Easy Tips to Retire Wealthy with an IRA

Tips to retire wealthy

Retire Wealthy – Individual Retirement Account

The bright side of entering your Golden Years is retirement: the freedom to do what you want, when you want. If you’re a millennial (ages 22-37 in 2018), you can ensure that you retire wealthy if you make a few smart choices today. Adam Bergman, founder of IRA Financial, says that your age is one of the golden keys to build for retirement.

Building your retirement to retire wealthy comes down to the advantages of retirement accounts: tax deferral and tax-free growth in the case of a Roth IRA.

Tax Deferral Popularized Retirement Accounts

With tax-deferral, you are not subject to pay your taxes right away with a retirement account or investment option. Instead, you earn money you make from investments now, and then pay taxes when you make a withdrawal on your distribution.

In the case of an IRA, you make investments without paying taxes on your gains. When you make money in a traditional brokerage account by selling an investment at a higher price than you paid for it, the government gets a piece of that money.

However, with an IRA, you have tax-deferral. Therefore, if you make $3,000 in gains by selling an investment, you can reinvest that $3,000. You aren’t obligated to pay taxes – yet. Again, you must pay taxes at the time of your distribution.

Roth IRA – Tax-Free Gains Leads to Retirement Wealth

With a Roth IRA, you fund your account with after-tax dollars. In other words, you pay taxes now rather than later. This is beneficial for participants who believe they will be in a higher tax bracket when they retire. A Roth IRA has many other advantages.

For example, let’s assume you have a Roth IRA or Roth 401(k) and you contribute $5,000. Over the years, you make many wise investment decisions, and that $5,000 increases to $50,000. Because you already paid with after-tax dollars, you can take out that $50,000 tax-free as a distribution. With a traditional IRA, you would owe taxes on the $50,000.

This is the primary difference between a Roth IRA and a Traditional IRA.

Your Savings Plan at Age 50 with an IRA

Let us assume you begin saving for your retirement at an older age – 50. You decide to make a monthly contribution of $20 – that’s $240 annually. How much will you have when you withdraw on your distribution at age 70?

Note: The expected rate of return for the following examples is if you invest $240 annually until you’re age 70.

Current Age – 50

Starting Balance – $0 (you’re beginning to save for retirement – therefore, you have no money in your retirement account).

Expected Rate of Return – 6% (this varies depending on the success of your investments, however we’ll use the example of 6%).

When you start saving at age 50 and generate a 6% rate of return, you will have $9,358 (Roth IRA) or $7,868 (taxable account) at age 70.

Your Savings Plan at Age 40 with an IRA

As you get older, it’s less likely that you will retire wealthy. However, it’s still important to create a retirement nest. Let us assume you start saving for your retirement at age 40 – where will you be at retirement age?

Starting Balance – $0

Expected Rate of Return – 6%

When you start saving at age 40 and generate a 6% rate of return, you will have $20,112 (Roth IRA) or $15,301 (taxable account) at age 70.

Your Savings Plan at Age 30

At 30, you are still a Millennial – one of the youngest age groups. While it may be advised to start sooner, you can still achieve some modicum of retirement wealth if you start contributing to your IRA today. Let’s look at the numbers.

Starting Balance – $0

Expected Rate of Return – 6%

When you start saving at age 30 and generate a 6% rate of return, you will have $39,371 (Roth IRA) or $26,843 (taxable account) at age 70.

Your Savings Plan at Age 25 with an IRA

Although you’re young and retiring seems far away, you decide it’s the time to make a retirement nest to retire wealthy. Truly, there’s no better time to start. Let’s take a look at the numbers.

Starting Balance – $0

Expected Rate of Return – 6%

When you start saving at age 24 and generate a 6% rate of return, you will have $54,122 (Roth IRA) or $34,824 (taxable account) at age 70.

The Importance of Starting Young

As you can see from the numbers, when you start earlier, you make significantly more than if you start later in life. This is why it’s so important to start an IRA early in life.

Additionally, it’s important to be consistent with your contributions. Create a reasonable monthly budget for yourself, such as the example we used – $20. You spend just as much on coffee in a month – perhaps more. As you can see, $20 towards your future if you invest young allows you to retire wealthy.

Traditional IRA & Self-Directed IRA

It’s your money, and you have options when choosing your retirement vehicle. Many people use a traditional IRA to make investments because they’re unaware that Self-Directed IRAs exist. However, depending on your knowledge of the Stock Market, you may benefit more from a Self-Directed IRA. This allows you to make investments in areas you better understand, such as real estate.

Self-Directed IRA

A Self-Directed IRA is similar to a traditional IRA and 401(k). The major difference is, it puts you (the IRA investor) in control; and greatly diversifies your investment opportunities. You can continue investing in stocks, bonds and mutual funds, but also make alternative asset investments.

Alternative investments include:

  • Real Estate
  • Peer-to-peer lending
  • Tax liens
  • Notes
  • Cryptocurrency
  • Precious metals

The list doesn’t stop here – that, among checkbook control, is what makes self-directing your IRA a smart decision. When self-directing, choose a Self-Directed IRA custodian for true control over your investments.

Traditional IRA

A traditional IRA (individual retirement account) is an account that allows you to contribute pretax income in your IRA with tax-deferred growth. Your custodian holds your traditional IRA and makes investments from your instructions as well as the options available. With a traditional IRA, you primarily defer to the experience of a professional regarding your investments.

Investment options with a traditional IRA include investments in stocks, bonds, mutual funds. You’re restricted in your investment opportunities.

IRA Financial

IRA Financial has helped over 12,000 clients invest $3 billion in alternative assets. Founder of IRA Financial Group, Adam Bergman, began IRAFG to educate retirement investors on how to properly self-direct their retirement accounts. With a Self-Directed IRA, you can make almost any type of investment; when you work with IRA Financial, you receive direct access to a team of tax and ERISA specialists to help you get started the right way.

Q For You

How old were you when you began saving for your retirement?


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