directed ROTH.
Here's the trick: With your ROTH IRA, when doing real estate, it does not count as a contribution-it counts as an investment just as if you owned a stock.
Here are some ways to feed your IRA using little of it's money: 1)Wholesale properties 2)Buy property and resell it 3)Leas option and cash out of a property 4)Option a property and sell it 5)Operate a start up business and transfer after tax profits to your IRA You can even partner with your own IRA.
You just have to make sure the profit distribution and initial investment matches the ownership interest.
i.
e.
) 50% capital invested = 50% profit split = 50% ownership So here are 6 Steps For Using Your IRA to Buy And Sell Property Or Property Related Assets 1 - Open A ROTH IRA with $500.
00 or more of a transfer of your existing IRA 2 - Contract to buy or option a property (or debt instrument) secured or unsecured by property.
Your IRA custodian must be the buyer or optionee for your benefit.
It would read something like "ETC, For Benefit Of 'Your Name' IRA" 3 - Send the custodian of choice a copy of the completed agreement used to buy or control the asset you're putting in your IRA 4 - Complete a 'Direction of Investment" form and order whatever the applicable money to seller will be.
ETC requires at least $100.
This provides evidence that the transaction is real and you're not receiving a gift.
***To take this partnering idea a little further, you can actually have your IRA and your spouse's IRA partner a deal.
You can also put your kids through college using a Coverdell ESA account.
You'll need to set that up before they turn 18 however.
*** Things you cannot buy in an IRA: 1 - Artwork 2 - Rugs 3 - Your own home or a home of your linear family 4 - A property or entity you currently already control 5 - Alcohol 6 - Stamps 7 - Gems 8 - Metals (exception: some U.
S.
coins) 9 - Antiques Hopefully this idea gets you thinking outside the box of how you can build wealth for now and for the future.
There are powerful tools right at your fingertips.
Source...