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Millionaire Money Habits

January 4th, 2008 at 12:45 pm

Take Control of Your Retirement Fund

There’s nothing exhilarating about a retirement plan. You simply pick a few mutual funds when you open the account and deposit some money to be spread across your picks every month. Every six months or so you may review your statements, see how you are doing, maybe rebalance a few things, but mostly just keep contributing money. Your contributions are probably automatic, so you don’t even have to do that much.

Take More Control

What if you could be your own investment manager and choose specifically how your investments are made, and not just limit those investments to stocks, bonds and mutual funds. Guess what? You can!

If you never heard of a self-directed IRA, that’s because it is a well kept secret that doesn’t make your portfolio manager any money.

With a self-directed IRA, you as the account owner manage and make investment decisions. You can purchase:

  • Real Estate: commercial, foreclosures, rental properties, etc.
  • Stocks, bonds and mutual funds
  • Precious Metals
  • Franchises
  • Tax Liens
  • High-yield Mortgage Notes
  • Storage Facilities
  • Virtually any investment allowed by IRS regulations

Let’s say you find a nice cash-flowing rental apartment for sale at $100,000 and you buy the property with the funds in your IRA. Here’s how the deal would work out for you after a year:

  • Down Payment from IRA: $25,000
  • Cash-flow after mortgage and expenses: $100 or $1,200 annual income
  • Property Appreciation: 5% or $5,000
  • Reduction in Mortgage Balance: $1,000
  • Total Return on $25,000 Investment: $7,200 or 29% return on your investment

That’s a little better than the 10% you hope to get out of your mutual funds.

Tax Free Profits

If you bought your real estate investment above with a Roth IRA, the capital gains are yours to keep - completely tax free. Even the money you will make when you sell the property is 100% tax free.

For more information read Nora Peterson’s, Retire Rich With Your Self-Directed IRA. This is the most thorough book on the topic, which walks you through each option in plain English.

Millionaire Money Habit: By taking control of your personal finances rather than being passive investors you can substantially boost your wealth. Take advantage of federally regulated retirement programs to make more money tax free.

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