Mark Twain said it best: “buy land, they’re not making it anymore.”  Indeed.  It’s estimated that around 80% of the wealth in the US today is in the value of real estate.  Real estate has always offered an excellent opportunity for long term growth.  Even today, with the real estate market in a slump, there are significant opportunities to be found, and using your Roth IRA to fund your investments can bring a better-than-average rate of return if handled properly.

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Death & Taxes

The Estate Tax debate rages on in the United States.  Temporarily on hold for 2010, the tax will come roaring back in 2011.  As Presidential administrations change and Congress turns over, no one knows what the future of estate taxes will be.  One thing is for sure:  the government needs money and will take it wherever they can get it.

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The ability of a Roth IRA to quickly accumulate earnings for your retirement is legendary.  But sometimes, life throws you a curveball and you find yourself short on cash.  Fortunately, Roth IRA rules allow you to use your retirement funds for other things.  Here are five situations where you may be able to tap into your Roth IRA funds:

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For those who have lost their jobs in today’s distressing economy, there is good news: your Roth IRA funds can be used to help you re-train for a new career, or to boost your employability in your present field.  Although many industries are not hiring, there are some fields (like Computer and Medical) that are actively recruiting.  Re-training is the logical choice for many people who have lost their jobs.

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A consistent character trait of entrepreneurs is that they are risk-takers.  They like to control how their time and money are spent.  Many entrepreneurs who own a Roth IRA prefer to administer their account themselves by choosing the “self-directed” designation.

You Control the Account Money

With a self-directed IRA, one sets up a Limited Liability Corporation which holds the IRA account funds.  Essentially, the IRA owns the LLC, and the entrepreneur becomes the directing member of the LLC.  The directing member is free to invest the IRA funds however they please.  All of the profits from business transactions stay in the LLC account, earning compound interest.  Having all of the profit generated by the LLC available for re-investment gives a business owner leverage that was not previously available.

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Andrew Carnegie understood it; so did J.P. Morgan, and Cornelius Vanderbilt. These nineteenth-century American industrialists understood that money earning compound interest, left alone, could build a fortune very quickly.  The power of untaxed compound interest building on itself is now within the reach of every American through a Roth IRA.

Savings which earns compound interest grows quickly because the interest earned is added back to the principle.   Future interest is earned on the sum of (the compound of) both the principal and earned interest.  When even small sums in a Roth IRA earn compound interest for a long time, it can add up to a small fortune.  It pays to start saving early, and save regularly; but power of a Roth IRA works well whether you contribute regularly or not.

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