Last Thursday, McGuire Capital Group Realty partnered with Entrust Group hosted a seminar on using retirement funds for investment purposes. Here’s what you missed!
Diversification is not about owning a wide variety of stocks. True diversity comes from mixing a vast array of investments – stocks, bonds, short-term investments, commodities, and real estate. However, not everyone has the money to purchase real estate… or do they? Using Entrust as a vehicle, it is possible to use retirement money to invest in any of these.
Types of Retirement Funds
So what exactly constitutes a retirement fund? There are many kinds – personal funds include traditional IRAs and Roth IRAs; business funds include SEP IRAs, SIMPLE IRAs, and 401(k)s.
A traditional IRA allows you to put off paying taxes on your retirement savings until you begin to withdraw funds from the account. This means contributions are made with pre-tax money. Roth IRA contributions are part of taxable income when contributions are made. Therefore, no taxes are paid when qualified withdrawals are made. SEP IRAs allow small business owners and self-employed people to contribute pre-tax money to their own and to their employees’ retirements. With a SIMPLE IRA, employees and employers both make contributions with pre-tax money, and distributions are taxed as ordinary income. Finally, an individual 401(k) allows business owners, spouses, and legal partners to contribute defined amounts annually using pre-tax money or a plan using after-tax dollars. Withdrawals are taxed as ordinary income.
Why Invest in Real Estate?
Our friend Bill Neville gives three main reasons for using retirement funds to invest in real estate. Firstly, you can take control of your own investment choices. Invest in what you know and understand. Secondly, diversification! Property prices do not move in correlation with the equity markets. This can help mitigate risk and portfolio volatility. Finally, tax benefits – contributions may be tax deductible and earnings are tax-deferred or tax-free.
There are also so many investment options in real estate. All types of real estate are permitted (residential, commercial, international, undeveloped land, and mobile homes), AND it’s possible to utilize direct purchase, partnerships, joint ventures, and private REITs.
Rules and Regulations
There are prohibited transactions and disqualified persons. To find out more information about these, please reach out to any of us here at McGuire or our friends at Entrust.
All you have to do to get investing is open an account, fund the account (contributions, transfers, or rollovers), and direct the investment purchase. It sounds so easy, right? That’s because it is. There’s oodles of options as to what kind of fund to use, funding options, and purchases.
Disclaimer: The Entrust Group (“Entrust”) does not provide advice or endorse any products. All information and materials are for education purposes only. All parties are encouraged to consult with their attorneys, accountants and financial advisors before entering into any type of investment.