Part 2 of the Ultimate IRA Report
Here is the next portion of the Ultimate IRA Report
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Real Estate IRAs: Secrets Revealed – Part Two |
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The Power of Tax-Free Compounding Interest: By: Dick Desich Hello, ! Welcome to Part II of the Real Estate IRA Report. In this edition, you will learn about the incredible power of compounding interest, and how the tax-free or tax-deferred status of an IRA can make a huge difference in building your portfolio and assets. Amassing a Fortune…The Power of Tax-Deferred Compounding Interest”The most powerful force on earth is compounding interest” - Albert Einstein One of an IRA’s greatest features is that it allows Americans to enjoy the true power of tax-deferred compounding interest.What is compound interest? Compound interest is basically interest on interest. For example, when you make an investment and receive a return, you are able to enjoy interest on both the investment principal and the earnings you have accumulated. The additional interest you make on your profits is called compound interest. Compounding can occur with any investment you make, but the “true” power of compounding interest is obtained when you make an investment in a tax-deferred environment. By taking advantage of an IRA’s tax-deferred status, you do not have to pay tax immediately on your earnings. Thus, you are able to enjoy the power of compounding on ALL of your profit, not just that which is left after taxes. Tax-Free Scenario: The Power of Compound Interest Let’s look at an example that illustrates the power of a tax-deferred environment. In this example, we have a man who is 35 years old and contributes $2,000 annually to his Traditional IRA, until the age of 65. These thirty contributions total $60,000.Assuming a 10% annual rate of return, this individual’s IRA at age 65 will be worth over $400,275! Remember, this example was based on contributions to a Traditional IRA. A Traditional IRA is funded with before-tax dollars, which, in most cases, are tax deductible, and taxes are deferred until funds are distributed. An even more powerful investment vehicle is the Roth IRA. With the Roth, contributions are made with after-tax dollars, so you don’t receive a deduction, BUT your earnings will not be taxed when you make a qualified distribution. Imagine making the same deals you are currently making, but receiving your profits tax-deferred or tax-free! All simply by using your IRA for your investment! Taxable Scenario: The Loss of Compound Interest Now, let’s look at the same investment made outside the IRA’s tax-deferred environment. We will use the same assumptions as above, except the individual’s investments would be subject to a 28% annual tax rate. The total value in the same individual’s account at age 65 would be just $227,220.Your “business partner,” the federal, state and local governmental taxing authorities, have claimed more than $170,000 of your profits! Tax-Free Profits Using Your Knowledge and Expertise: A Real-Life Example of Combining Real Estate and Self-Directed IRAs Sherman Ragland is a real estate investor from the Washington, D.C. area, and an Equity Trust client. While searching for investment properties, Sherman came upon a two-bedroom home that he was able to purchase for $24,000.Recognizing that this would be a good deal for his retirement account, Sherman instructed Equity Trust, his custodian, to purchase the property on behalf of his IRA. The property needed improvement so that it could be rented out, and Sherman instructed Equity Trust to submit $7,500 to a general contractor. After repairs were complete, the home was put on the market as a lease-to-own property and was rented out for one year at $10,000. The rental income flowed directly into Sherman’s IRA. During this time, Sherman added a third bedroom that cost approximately $20,000, paying for it out of his Equity Trust IRA. The following year, Sherman’s tenant qualified for financing and Sherman’s IRA sold the home for $135,000. Let’s take a look at how this deal worked out for Sherman. With the $24,000 initial purchase price and $7,500 in fix-up expenses, plus $20,000 for the addition, Sherman had total expenses of $51,500 in the deal. He had $10,000 in rental income and netted $135,000 on the sale, for total income of $145,000. After expenses, Sherman realized a $93,500 profit . This profit remained in Sherman Ragland’s IRA at Equity Trust, ready to be invested in the next deal Sherman found. If he had done the same investment outside of his IRA, using personal assets, Sherman would have paid 23% in capital gains and state taxes leaving him with a profit of $71,995. The difference for Sherman Ragland, in just this one deal, was $21,505! And, all the while, Sherman is building tax-free retirement income -which means he won’t have to worry about the problems of socialsecurity. The bottom line is that, using his knowledge and expertise, Sherman is creating a bright future for himself as well as his family. In addition to the power of compound interest, other tremendous advantages IRAs can offer include reduction of taxable income, asset protection and estate planning.Watch for Part III of the Real Estate IRA Report, where we will discuss how to receive a $50,000 tax deduction using self-directed Real Estate IRAs, and how to use your IRA as an estate planning and asset protection tool! “Again, ask yourself what type of return you can make investing in real estate. 10%? …20%? …30?” If you have enjoyed this report, why not forward it to an associate or colleague who can profit from this information? They’ll thank you for it! If this message was forwarded to you: Get a free full version of this mini-course by visiting www.trustetc.com. Along with your free mini-course, you will receive a free subscription to “The Ultimate IRA Report,” a comprehensive update on IRA and wealth creation information.
Want to learn more about how to combine your own investment knowledge and expertise with the tax savings benefits of IRAs and the high potential profit value inherent in real estate and other alternative investments? Visit our website for more detailed information: www.trustetc.com How would you like to create tax-free wealth for you and your family? Richard Desich has developed a whole series of educational materials and training seminars to teach individuals how to truly create wealth for themselves and their families. Additional information is available at www.irareg.com Please do not reply to this email. All inquiries should be directed to help@trustetc.com or call Equity Trust Client Services at 440.323.5491. Equity Trust Company, 225 Burns RD, Elyria, OH 44035, USA |
Have Questions? We’ ve Got Answers! Has this seminar sparked some questions that you might have about self directed real estate IRA investing? If so follow the link below for a consultation with a self directed IRA specialist. With over 33 years of experience we can answer all of your questions and best of all we’ll call you at YOUR convenience. |
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