Though it has always been legal to invest in real estate through your IRA since it was created in 1974, the idea of re-directing your retirement funds into investments other than stocks, bonds, and mutual funds is still pretty novel to a lot of people. Well, it’s not too good to be true—it’s true.

One of an IRA’s greatest features is that it allows you to enjoy the true power of tax deferred compounding interest. Compound interest occurs when interest is earned on a principal sum along with any accumulated interest on that sum. In other words, you are earning interest not only on your original investment money, but also on the interest earned from the original money.

Compound interest can occur with any investment you make, but the true power of compounding interest is obtained when you make an investment in a tax-deferred environment, like an IRA.

With a tax-deferred IRA, you do not pay tax immediately on your earnings—for example, the sale of a property, rental income on a property. Thus, you are able to get the compounding power on ALL of your pprofits, not just what is left after taxes. And with the Roth Self-Directed IRA, after five years the money is tax-free for life!

When deciding upon the appropriate IRA to roll your current retirement account into, think about Traditional vs. Roth. In both plans, your investment profits grow tax-free, but the differences are when you receive the tax advantages to the principal investment and yearly contributions. With a Roth IRA you don’t receive a tax deduction on your yearly contributions, but when you take your money out of the account you don’t have to pay any taxes. A traditional IRA gives a tax deduction every year based on your contribution, but you will have to pay income tax when you take your money out of the account.

Can you earn tax-free profits investing in real estate and real estate notes? Yes, you can. Let Great Lakes Secured Investments show you how. Many investors are successfully investing in real estate and other alternative assets through their IRA and not paying taxes on the profits. Not paying taxes on profits means more money for your retirement.

Related posts:

1. The Problem with Treasury Bonds as Fixed Income Investments
2. MORE SIGNS OF UPCOMING DECLINES IN TREASURY AND SAVINGS BONDS
3. Interest Rate Volatility

But now, money is flowing out of government bonds and into riskier assets once again, meaning yields are going back up. The yield on 10-year Treasury notes has nearly DOUBLED just since December.

The problem is what those higher yields do to the underlying face value of your bond—the bond price goes down. In fact, the benchmark 30-year U.S. Treasury bond has tumbled over 10 percent since April.  The price of long-term government bonds has already plunged more quickly than at any time in history. The Treasury bond market is crumbling and looks like it will for some time to come!  Scary as it may sound; perhaps someday the government will be unable to sell its long-term notes and bonds at ANY price.

Most non-political types would say the federal government’s increased spending and interest rates are the reason. Federal borrowing has soared to unbelievable levels. Nearly $100 billion in bonds, notes, and bills are being offered at each weekly Treasury auction — the most in our nation’s history. Interest rates are rising.   None of that money is going into the housing industry to provide mortgages and re-stabilize the real estate market.  It’s all going into subsidizing federal spending.

If I were, saying, over 55 years old and thinking about long-term retirement income, and did so almost exclusively in Treasury Bonds, I’d be terrified at the thought of my wealth evaporating so quickly.  You figured you could settle for low yields in exchange for no volatility.  Steady, albeit low income—you thought—would work, as long as it was “safe”.  And what could be safer than investing in the US government, you thought. But now you can’t even count on your portfolio of US treasury bonds to hold its value either?

Unfortunately, in my opinion, NO.   You can’t.

Please re-think your portfolio and how it will be affected by this new paradigm of high government spending and higher interest rates.  Consider re-allocating it to smarter, more profitable, and more worthy causes.

As I write in mid 2009, the US mortgage industry has nearly shut down.  Most good people are unable to get a mortgage, no matter what you hear on the news.  It’s as simple as that.  Surely you have a niece, cousin, brother-in-law, co-worker, or friend who can attest to their inability to qualify for a mortgage to buy a new house.

Consider an investment in something that provides a much more secure fixed income, such as a real estate Note, secured by somebody’s home.  And in the process you’ll make much higher income than with those traditional investments such as treasury bonds.

Related posts:

1. MORE SIGNS OF UPCOMING DECLINES IN TREASURY AND SAVINGS BONDS
2. UPDATE: ACHIEVING HIGHER YIELDS WITHOUT EXCESSIVE RISK
3. The High Yield Great Lakes Secured Income Investments