There has been a lot of buzz in the real estate community about some of the benefits of “QRPs.”
What exactly are QRPs?
Do these benefits really exist?
Or is it another scam of the month that we should all be weary of as real estate investors?
The good news is… QRPs do actually offer a lot of the tax benefits that a traditional IRA does not, and may be one of the best retirement plans for investors. In this article, we will discuss some of the key differences and what you need to know as we approach the end of the 2013 year.
To start off, there are a handful different “types” of QRPs (qualified retirement plans). Some of the most commonly seen are 401(k)s, Simple 401(k)s, Safe-Harbor 401(k)s, and Self-Directed Solo(k)s. Each of these types of qualified retirement plans have different attributes in terms of contribution amounts, limits, and investment options. Of the above, the most commonly used vehicle for real estate investors is the Self-directed Solo(k).
Is the Solo(k)s the Best Retirement Plan?
There are several key differences to note when comparing the Solo(k) to the traditional IRA. One is the difference in contribution limits. While a traditional IRA generally has an annual contribution limit of up to $5,500 per person per year, the Solo (k) can allow for retirement contributions of $50,000 or more per person per year. Businesses with a spouse on the payroll can also contribute to the Solo(k). This means potentially being able to have retirement contributions of $100,000 or more each year that can reduce your taxes and be used for real estate investing. As you can see, this is significantly higher in dollar amount as compared with an IRA or a Roth IRA. This is a very significant difference especially if you are …read more