Building Your Nest Egg with a Self Directed IRA Retirement Plan
One way that we have of increasing personal purchasing power beyond the level of inflation and the only way we have of setting aside sufficient funds for a comfortable retirement is to do it ourselves.
Building a retirement nest egg that meets your needs isn’t easy. We’re faced with ever-increasing pressures from local and federal governments to hand over more income.
Here are the facts that really matter:
Since 1973, the average American’s purchasing power has declined by 11 percent in real terms. Effective federal income and capital gains taxes now range between 28 percent and 38 percent – and state taxes, such as California’s nine percent – increase the burden on individual taxpayers. To break even in today’s economic climate, the average American must get a 10 percent raise each year. And for our investments to increase in value, we must make slightly more than 10 percent a year on each dollar we invest.
These facts make one thing crystal clear. The only way that we have of increasing personal purchasing power beyond the level of inflation, and the only way we have of setting aside sufficient funds for a comfortable retirement, is to do it ourselves.
What tools are available to build your retirement?
One of the most effective tools for building your retirement is also one of the least well known. That tool: self-directed employee benefit plans. Whether it’s a profit sharing plan, an IRA (Individual Retirement Account), or a SEP-IRA (a Self-directed Employer Plan-IRA), a self-directed employee benefit plan that offers maximum investment flexibility to the investor, can literally be worth its weight in gold… or real estate, or limited partnerships, or whatever allowable investments the individual chooses to include in his or her portfolio.
What are the restrictions of a self directed IRA?
Certain types of gold and silver, for example, may he held in an IRA account, but not in a profit sharing plan account. Collectibles may be held only through investments in limited partnerships established for that purpose. And, you may not deal with any member of your family, other than siblings, in making investments through a self directed IRA.
Approved by the IRS
Beyond that, if a trustee offers self-directed employee benefit plans that are approved by the IRS for a full range of investment options, any legal investment may be made through a self-directed plan. And, every penny earned in such a plan is reinvested, accruing tax-free until the account holder begins withdrawing funds from the account. You can make all investment decisions for yourself.
What are the investment options?
Discounted notes, closed corporate stock, real estate, unsecured loans, limited partnerships, plus stocks, bonds, CDs and more. Many self-directed account holders turn to these options as interim investments, using them to realize better-than-passbook earnings while they seek out the next major investment.
How do I choose the right account?
To determine which of type of account is right for you, ask yourself these two questions:
- How much money does the person want to save each year ?
- Is the person an employee, employer, or sole proprietor?
Employees have just one choice: the IRA. They may invest up to $5,000 (2012)per year, and depending on their income levels and their or their spouse’s participation in an employer-sponsored pension plan, the contribution may or may not be tax-deductible.
Employers and sole proprietors may use IRAs as investment vehicles, too, but they also have the option of opening profit sharing plans, SEP-IRAs, or Money Purchase Pension Plans. Profit-sharing plans and SEP-IRAs allow contributions of up to 25 percent of an individual’s net earned income up to a maximum of $50,000 each year.
