Not as painful as you think…
| Aspect | Tax-Deferred Investment Growth | Taxable Investment Growth |
|---|---|---|
| Tax Treatment | Gains and income are tax-deferred until withdrawal | Subject to annual taxes on gains, dividends, and interest income |
| Compounding Effect | Enhanced compounding due to tax deferral | Compounded returns are reduced by annual taxes |
| Withdrawal Taxation | Taxes applied upon withdrawal as ordinary income | Taxes on capital gains and dividends (vary by type) |
| Annual Tax Drag | No annual tax obligation on gains | Annual reduction in returns due to taxes |
| Time Horizon Suitability | Particularly advantageous for long-term investors | Suitable for short- to medium-term investment goals |
| Flexibility | Withdrawals may have penalties before retirement age | Liquidity and flexibility in managing investments |
| Tax Efficiency Strategies | Limited tax-loss harvesting opportunities | Tax-loss harvesting available for capital losses |
Never heard of a Self-Directed IRA? Or Wall Street Bankers don’t want you to know that an IRA account can hold more than just stocks, bonds, mutual funds, Exchange Traded Funds (EFTs) and Certificates of Deposits.
Probably because the large IRA companies, such as Fidelity, Charles Schwab, JP Morgan and Merrill Lynch don’t ‘sell’ or ‘offer’ mortgage promissory notes, and therefore you cannot have a note held with these IRA custodians.
Many lesser know Self Directed IRA custodians are available through a simple Google search and there are restriction on certain transactions.
