Why we are forced to invest our retirement nest egg in the stock market?

This was a statement posed by NYC Money in her post called Can You Afford to Retire?-a fun blog to read by the way. This can be a headache for a lot of people-but there are custodians that will let you have other assets in your retirement accounts. Two of those custodians are mentioned in my post here. Shop around as rates can vary but you can have someone like your accountant be your custodian for a lesser amount.

I personally would rather have assets in a Roth vs an IRA for tax reasons. Roy left this comment concerning her post:
“Real estate is a good idea, but you have to think that the IRA limits would hinder many from using that option. One would already have to have a decent sum in their IRA to be able to invest in properties. Maybe a high yielding REIT would be another option.”

Good point-here are some options. Say you had $20,000 in a retirement account that would let you purchase real estate. Say the property you were purchasing was going to cost $200,000. You could say that your $20,000 was buying a 20-40% interest in this property.You can see how you just leveraged your retirement account. I know folks who have done this and would always advise you to work with an accountant who has been down this road!! That’s like a disclaimer πŸ™‚

Sandra Block at USA Today has an article about a pending tax bill which would allow some individuals to convert a conventional IRA to a Roth IRA in 2010. I was still an investment advisor when this opportunity was first offered in 1997-it was a great deal for tax payers so stay tuned. Sandra discusses all the tax ramifications etc..

I’ve read other blog posts that show tax rates have gone down over the years-but I didn’t see them mention the AMT(Alternative Minimum Tax)-this is the one that screws a lot of hard working middle income folks. I should also mention that in my years as an Investment Advisor about 90% of all my clients were in a higher tax bracket at retirement. One possible reason is the fact that there homes were paid off. As you might guess, I do think the marginal tax rates will continue to increase over the years and would urge you to take a hard look at Roth’s!

What do you think-Will tax rates increase or decrease in the next 10-20 years?

Steve Mertz
AMT Kills Cash Flow!

4 Responses to “Why we are forced to invest our retirement nest egg in the stock market?”

  1. Steve Mertz says:

    Thanks-Good catch, I can’t believe my proofreader let this slip, that would be you Madame X http://myopenwallet.blogspot.com/
    πŸ™‚

  2. Andrew says:

    I would think taxes would increase in the next 10-20 years to pay for all the debt created in the past 5 years and counting. Now that the wealthy have received so many tax breaks there needs to be a way to generate more money to get this country out of debt. I’m no economist but that’s my take.

  3. Market Participant says:

    I’m sure I really see the advantages in directly investing in property vs owning REIT shares. The REITs themselves are leveraged, and probably on much better terms than you can get as a direct investor.

    Alot can go wrong in a single property, so in my mind it makes sense to get two layers of diversifcation by investing in a REIT ETF.

  4. Empty Spaces Inc. says:

    i’m not a huge fan of the stock market, so i had my corporation start a 401k-pension plan combo that invests in anything under the sun. real estate, oil, stocks, 2nd trust deeds, you name it!
    my cpa is great!

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