Why Invest in an IRA if You Need Money NOW?

Author：佚名 Source：none Hits：130 UpdateTime：2008-10-19 0:02:04


Here's a take on retirement planning from a youngster with a full head of hair and his whole life ahead of him:

When I first began investing in real estate, I was 22 years old and I wanted to make money for two reasons: 1) To finish paying for college, and 2) To generate enough cash and equity to be able to live off my passive investments as soon as humanly possible. This meant that I needed access to every dollar I earned (as well as dollars I borrowed) in order to buy more houses, create more wealth, and get to the point where I could retire early.

Like many of you, I heard how amazing self-directed Roth IRAs are for real estate investors who use them to invest in real estate and grow their nest egg by leaps and bounds, tax-deferred. But every time I came close to actually getting started, this little voice would pop up in the back of my mind:

"I need my money NOW, not when I'm 60!"

I rationed that if I were going to wait until I was 60 to retire and take money out, then a tax-deferred retirement account made sense. But since I planned on retiring and living off my investments at the age of 25 or 30, I figured, "What's the point?"

Here's four points I should have considered:

Point #1: Why not? The opportunity to have at least a portion of your hard-earned money safe from the clutches of the government is too good to pass on. When no taxes are paid on interest earned, even small amounts of savings can add up over time. If you want to use as much of your income as you can to live on, or to do deals, consider investing at least a small percentage of your income or profits in an IRA.

What if you put a mere 1% of your income into an IRA account? If you earn $60,000 per year and invest only 1% of it, that is only $50 per monthnot something that is going to have a major immediate impact on your ability to buy more properties. But it will add up in 30 years if you can earn at least 10% per year, which for creative real estate investors is low.

After all, aren't we in a business where you can wholesale a deal and make $5,000 in 15 days with $0.00 of your own to begin with? If you can make an infinite return, then trust me, you can earn an ROI of at least 10% per year. So why not sock away some savings or at least do one deal in your IRA? I think the chance alone to legally thumb your nose at the IRS is priceless.

Point #2: Diversify a little. Having success with high-return real estate investments does not mean the principle of diversifying is not applicable to you. Even the world's wealthiest people diversify their investments. They don't just keep reinvesting 100% of their money in one thing, because what if it stopped working and you lost it all?

You could separate your IRA funds from your other savings and investments and use them exclusively for some other kind of investment, like high-interest loans, buying liens and judgments, or even (gag me) mutual funds.