LITTLE ROCK, Ark. (KTHV) -- Often people use the account names '401K' and 'IRA' as though they are the same thing.
The financial lingo can be confusing for a lot of people. Stephanie Parker, an IRA administrator at Delta Trust Investments, spoke to THV's Ashley Blackstone on 'Today's THV This Morning' about IRA accounts and the benefits that they offer investors.
What's the difference between 401(k) and an IRA account?
401(k) is a benefit offered through your employer to help encourage you to help save for retirement. This is normally funded by contributions or deferrals made directly from your paycheck into the plan. An IRA is an individual private investment funded by your own money or a rollover from 401(k) or qualified plan.
What is a benefit of an IRA account?
An IRA allows that you are saving for your retirement or possibly the rest of your life. An IRA will also allow you more freedom of investment choices. With an IRA, you can invest in pretty much anything is not considered a collectable. Stocks, bonds, mutual funds, privately held stock, real estate and partnership.
How can one invest in real estate with an IRA?
Simply by using IRA funds to purchases the property, titling the property in the name of the IRA under the custodian's tax id number. Of course based on IRS guidelines the property cannot be used by or for any disqualified person such as yourself, spouse, ancestors, descendants or their spouses.
What types of real estate can people purchase through an IRA?
Farmland, timberland, rental properties - keep in mind, no matter what type of real estate you purchase it cannot be personally used while in your IRA.
If it's not for your personal use then how would one use the real estate?
The most common way is rental property and the rental proceeds will help grown your IRA account. With timberland, people often increase their IRA account through the timber cuttings.
If an IRA account is established for retirement purposes, then what happens to the property when you retire?
Most people at retirement sell the property and the proceeds of the sell gives the cash to access when needed. Purchasing real estate in an IRA can be very complex so always consult with a tax or legal professional before doing this.
If you have questions for Stephanie, you can contact her at 501-907-2280 or firstname.lastname@example.org.