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Comparing Roth IRA Rate of Returns for Traditional Investment Choices
By Adam D. King Platinum Quality Author
 

Comparing Roth IRA rate of returns can be confusing and frustrating. Many people have questions about their IRA. They range from fairly simple things, such as the Roth IRA income limit, to more complex questions, such as allowable investments in a self directed account. The subject is broad. What we hope to do here is add a little clarity and give you some ideas about where to go for more help.

Let's start with the Roth IRA income limit. Congress limits who can contribute to a Roth IRA. The limitation is based upon the individuals or the couple income. For the tax year 2008, you can contribute to an IRA, if you are single and will make less than $101,000 for the year.

For couples, filing jointly, the Roth IRA income limit is $159,000. You are eligible to make a "partial" contribution, if you are single and make between $101,000 and $116,000 per year. For married couples filing jointly, partial contributions are allowed for income levels between $159,000 and $169,000.

It is important to note that married couples filing separately, who lived together during the tax year, are only allowed to contribute a very small amount to a Roth. It is best to file jointly, at least for this purpose.

The maximum amount that an individual under the age of 49 is allowed to contribute is $5000 per year. Age 50 and above may contribute up to $6000 per year. Starting in 2009, congress has agreed to increase contribution limits by $500 per year, in order to try to keep up with inflation.

Inflation is one reason that Roth IRA rate of returns are so important. Some investment choices have such low returns that they do not even keep up with the inflation rate.

Certificates of deposit, for example, have been very popular low risk investments for many years. The problem is that the returns are so low; they can barely keep up with inflation.

The stability of your Roth IRA rate of returns is one thing that should be very important to you. You want to see consistent growth. Because of the problems with the economy, stock market investors have seen little or no growth over the last few years. Many have even lost money.

That's not to say that you should not invest in stocks or mutual funds at all. Historically, the market recovers over time. But, you may want to consider greater diversification within your portfolio.

If you are only making one type of investment, you risk losing continued increases in your Roth IRA rate of returns. You should invest in a variety of stocks, bonds, mutual funds and consider other things, such as real estate.

Real estate deals conducted within an IRA are not subject to capital gains or other taxes. It is possible to own real estate within the IRA, for rental income, as an example. The best deals are cash deals; properties that you can buy outright with IRA funds, rather than those that require a mortgage.

Investing in real estate can really help you increase your Roth IRA rate of returns, if you make the right choices. There are a few experienced real estate investors that are willing to help you make those choices. If you are not seeing your retirement account grow the way that you wanted it to, you might want to consider some changes.

 
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