This article appeared in Forbes.com in April 2018. Written by our own Adam Bergman, the article talks about taking distributions from a Self-Directed IRA.
From the Original Forbes Article
One of the primary reasons IRAs and 401(k) plans have become the primary retirement vehicles for American workers is the concept of tax-deferral. The concept is premised on the notion that all income and gains generated by a retirement account investment flow back into the retirement account tax free.
So instead of paying tax on the returns of an IRA investment, such as real estate, tax is paid only at a later date (or never in the case of a Roth IRA), leaving the investment to grow unhindered. The beauty of tax deferral is that the deferral compounds each year. For example, Joe is thirty years old and decided to start an IRA and had a retirement account balance of zero at that time.
Assuming that Joe decides to make annual IRA contributions of just $3,500 each year until he reaches the retirement age of seventy and that he is able to generate an average annualized rate of return of nine percent with a prevailing tax rate of 25 percent, at age seventy, Joe will have $1,289,022 of tax-deferred income in his IRA. In contrast, if that money had been invested outside of a retirement account as personal funds, the same assumptions produce just $699,475.
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