How to Make Retirement Investments Work for You
Majority of taxpayers have become anxious about retirement because of present state of the economy. The anxiety stems from not being able to support the lifestyle they have become accustomed to once they stop working when they cease to be professionally marketable because of age. This concern is not without reason, considering that the standard of living now is so much higher that before and is still expected to rise in the years to come.
This situation has caused many to re-examine their retirement investments and how they can get the most out of it. Today, as many as 60% of taxpayers have 401K accounts which are traditionally invested in stocks, bonds and the money market. These 401K accounts are employment-based and are administered by the employer or his designate. Generally, there is not much the employee can do about where his retirement funds are invested. These circumstances have added to the apprehension of the employees about retirement as a whole.
However, there is another route that you can take in order for you to take matters in your own hands and make your retirement investments achieve your retirement goals. As long as you have income, self directed IRA accounts have been made available wherein you make the principal decisions related to your fund investments. With these accounts you are allowed to choose the custodian that has expertise in the types of IRA investments you are inclined to make. There is also a wide array of investments that you can choose from, from the traditional investments of stocks and bonds to real estate, precious metals, tax liens, foreclosures and so much more.
While the amount you save from your compensation into your nest egg is one of the key factors in achieving your goals for when you retire, equally important is how you make your retirement investments. As any investor will tell you, investing and speculating carries with it risk. But together with this risk is the opportunity to earn income from your investments in quantities that will allow your funds to grow and overtake inflation. And since in a self directed IRA you will be making the decisions, it is important that you find the balance between this innate risk and making safe retirement investments.
In a self directed IRA one of the most common retirement investments is in real estate because it offers the account owner a tangible asset that has the potential of generating income while it is held by your account and can produce even more profit when you resell it. Despite fluctuations in real estate prices, these movements are not as pronounced and as volatile as with the prices of commodities. Hence, real property can be considered as safe retirement investments although long-term in nature.
And because your funds are in a retirement account, you benefit from the tax shelter despite the fact that your retirement investments earn income. You do not have to pay taxes until you start making withdrawals from your account. Capital gains from real estate sales are taxed a whopping 35%. But if the income is derived within a retirement account these become taxed only when you make qualified withdrawals as ordinary income. If you own a Roth version then you will even benefit from tax-free withdrawals. So consult your favourite financial adviser now and find out how to make the most out of your retirement funds for the security of your retirement.