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Learn the facts about an IRA rollover and avoid some common mistakes. There are subtle differences between a rollover IRA and an account that has been funded using a transfer, but the terms are sometimes used interchangeably. If you become confused by the details and make a mistake, the account could lose its tax-free or tax-deferred status. Let me try to help you avoid that. You as the Middleman With an IRA rollover, you might think of yourself as the “middleman”, since a check is made out to you and you must find a new custodian within 60 days. Otherwise, you will pay taxes on the fund. In some cases, your current custodian may be required to withhold at least 20% of the fund for tax purposes. But, if you make a transfer, instead of a rollover IRA transaction, you are not the middle man and you don’t have to worry about taxes. How to Compare Custodial Companies If you are about to make an IRA rollover, it’s time to compare custodial companies. They charge different fees and offer different investment options. Sometimes, the fees that they charge can inhibit your ability to grow the account to its full potential. Limiting your investment options also limits your ability to grow the account. So, when you are thinking about a rollover IRA, you need to do a little “shopping”. Compare the fees that companies charge, as well as the investment choices that they offer. What Investments Are Allowed Under the current tax laws, you are allowed to invest in public and private stocks, residential and commercial real estate, bonds, treasury notes and bank certificates of deposit, as well as lesser known vehicles, such as tax liens, judgments, lottery winnings and mortgage notes. Most custodians do not offer all of these options for a rollover IRA. The majority of the accounts are invested in mutual funds, created by the custodial company. An IRA rollover is safer and can earn more when it is fully diversified. Many people think of diversification as investing in different areas of the stock market. But, complete diversification includes all of the markets; real estate, stocks and money. The Numbers Game There are “numbers” that you need to consider when deciding which markets to invest in and how heavily. Bonds, treasury notes and CDs are considered risk-free investments, because they are guaranteed by the federal government, but a rollover IRA will earn a maximum of 4% on these investments. The inflation rate is expected to exceed 5% per year over the next twenty years. You need to consider that, because it means that your money will have less buying power in twenty years. If your expenses remain the same and you hope to retire in 20 years, you will need twice the money to cover the same expenses. If your expenses are higher, then of course you will need more. Stock market returns rarely exceed 8%, but returns in the real estate market are unlimited. If you make the right choices today, an IRA rollover can secure your future and your ability to retire, in style. Good luck! If you are interested in investing in real estate in your IRA, but would like a simpler more TURNKEY solution, click on the url at the foot of this article, this will take you to my website. You will find much more enlightening information there. Gordon Hall is an active participant of a national network of professional writers, who advocate socially conscious real estate investing, through the use of retirement vehicles such as IRAs, 401Ks and other retirement assets. For more information, or to get involved, please visit the following http://www.double-your-ira.com
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