Individual Retirement Account

There is a need for every young adult to set up an IRA as soon as possible. The advantages and benefits are enormous. It is the greatest wealth building vehicle at your disposal. The beauty of the IRA is that you can save money, invest money, and then reinvest the money that you make without paying any taxes. That means your savings, interest, and dividends will compound year after year. This will put you on the fast track to financial freedom.

There are many types of of IRAs which may be employer provided of self provided. The types include:

Roth IRA contributions are made with after tax assets, all transactions within the IRA have no tax impact, and withdrawals are usually tax free.

Traditional IRA contributions are often tax deductible, all transactions and earnings withing the IRA have no tax impact, and withdrawals at retirement are taxed as income.

SEP IRA a provision that allows an employer (typically a small business of self employed person) to make retirement plan contributions into a traditional IRA established in the emplyee's name, instead of a pension fund account in the company's name.

Simple IRA a simplified employee pension plan that allows both employer and emplyee contributions, similar to a 401k plan, but with lower contribution limits and simpler administration. Although it is treated seperately, it is termed an IRA.

Self-Directed IRA a self-directed IRA that permits the account holder to make investments on behalf of the retirement plan.

The IRA must be set up with a custodian . The custodian adminsisters the IRA account. There are many different kinds of Individual Retirement Accounts and many custodian options. We will only deal with the self directed IRA. The self-directed IRA is where the financial power lies.

Most IRAs are invested in the securities market. They are invested in stocks, bonds, and mutual funds. The self-directed IRA can be invested outside of the financial markets. Like in real estate. Using an IRA to invest in real estate is a powerful wealth building strategy.