The particular provisions of an IRA will differ from one person to another, depending upon how much time they have left before they retire, how much money they have earned, whether or not they own their own home, and whether or not they have received matching contributions from their employer. The plethora of possibilities with IRA investments can seem like a confusing labyrinth, but with the help of a professional wealth management adviser it is entirely possible to find and sketch out a viable solution. If you can couple your IRA investment with other assets such as real estate, it is much more likely that you will build a rich and comfortable retirement.
One of the primary differences between IRA plans and other retirement vehicles is the manner in which the contributions are made. A saver can make contributions after taxes have been paid, or they can choose to allow the contributions to be taken straight out of their pre-tax income. The manner in which the contributions are made plays a key role in whether or not the proceeds will be taxable once retirement age is reached. Contributions can also be paid by way of your employer, either exclusively or by a contribution matching program, which puts the control in your hands. This can definitely be one of the most effective ways to accumulate wealth through this vehicle, while still having other investment options available to you.
The whole premise of an IRA is to gradually save towards retirement. Any funds that are taken out of the investment before retirement age will be subject to substantial penalties, unless the reason for your withdrawal falls under an exemption category. The IRA plans that have the most “teeth” in them will have very few provisions for early withdrawal, because the decrease in accumulated capital is considered to be a loss in the entire system. If you estimate that you will need to withdraw money in the future due to medical expenses or to fund the college education of one of your children, you will need to select a fund that carries few penalties.
The most beneficial IRA plans provide flexibility in terms of how your money can be invested as well. You can directly invest in individual stocks, but for most investors this strategy carries too much risk. Countless times, corporations have gone bankrupt and their shares suspended from trading, causing their stock to essentially become worthless. The majority of the money invested in these types of plans usually goes towards mutual funds, which are generally safer and yet can be more profitable for the average investor. With a mutual fund, you can invest in large corporations that have high share prices, since you are essentially investing in a basket of securities by way of the fund.
Another important selling point to look for with an IRA is whether or not it will allow you to invest borrowed money into it. This may be difficult to find in most cases, as most IRAs do not allow you to invest money on margin, unless it is secured by someone other than the primary account holder. With this in mind, it is clear why the percentage of IRAs that allow borrowed funds for investment is extremely minuscule. The rules regarding using the accumulated capital of an IRA as collateral for a loan are even more restrictive. Most IRAs simply won’t allow it, no matter which particular one you choose.
When you are examining which IRA will be the best for your individual goals, make sure that you keep the big picture in mind and focus on your objectives. If you’re looking to achieve optimal results from your retirement plan, you will have to ensure that you have enough retirement income to comfortably pay off your mortgage. This is one of the first data points you will need to consider before you can fully calculate how much money you will need to put into your IRA investment. The money that you are able to invest will then be able to accumulate much more rapidly once you have identified the best IRA for your individual investment objectives.