Why an IRA is a Good Choice for Retirement Funds
In a perfect world, we’d have a retirement fund that earned a good amount of interest. We’d be able to save regularly, and our portfolio would grow steadily throughout our working years. We’d take our money out of the market at retirement, hopefully never looking back.
But this isn’t a perfect world, and even retirement funds won’t guarantee a high rate of return. (With low interest rates and market volatility, few investments can.) Take a moment to imagine how much more comfortable retirement would be if you could earn interest on your retirement funds. If instead of relying on pensions or Social Security, you could rely on interest earned on your investments, wouldn’t that make a difference?
You can! A self-directed IRA gives you a lot of control over how you invest your retirement funds. And that control can have a direct impact on your bottom line! You may be surprised by how much money you can make with an IRA. It may be more than you even dreamed possible.
The Best Rates On Your IRA
If you’ve been putting money into an IRA every month, then you’ve no doubt noticed that your money has been growing pretty slowly. This is because most banks tend to offer lousy interest rates on their standard savings accounts.
So here’s the big question—how do you get more interest from your IRA? Where can you stash your money with a better rate of return than you’ll typically find at the bank?
There are two ways that you can make more interest on your IRA money. You can open your account at a rate-paying bank or you can invest in a certificate of deposit from a bank, brokerage or credit union. I also strongly advise that you look into peer-to-peer loans, which can give you an even higher rate of return.
Why is There So Much Confusion?
It’s not exactly the biggest secret ever, but almost no one knows that IRAs have no time limit restrictions. Most think that as long as you are working –and your money is in an active savings account with a bank, you can contribute to an IRA. Yet the truth is that anyone can set aside money for retirement, including children, who aren’t saving for retirement, but are smart enough to want to save and invest for their future.
By simply having a discussion with your children when they are young and helping them to understand the importance of investing and saving money for their future, you will be able to show them that they can maximize the potential of their money by contributing it to an IRA account.
You have to understand that you have total control over the money – even when your children reach maturity and normally would have complete control over the assets. Although you do not have the authority to, you can still access the money in your child’s traditional IRA account to pay for their future college education.
While there are no specific time frame regulations on IRAs, it may be advisable for your children not to access their account before the age of twenty-nine, considering this is the minimum age requirements for withdrawing money from a traditional IRA.
IRA Interest Rate = Total Return
Or Are You Getting Sucked Dry?
In this article, we will discuss the approximate earnings of a variety of different IRA accounts. You will learn how to calculate the interest rate of an IRA account and then how to compare that calculated interest rate against the market average interest rate to see if you are being made a reasonably fair deal. I know it sounds abstract, but it is really quite simple.
Income From a Portfolio
Many Americans aren’t saving enough for retirement. Fortunately, there are some safe and proven ways to increase the income they receive from a traditional IRA, which can transform it from a dull retirement planning vehicle into a reliable source of retirement income.
This is achieved with a portfolio of municipal bonds and certificates of deposit (CDs) that will help you earn a safe return on your investment. The advantage of going with a portfolio of bonds and CDs over a portfolio of stocks is that bonds and CDs are very stable, and a small percentage of your assets are at risk.
This is advantageous for retirees because losing a large percentage of your assets at once could be detrimental to someone who is withdrawing money from their investment, year after year.
The combination of Bonds and CDs also creates diversity within your portfolio. It allows you to divest from the stock market and your 401k without taking on too much risk. This approach does have a few disadvantages, however. It doesn’t provide the growth potential of other investments, so this type of portfolio strategy should be used for conservative portfolios only. The other disadvantage of this strategy is that it’s not a sexy investment that’s fun to talk about. But it’s a solid investment vehicle that guarantees results.
Appreciation on a Portfolio
For Best Results: Avoid Active Trading in Your IRA
Another way you can make use of your retirement funds is to invest in an IRA (Individual Retirement Account). Today, you can invest in almost any type of security or investment or combination of them in a self-directed IRA. As with the 401k, you will also need to pay taxes on the gains upon withdrawal (though a Roth IRA has some tax benefits).
Count Your Interest Blessings
One of the most powerful things about a Roth IRA is the ability to earn interest on your money. This interest is 100% yours to keep, and it’s Uncle Sam-tax free. The interest your money will earn depends on the type of investment you choose, but all investment options provided by a Roth IRA have one thing in common … they’re all low-risk and made up of a bunch of different stocks.