How To Make Millions...Legally

Want in on a little-known secret that can literally turn a small amount of money into millions of dollars, perfectly legal and sanctioned by the IRS to boot? Guarding Your Wealth" is a nationally syndicated weekly personal finance column written by Jeffrey D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group, a private wealth management firm that employs sophisticated proprietary strategies designed to protect and grow its clients' investments. Please visit our website, www.guardingyourwealth.com to read past articles in our archive.

(PRWEB) May 15, 2004 --Im going to share a little-known secret that can literally turn a small amount of money into millions of dollars. Its all perfectly legal and is sanctioned by the IRS to boot! Im talking about the wonders of stretching" your Individual Retirement Account (IRA).

Dont worry if you havent heard of stretching" your IRA. Many advisors and even some CPAs arent even aware they exist. But before you learn about stretching an IRA, you need to understand IRA basics. These retirement savings plans have been around for years, allowing millions of Americans to have the benefit of tax-deferral in saving for their golden years.

(Mr. Voudrie responds to questions from readers on an almost daily basis. If you would like clear straightforward unbiased answers to your financial questions, contact Jeff@guardingyourwealth.com)

Traditional IRAs allow you to invest a certain amount of before-tax earnings on a yearly basis. That reduces your current taxes because you dont pay taxes on that money until you actually take it out later. The main benefits are your savings grow more quickly because you arent taking money out to pay taxes and you should be in a lower tax bracket when you retire.

Company retirement programs like 401(k)s work similarly. Sometimes companies will match a portion of their employees contributions, dramatically increasing the employees return. If your company matches any of your contribution make sure you take advantage of it! When you change jobs or retire you can transfer the money from your 401(k) into your own IRA.

Roth IRAs allow you to invest after-tax dollars, but the earnings on a Roth IRA are never taxed if you meet some simple requirements. Additionally, you arent required to start taking money out of a Roth IRA at age 70 ½ like as in a traditional IRA. This is a significant difference, especially if you dont anticipate using all the money.

Now let me give you an example of how stretching" your IRA can turn thousands of dollars into many millions of dollars. Sam is 30 years old and contributes $3500 per year to an IRA or company retirement program. Doing so until he turns 65, he would accumulate about $1 million if he earned 10% per year. Thats great, but were just getting started.

Lets assume Sam then takes 5% out each year to live on until he passes away 15 years later. Earning 10%, his IRA would be worth over $2 million. Sam leaves his IRA to his daughter Rachel who is 50 years old.

Most people, including many CPAs, banks and other financial advisors assume Rachel would have to take all the money out of the IRA and pay taxes on it. That could mean a truckload in taxes, as much as $1 million in this example!

A client recently told me of a friend who this happened to. The friends father left her an IRA valued at $150,000. She was told she had to take all the money out of the IRA at once. When she did, it ended up costing her $45,000 in taxes! I could have saved her this money.

You see, Rachel (and this friend) has the option of leaving the money in Sams IRA under current IRS rules. She would need to start taking money out each year based on her life expectancy and pay taxes on that, but the rest could continue to grow tax-deferred. If Rachels life expectancy is 30 years when Sam passed away, she could continue his IRA and would only have to take out 1/30th each year.

This means the $2 million can continue to grow tax-deferred for another 30 years! That may not seem that exciting to you, but lets do a little math. Lets assume Rachel continues to earn 10% and that she takes out 5% each year (she can take out more than required). Thirty years down the road, the IRA Rachel inherited from Sam will have grown to over 9 MILLION DOLLARS!

Imagine being able to pay for your grandchildrens and great-grandchildrens education, helping them purchase a home or start a business while still meeting your own needs. That is the power of stretching" your IRA.

You can stretch" virtually any IRA, but there are certain requirements. Ill discuss those more in a future article. In the meantime, let me know if you have any questions.

Part II of this series entitled "How To Stretch Your IRA - Tax Free" can be found on the Guarding Your Wealth web site at http://www.guardingyourwealth.com/article_archives.shtml

Mr. Voudrie is a Certified Financial Planner, a nationally syndicated columnist and the President of Legacy Planning Group, Inc., a Private Wealth Management firm in Johnson City, TN. He can be reached by calling 1-877-827-1463 toll-free, by email at jeff@guardingyourwealth.com or by going to www.guardingyourwealth.com.

Looking for an energetic expert who is passionate about financial and wealth management? Mr. Voudrie is an excellent speaker who will excite and inspire your audience. Mr. Voudrie is available for a limited number of speaking engagements, television appearances and radio talk shows. For booking information, contact Christine Lavender at (877) 827-1463 or email christine@guardingyourwealth.com.

Related Articles can be found at www.guardingyourwealth.com under the Guarding Your Wealth Article Archive:

How To Stretch Your IRA - Tax Free
How To Make Money In 2004
How To Invest In 2004 - An Update
Investing Aint What It Used To Be