The reason why IRA contribution limits are set at low levels is to ensure that the investment accomplishes its original stated purpose, which is to allow people to save money for retirement. There’s really no way to circumvent the system, because even if you have more than one IRA account, the limit will still be imposed in aggregate. The only way you can contribute more on a yearly basis is if you were to inject borrowed money into it, but this is not an easy option due to collateral requirements.
The most important limit to consider is the means by which the IRA can be funded. The primary source of funding should be from personal income, since most significant capital gains will be too sizable to use for IRA contributions. One way you could accomplish it is by strategically breaking up the gains into several smaller chunks and investing them over time. It’s important to note that this will only work if you’re not contributing to that same investment with your regular job income. An IRA works best for people who have a regular sum of money set aside every month, and are able to make consistent contributions.
Along with the contribution restrictions, there are stringent controls regarding the amount of money that a person can withdraw, and what types of scenarios must be in place before the money can be used. Generally speaking, withdrawals from IRA accounts are not allowed, unless you are willing to forfeit the benefits for which you opened the account in the first place. The main exceptions to these stipulations deal with family-related scenarios. You have the ability to withdraw money in order to fund a child’s (or grandchild’s) education, and you can also use IRA withdrawal money to put a down payment on a first home. The allowable lump sum is limited to $10,000, but in light of the strict contribution limits, it is doubtful that the average IRA owner could raise more money by another route.
The stringent IRA contribution stipulations can make it tough to select the right investment. In order to properly invest in stocks, you will need a significant amount of free capital, unless you are willing to forage into the risky realm of low-cap stocks. Mutual funds are the most common choice, since they spread investor risk over a wide range of stocks, and they require a much smaller up-front investment. Real estate investments are actually possible through IRAs as well, but it goes without saying that having the initial capital for such an investment is not always an easy task.
It is possible to contribute additional funds to expand the already-strict limits on what you already have, but it can only happen by way of borrowing. In theory, you can contribute any amount of borrowed money you wish into an IRA, but this option is extremely limited by the amount of collateral you can put up for those loans. You are not allowed to personally underwrite any borrowed money that you wish to contribute to an IRA; this obviously severely limits your options. The yearly contribution limits make it quite difficult to accumulate assets in a quick manner within an IRA, but even if you could, you wouldn’t be able to pledge those assets as collateral for other loans.
IRA contribution limits are set at restrictive levels in order to benefit the economy as whole. The nation collectively benefits from IRA investments, because they reduce the amount of funds that need to be paid out directly by the government. If the contribution limits were to be raised, it would create more lost tax revenue for the government. Future projections indicate that there will be little, if any, increases in IRA contribution limits over time.