Real Estate In Simple IRA | Max Out Your Investments
Simple IRAs are typically associated with small businesses and small business owners employing 100 employees or less. They are a restrictive yet useful form of retirement planning for businesses without a lot of excess cash to throw around and they serve their purpose to provide employees with a better and more fruitful future. However, more and more real estate investors are starting to poke their heads in the Simple IRA game and are realizing the true benefits that these accounts hold. In fact, owning real estate in Simple IRAs is one of the fastest growing investment tools out there today.
Why can employees benefit so richly from a small business retirement account? Real estate in Simple IRAs is so beneficial to real estate investors because they are so often the employee and the employer. In essence they own their own business (buying and selling real estate) and they are the one who is employed as well! When they use a Simple IRA account to plan for their retirement the funds from both the employee and the employer (as required by the IRS) go directly into the same Simple IRA account! A real estate investor can actually benefit from being two separate entities!
As if this isn’t enough, a real estate investor can also have their own, individual IRA, either Roth or traditional!
Simple IRA accounts are usually advised for business owners who make $50,000 or under as a real estate investor. The reason for this is you will be able to capitalize on the maximum amount as stated in the law. A Simple IRA can only give you back so much money each year and if you make over $50,000 you will not be able to receive the maximum amount (although you will obviously receive some compensation). Plus, as your own boss you can choose to have these funds deposited directly into your IRA account instead of through your paycheck, which makes for less paperwork and easier handling.
Let’s say a real estate owner, who makes $50,000 per year enters into a Simple IRA account. Well, because he is the sole owner of the business he is able to put up to $10,000 into his Simple IRA account plus another 3% of his $50,000 annual income (which comes out to $1,500 per year). Because he is both the employer and the employee he is able to put $11,500 into his Simple IRA and he even has the option of opening up a Roth IRA (which he can put up to $4,000 per year into). As a real estate investor this man has the potential of putting up to $15,500).
Simple IRAs are a useful tool for real estate investors in today’s financial market because they can benefit by being the only employee and the owner of the business as well.
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