Dmitriy Fomichenko talks to us about using the right IRA to generate tax free income for retirement.
Setting yourself up to live comfortably when you retire can be easily done through retirement plans. Find out how to make the most out of your yearly contributions.
Mike: Welcome back to the FlipNerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level.
And now, let’s meet today’s expert host.
Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level.
And now let’s meet today’s expert host.
Dmitriy: Welcome to the REI Classroom. My name is Dmitriy Fomichenko. I’m the founder and president of Sense Financial and today I’ll be your host. And what I’ll do today is I’m going to talk about how to create tax-free income for life.
Mike: This REI Classroom real estate lesson is sponsored by AceBusinessFunding.com.
Dmitriy: Now there are not many things that I know how you can have income and not pay taxes on that, but one of the ways that I know is to do that inside of our retirement accounts, specifically inside of a Roth. And you can do that inside of a Roth IRA, but a better way to do that is inside of a Roth Solo 401(k).
A Solo 401(k) is a qualified retirement plan designed for those people who are self-employed or own a small business, and specifically real estate investors fit into that category. I talk to a lot of real estate investors who own some small businesses and have taken advantage of that.
Now, with a Roth Solo 401(k) you’re eligible to make contributions up to $24,000 a year regardless of your income. So this is a great way to maximize your retirement savings and when you make investments inside of a tax-free account you’re able to grow it and eventually you can generate income that is going to be when you retire and you start taking distributions from your account they’re going to be completely tax free.
One of the ways you can do that is by investing in rental properties but one that I specifically like the most is passive aspect of investing, and that’s investing in real estate notes or trust deeds, or you can just be the private lender and you can provide capital using your Roth Solo 401(k) to other people who do need capital maybe on their deals, whether they’re doing flips or they buy and invest in properties and they’re not able to get conventional financing, or they’re using their retirement accounts, too.
You can use your 401(k) to provide financing to those people who buy properties inside of their retirement account. And when you invest inside of a Solo 401(k) Roth subaccount, you’re building your wealth tax-free inside of a tax-free or tax-deferred account, and when you retire all of the income that you generate from your investments is going to be tax-free
That’s a strategy that I’m discussing with many of my clients, is by during your accumulation phases as you work and generate an income from whatever it is that you’re doing, you can shelter away money into a Roth Solo 401(k) and you can keep doing that for the years to come, and then when you basically reach the retirement age what you can do is you can just start taking out investment returns, whether it’s rental income or interest on the notes that you own inside of your Roth 401(k) or Roth IRA, and that’s going to allow you generate that tax-free income for the rest of your life without touching the principle. So you’re still owning your assets, whether it’s real estate or a trust deed, or a loan that you lent out to somebody else.
If you accumulate enough of those investments then you can do not touch the principle and you just pull out the income tax-free for the rest of your life, and you can actually pass it out to your kids and to your heirs.
So that is a great way. I do encourage everyone, especially the younger you are the more time you have to grow your wealth, the more sense a Roth 401(k) makes sense to you. A different, a great way to go, check out Roth 401(k), investigate that for yourself, and this is a great way to start diversifying your wealth and your portfolio, and build tax-free income for the rest of your life.
Thank you for joining us and I will see you next time.
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