In 1974 the Individual Retirement Arrangement or IRA was introduced to serve as a scheme where American taxpayers could save for their retirement while taking advantage of tax benefits. This retirement account may be held together with other employer-based retirement plans or even social security. With the current state of the economy increasing their fears that they may end up poor during retirement, many have been encouraged to resort to investing in IRA.

Traditionally, retirement accounts, especially the employment based accounts, are managed by administrators who deposit the funds into mutual funds. In this way the administration of funds is simpler but leaves the account owners little choice on investment options. Investing in IRA accounts are more flexible, so much so that during the past years an increase in appreciation for real estate IRA, business enterprises, franchises, etc. as self directed IRA investments have been observed.

Present self directed IRA account owners have discovered that real estate IRA is one of the most profitable investments because it allows the purchase of real property inside the account while benefiting from its tax perks. It is a well known fact that real estate is one of the more tangible assets that one can hold aside from the guaranteed increase in its value over time given the right conditions.

The IRS mandates that in IRA real estate should be used solely to generate income for the account, in other words, only an investment tool. The IRS prohibits the use of the assets for the personal gain and benefit of the account owner or other disqualified individuals. What this means is that real estate IRA, which includes the purchase of tax liens, foreclosures, foreign and local real estate, should be used to derive income for the account from rentals or capital gains should the property be sold, and the like and that all its earnings be put back into the account until retirement. Conversely, all expenses required for the maintenance of the real property has to come from the account.

Real estate IRA provides the perfect opportunity for retirement account owners to watch their fund grow as a result of the income derived sans the imposition of the usual taxes on these types of transactions. In a traditional IRA account taxes are paid on qualified withdrawals from the account but are only classified as regular income. In the event of retirement the value of the account would have risen in leaps and bounds to include total contributions, all assets held by the account and the income derived from its past investments. The perks get even sweeter for the Roth version where, while the contributions form part of the taxable income, the withdrawals come out tax-free.

However, the IRS mandates all self directed IRA owners to appoint a custodian for the account. If the inclination is towards real estate IRA, an account owner must be sure to appoint a custodian who not only allows these investments but also have expertise in investments in real estate. Some custodians who are less proficient in real estate transactions may decline such investments simply because they might find these cumbersome.

Once a suitable account custodian for a real estate IRA is found, the owner can direct the custodian to purchase the assets for the account, either as sole investments or as a means of diversifying the account’s portfolio. All an account owner has to do is to wait for his retirement and to enjoy the fruits of his investments.

Gerald McCabe provides detailed information on Retirement Plans, 401K Retirement Plans, Self Directed IRA, articles about Real Estate IRA, Retirement Plan Services and more. For more info regarding Real Estate IRA, Visit http://myselfdirectedira.com or call us at 888-683-5228