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Are you considering investing in real estate with your IRA or 401(K)?NYC

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Are you considering investing in real estate with your IRA or 401K?

Individual Retirement Accounts (IRAs) and 401k plans are long-term savings accounts that offer tax advantages if you comply with various Internal Revenue Service (IRS) regulations. The purpose of these rules is to encourage the use of retirement accounts for accumulation of retirement savings. With the rough start to 2016 for the world stock markets, alternative asset investments, such as real estate, have become more attractive to many retirement account holders.

Most people mistakenly believe that their retirement accounts must be invested in traditional financial related investments such as stocks, mutual funds, exchange traded funds, etc. Few Investors realize that the Internal Revenue Service (“IRS”) permits retirement accounts, such as an IRA or 401(k) plan, to invest in real estate. You can make transfers or take loans against your 401k to access the funds for investment. Careful planning with either type of retirement plan can result in little or no tax ramifications.

Most people don't have a financial education. So, when it comes to investing and building a solid retirement, they blindly turn their money over to people they believe are financial experts: people such as bankers, financial planners, and stockbrokers. Most of these so-called experts are not really investors in the true sense of the word. Most are them working for a paycheck, or self-employed working for fees and commissions. Most "experts" can't afford to stop working simply because they don't have investments working for them.

Interestingly, the vast majority of investors never meet the person taking their money. Most employees simply have their money automatically deducted from their paycheck into retirement plans like a 401(k), the same way the tax departments collect taxes.

Retirement plans like the 401(k) go by different names. But they all share one thing in common, your employer takes money out of your paycheck and hands it over to a broker you've most likely never met to manage one of the most important things for your future—your retirement.

Here's a few things you may not know about your 401K:

  1. Taxes work against you with a 401(k): Long-term capital gains are taxed at a lower rate of around 15%. But the 401(k) gains are taxed at the ordinary earned income tax rate, which is much higher and the highest taxation rate of the three types of income: Ordinary earned, portfolio, and passive. And, if you want to take money out of your 401(k) early, you'll have to pay a 10% penalty too.

  2. You have no insurance if there is a stock-market crash: To drive a car, I must have insurance in case there is a crash. When I invest in real estate, I have insurance in case of a fire or other loses. Yet the 401(k) investor has no insurance to prevent losses from market crashes.

  3. The 401(k) is for people who are planning to be poor when they retire: That is why financial planners often say, "When you retire, you'll be taxed at a lower tax rate." They assume you'll make less money when you retire and thus be in a lower tax bracket.

TIME has run a number of articles over the years questioning the wisdom of putting so many people's retirement at risk through 401(k)s. They've been predicting that millions won't have enough money to retire after a lifetime of handing money over to strangers. A typical 401(k) plan takes 80 percent of the profits. The investor may receive only 20 percent, if they're lucky. The investor puts up 100 percent of the risk and the money. The 401(k) company puts up no money but gets the majority of profits.

Why are 401(k)s so popular?

They're easy, for one. But the main reason is that those who run these plans make a lot of money off your money. Those who run these plans don't get paid by how much money they make you. They get paid by how much money you turn over to them in the long run. Thus the old line, "Invest for the long-term in a well-diversified portfolio of stocks, bonds, and mutual funds."

The reality is that real investors do not park their money. They move their money. It is a strategy known as the velocity of money. A true investor's money is always moving, acquiring new assets, and then moving on to acquire even more assets. Only amateurs park their money.

There are much better ways to invest for your retirement, but they require financial education. I encourage you to meet with us and learn about better, more sophisticated ways to prepare for retirement.

Ready to do something GREAT with your money? Yes, let's do this! RSVP NOW!!

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