With a self-directed IRA, you can apply for a non-recourse loan, which can be used to purchase a property that will be turned into a rental. It might seem simple, and to many in the financial world, it is, but some of that jargon can make understanding IRAs and non-recourse loans a bit more difficult.

First Western Federal Savings Bank is here to explain how Roth IRAs work, and how they can be used with a non-recourse loan. Learn more from our lenders, and contact us to begin your loan application today. We look forward to hearing from you!

Roth IRAs have tax benefits in retirement.

With a Roth IRA, you can start taking tax-free withdrawals once you reach the age 59½. As Forbes explains, “That’s different from the tax break you get from a traditional IRA. With those accounts, savers get the chance to deduct contributions (up to allowable limits) from their taxes in the same year the money is stashed in the IRA.”

With a Roth IRA, income taxes must be paid on the money before it is contributed into the Roth IRA. It’s best practice for you to start saving and putting money into your Roth IRA sooner rather than later — that way by the time you reach retirement age, you can have a great nest egg to access. This can be utilized for a number of purposes, including investment opportunities.

Roth IRAs are more flexible than traditional IRAs.

Ideally, no one’s dipping into their retirement before it’s time — or at least, no one’s dipping into their retirement because they have to. Self-directed IRAs can be used for investment purposes, which is a great way to advance your financial portfolio. The great thing about Roth IRAs is that there’s less risk of penalty for withdrawing from these funds before you reach retirement age. When certain conditions are met, you should be fine to take out money before you retire, and not have to pay taxes or a fee from early withdrawal.

Additionally, Forbes reports that “Investment earnings can also be tapped early as long as you’ve held the account for five years before the withdrawal.” That being said, if your money is being used for a first-time home purchase, or if you become disabled or pass away and money is going to your estate or your beneficiary, money can be withdrawn earlier than five years into IRA ownership.

You can have both a traditional and Roth IRA.

Some people opt for a traditional IRA because it’s more beneficial for a saving perspective, or because they make too much money to enroll in a Roth IRA. The IRS has made it possible for people to contribute to both a Roth and traditional IRA in the same year. For 2017 and 2018, you could contribute up to $5,500 for the combined annual IRA limit. This is highly beneficial, because not only does it give you added flexibility, you can decide which IRA to withdraw from, depending on what tax and financial circumstances are at a given point in time.

Roth IRAs can be used for investments.

Stocks, real estate (but only for rental purposes), mutual money funds, and more can all be utilized with a Roth IRA. As we briefly mentioned, however, real estate can only be invested in and acquired with a Roth IRA if it’s not a primary residence, and if it’s with a specialized trustee. Our non-recourse loan lenders can help you work with your Roth IRA in order to purchase real estate. Find more information on non-recourse loans and how they work in tandem with self-directed IRAs by visiting our IRA page.

We’re hoping this clears up some facts and information about Roth IRAs. This is a highly valuable investment tool that could make a huge difference in your financial assets. Contact First Western Federal Savings Bank to learn more.