Equity Trust Co.’s Mae Szippl recently discussed how to invest in real estate and build long-term wealth that spans generations in a webinar hosted by HomeUnion®. A self-directed IRA (SDIRA) allows an investor to take control of their investment choices. Szippl says that an investor can “choose to make investments in real estate using existing retirement funds, whether via a current IRA or old 401K that’s able to be moved. With an IRA, you don’t have pay taxes on rental income or capital gains.”
This is welcome news for residential real estate investors!
Below are three important facts about a self-directed IRA that every real estate investors should know:
- A SDIRA enables real estate investing with existing retirement funds or inactive 401(k)s
- There are two types of accounts: 1) tax-free and 2) tax-deferred
- Multi-generational wealth building is possible with a self-directed IRA: One can pass it down to their heirs
There are two types of self-directed IRAs: tax-free and tax-deferred accounts. With a tax-free or Roth account, an individual pays taxes on the money you put into the account, and pay no taxes on distributions as long as the account has been seasoned for five years and the account holder is 59 ½ or older.
A traditional account enables tax deferment. Using this type of structure, an investor pays taxes on their distributions. At the age of 70 ½, when an individual takes the required minimum distribution, that person can also have tax deductions on these contributions.
In addition to the benefits one can achieve near retirement age, perhaps the most compelling is the ability to use an SDIRA to “build a legacy,” remarks Szippl. “Your SDIRA will be passed on to whomever you choose: your children, your grandkids, whomever. They will be able to use this account as their own and continue to grow the account. This isn’t just something you’re building for yourself right now – you’re building it for generations to come.”
Watch this webinar for more details on using a self-directed IRA to invest in real estate or contact one of HomeUnion®’s Solutions Managers at (866) 732-3220.