It’s easy to get so caught up in buying and selling real estate that we forget about our own needs. Where will you live after you retire? Will the market be favorable to buyers at the time you need to purchase a place?
Most of us have the picture of our dream retirement home tucked away in a corner of our mind. It’s time to take that vision out and start acting on it – especially if your dream is to live in the country or in resort neighborhoods. These properties are being snapped up quickly by those desiring vacation homes. In fact, according to recent reports, vacation-home sales are beating out the sales of investment homes. This means that the charming condo you’ve had your eye on ever since you honeymooned in some little slice of paradise may no longer be there by the time you retire. Or it will be so exorbitantly priced, it will be untouchable. So the time to buy is now.
Don’t let a lack of capital dissuade you from making that purchase. Thanks to self-directed IRAs, you can use your retirement funds before you retire to buy your dream retirement home. And to make the investment, you don’t have to take a distribution or pay additional taxes or penalties for using that money. While you can’t purchase a house that you will live in now, you can purchase it and rent it out. Or you can just let it build in equity within your IRA for the time being. Once you hit retirement age, you can then take your standard distribution and essentially purchase your dream home from your IRA.
This is an especially powerful tool if you are investing with a Roth IRA, because, with this model, you can just take a simple distribution and you are on your way to relaxing in your version of paradise.
Renting your investment home for additional revenue is an excellent way to funnel additional money back into your IRA – the same way you would with earnings from stocks and bonds. So, while you can’t travel the world now using that rental money, it will still be growing inside your IRA. And you’ll have the reassurance of knowing that your dream retirement home is waiting for you to take occupancy when the time is right.
An experienced retirement account facilitator, like the Guidant Financial Group (the company I work for) will be able to give you some more details. Meanwhile, here are a couple of sites that touch on real estate IRAs and the purchasing of retirement homes, as well as the popularity of vacation properties:
http://www.guidantfinancial.com/resources/articles/buy_dream_retirement_home.aspx
http://www.realestatejournal.com/buysell/markettrends/20070502-hoak.html
Wishing you success,
SFPetersen
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