Sep 30

October 1 Deadline to Set Up SIMPLE IRA

If you are a small business owner and are looking to have a retirement plan, a SIMPLE IRA is a great option.  Act quick though, tomorrow, October 1, is the deadline for opening a new plan for the year.  There are lots of advantages of the SIMPLE IRA for both you and your employees.

A SIMPLE IRA is a great retirement plan for small businessesThe SIMPLE IRA, aka the Savings Incentive Match Plans for Employees IRA, is in a word, simple, both to set up and to operate.  This gives you, as a business owner, the ability to offer a qualified retirement plan to your employees for little hassle and modest contributions.  Note that this plan is only available to businesses with less than 100 employees who earned at least $5,000 compensation during the last year.

If you’ve ever contributed to a 401(k) plan, you basically know how the SIMPLE plan works.  Your employees contribute to the plan (up to $12,000 or $14,500 if you are 50+ years old for 2013) and you make contributions for each eligible employee in one of two ways.  First, you may choose a dollar for dollar matching contribution up to 3% of each employees’ compensation.  For example, an employee who earns $50,000 and contributes $5,000 will receive $1,500 from you.  If you are having a down year, you may contribute less than 3%, but may only do that twice within five years.  The other option is a non-elective contribution of 2% (no matter if the employee contributes to the plan or not).  That same $50,000 employee who makes no contribution would receive $1,000 from you in this example.

SIMPLE IRAs offer many advantages over other qualified plans.  There’s no annual reporting to the government if you use a SIMPLE IRA.  It’s also much easier to budget with this plan.  If you choose the non-elective contribution, you know your contributions will be 2% of your employees’ payroll.  It may be smaller with the 3% option since you don’t contribute to employees who don’t contribute to the plan.  You have no fiduciary exposure since employees manage their own investments.  Further, you can choose a plan that allows the employees to choose his or her own financial institutions.

The major drawback is that you cannot contribute as much as you can to other qualified plans like a 401(k) or SEP IRA.  As mentioned, you must set up the plan by October 1 for the current year.  If you have the plan previously, to use one for the current year must be done by January 1 for that year.

A SIMPLE plan is just one great option for small business owners who want to set up a retirement account for their employees.  You might look into a SEP IRA as well.  You have until October 15 to set one of those up for your business for the current year.  If you have any questions or are looking to set up a plan for your small business, contact one of the tax experts at the IRA Financial Group @ 800.472.0646 now!

Sep 27

“Checkbook Control” Self-Directed IRA LLC Can Save Retirement Investors Thousands of Dollars in IRA Custodian Fees Over the Years

Establishing a “checkbook control” IRA LLC will save thousands of dollars vs. a full-service custodian over the long run.

IRA Financial Group, the leading provider of “checkbook control” self-directed IRA and Solo 401(k) Plans announces the result of its internal report which highlights the fee benefits involved in establishing a checkbook control IRA LLC solution vs. a full service custodian self-directed IRA.  A self directed IRA LLC with “Checkbook Control” plan is an IRS and tax court approved structure that will allow you to use your IRA funds to make almost any type of investment, including real estate, tax liens, precious metals, foreign currency and much more tax free!

IRA Financial Group Report Shows “Checkbook Control” Self-Directed IRA LLC Can Save Retirement Investors Thousands of Dollars in IRA Custodian Fees Over the Years With a “checkbook control” Self Directed IRA LLC the IRA holder will never have to seek the consent of a custodian to make an investment or be subject to excessive custodian account fees based on account value and per transaction. IRA Financial Group’s internal report showed that over a five-year period, an investor that established a “checkbook control” self-directed IRA LLC would save, on average, an amount in excess of $3500. The internal report surveyed the fees of a number of the top full service IRA custodians in the industry. “What is interesting is that many full-service IRA custodians argue that one reason to not adopt a “checkbook control” self-directed IRA LLC is the cost when in-fact over a five year period the self-directed IRA LLC structure is significantly more cost effective than a full-service IRA custodian,” stated Stacy Sanders, a tax professional with the IRA Financial Group.

To establish the Self-Directed IRA LLC “Checkbook Control” structure, a limited liability company (“LLC”) is established that is owned by the IRA and managed by the IRA account owner (you). The IRA owner’s funds are then transferred by the passive custodian to the new IRA LLC bank account. As the manager of the IRA LLC, the IRA owner will have the authority to make investment decisions on behalf of the IRA providing the IRA owner with “checkbook control” over his or her IRA funds.

According to Adam Bergman, a tax attorney with the IRA Financial Group, with a Self-Directed IRA LLC with “Checkbook Control”, the IRA holder, as manager of the IRA LLC, can act quickly on a great investment opportunity. With a Self-Directed IRA LLC, when the IRA holder finds an investment with IRA funds, he or she would simply write a check or wire the funds straight from your Self-Directed IRA LLC bank account to make the investment. The Self-Directed IRA LLC allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading “checkbook control Self Directed IRA Facilitator. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at or call 800-472-0646.

Sep 25

Avoiding IRA Early Withdrawal Penalty

When withdrawing money from your traditional IRA before you reach age 59 1/2, you will generally face a 10% early withdrawal penalty.  For example, if you are in the 25% tax bracket and withdraw $5,000 before that age, you will lose $1,750 in taxes and penalties.  There are ways to avoid this stiff penalty however.

Obviously, wait until you reach age 59 1/2!  Once there, you can withdraw any amount of money at any time without facing the penalty.  You will pay the taxes on the amount though.  If you don’t need the money, you won’t face required distributions until age 70 1/2.

Avoid early withdrawal penalties from your IRANext, is higher education costs.  This can be for colleges, universities or vocational schools eligible to participate in federal student aid programs.  The money can be used for tuition, books and other fees and supplies.  It may also be used for boarding if the student is at least half-time.  You may use it for yourself, your spouse, children of grandchildren.  Note, that if you use money from your IRA, this is considered earned income and could boost you into a higher tax bracket which could cause your child to miss out on federal aid.

Looking to buy a home?  An IRA can be tapped penalty free as well.  You may borrow up to $10,000 ($20,000 for couples) towards a “first home” purchase penalty free.  A first home is defined as not having owned a home in the past two years leading up to the distribution.  You may also help out your children, grandchildren or parents.  If the purchase is delayed or canceled, you have 120 days to get the money back in your IRA to avoid a penalty.

Next is medical expenses, disability and health insurance.  You may withdraw from your IRA to pay for unreimbursed medical expenses that exceed 10 percent of your adjusted gross income.  You may also withdraw for health insurance for you, your spouse and dependents if you become unemployed.  You must receive twelve consecutive weeks of unemployment benefits to qualify.  You must take the withdrawal the year of or the year after receiving unemployment benefits and no later than sixty days after re-employment.  Lastly, if you become permanently disabled and cannot earn an income, you may bypass the penalty.  However, you must show positive proof to the fact.

There are a few more ways to get your money early such as being in the military, setting up an annuity or utilizing a Roth IRA.  Check out this article for more details.

When you need the money from your IRA to deal with an emergency, only take what you need and get the money back in there as quickly as possible.  The more money you have in your IRA, the more earning power it will have.  If you have any questions, contact a tax expert at the IRA Financial Group @ 800.472.0646!

Sep 23

Using a Roth IRA as an Emergency Fund

Emergencies pop up all the time.  Whether it’s as serious as a health scare or as simple as needing a new microwave, you should be prepared for when it happens.  It’s great if you can build up a fund to deal with these emergencies, but what if you cannot afford to?  One thing you never want to take for granted, is saving for retirement.  This is a major, long-term need for everyone out there.  There is a way to do both with one account – the Roth IRA.

A Roth IRA can be used as an emergency fundMost experts agree that you should try to build an emergency fund that’s roughly two months salary.  Even if you’re doing well, with a good paying job and little to no bills, it still may be tough to both invest in your future and save for those unexpected emergencies.  A Roth IRA is the answer for many.  Unlike traditional IRAs and 401(k) plans, a Roth is funded with after-tax money.  You don’t get the immediate tax break of the other plans, but distributions (both principle and earnings) during retirement are completely tax-free.

Generally, there is a penalty for withdrawing money before you reach age 59 1/2.  The government will hit you with a 10% early withdrawal penalty.  However, with a Roth IRA, you can withdraw any or all of your contributions.  You will only get penalized if you withdraw earnings from the account.  For example, if you contribute $1,000 each year for ten years and now your Roth IRA is worth $15,000 ($10,000 in contributions and $5,000 in earnings), you are allowed to withdraw $10,000 at any time and for any reason.  If you withdraw more than that, you will be hit with a 10% penalty on the amount that dips into the earnings.

There is a couple of major drawbacks for using your Roth IRA as an emergency fund: any money you take from the account is no longer there for retirement and it’s not earning for you.  Further, if you take a substantial amount, it’s hard to get all the money back in your account in a timely matter.  For 2013, you are allowed to contribute $5,500 to an IRA ($6,500 if you are age 50 or older).  If you withdraw $50,000, it will take years to get that money back in there.

If you cannot afford both an emergency fund and a retirement account, a Roth IRA could be the answer for you.  Withdrawals from the account should not be taken lightly since this will help fund your retirement years.  If you have any questions or are looking to open a Roth IRA for yourself, contact the tax experts at the IRA Financial Group @ 800.472.0646.

Sep 20

“Checkbook Control” IRA Gaining in Popularity in Light of Recent Tax Court Case Confirming its Legality

IRA Financial Group has seen strong demand for the “checkbook control” IRA in light of recent Tax Court case Peek Vs. Commissioner

Peek v. Commissioner (140 T.C. No. 12, 2013), a recent U.S Tax Court is an important case because it reinforces the ability for a retirement account investor to use retirement funds to invest in a wholly owned entity without triggering a prohibited transaction. In the Peek case, the U.S. Tax Court ruled that a taxpayer’s personal guaranty of a loan by a corporation owned by the individual’s IRA is a prohibited transaction under section 4975(c)(1)(B). The Court found that the taxpayers had provided an indirect extension of credit to the IRAs, a prohibited transaction under Internal Revenue Code § 4975 that disqualified the IRAs. According to an IRA Financial Group internal report, the Peek case help spur string demand from retirement investors looking to make real estate and other investments in a “checkbook control” format,

"Checkbook Control" IRA Gaining in Popularity in Light of Recent Tax Court Case Confirming its LegalityAccording to Adam Bergman, a tax attorney with the IRA Financial Group, some commentators have incorrectly construed the Peek case to hold that a checkbook control self-directed IRA was in violation of IRS rules. In fact, Peek holds just the opposite, that an individual can use IRA funds to invest in a wholly owned entity to make an investment. The Tax Court did not have an issue with the taxpayer forming a special purpose corporation to make the investment as well as serve as director and registered agent of the corporation, but did rule that that the investment made by Peek triggered a prohibited transaction solely due to a personal guarantee of a loan, not the use of an entity wholly owned by an IRA to make the investment. “Even though the Peek case centered on the IRA prohibited transaction rules, the Tax Court could have argued that establishing a special purpose entity wholly owned by IRA funds and managed by the IRA holder is a prohibited transaction, but it did not, “ stated Mr. Bergman. “The Peek case is yet another Tax Court case that confirmed that an individual could use IRA funds to invest in a newly established entity and manage it without triggering the IRA prohibited transaction rules, “ stated Mr. Bergman.

Section 4975(c) prohibits specified transactions between (i) various plans including IRAs and (ii) “disqualified persons” (or “parties in interest” under the ERISA version of these rules), which in the case of an IRA includes the IRA owner. Subject to certain exemptions, pursuant to Internal Revenue Code Section 4975, a disqualified person cannot engage in transactions with the plan that, among other things, constitute direct or indirect: (i) Sales, exchanges, or leasing of property; (ii) Lending of money or other extension of credit; (iii) Furnishing of goods, services, or facilities; or (iv) Transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan.

In 2001, two taxpayers, Mr. Lawrence Peek and Darrel Fleck sought to use a self-directed IRA to acquire a business. The taxpayers established self-directed IRAs using 401(k) rollovers, created a new company (FP Company), and then directed the IRAs to purchase the common stock of FP Company with the cash in the IRAs. FP Company then sought to purchase the business. To consummate the purchase, in addition to the cash and other credit lines, FP Company provided a promissory note to the sellers. This promissory note was backed by the personal guarantee of the taxpayers, and the guarantees were then backed by the deeds to the taxpayers’ homes. The IRS argued that Mr. Fleck’s and Mr. Peek’s personal guarantee of a $200,000 promissory note from FP Company to the sellers of the business in 2001 as part of FP Company’s purchase of the business assets were prohibited transactions. Tax Court agreed with the IRS and found that the taxpayers had committed prohibited transactions.

According to Mr. Bergman, “Peek highlighted the importance of working with independent tax professionals who can properly advise on a proposed investment. Mr. Peek and Mr. Fleck relied on the advice of Mr. Blees, a CPA, who was also the promoter of the transaction. As a result, Mr. Blees did not warn Mr. Peek and Mr. Fleck about personally guaranteeing the business loan for their IRA investment.”

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP and Dewey & LeBoeuf LLP.

IRA Financial Group is the market’s leading “Checkbook Control” Self Directed IRA and Solo 401k Plan Facilitator. We have helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate tax-free and without custodian consent!

To learn more about the IRA Financial Group please visit our website at or call 800-472-0646.  Don’t forget to follow us on Twitter!  @BergmanIRA

Sep 18

Info About IRA RMDs

Individual Retirement Accounts, or IRAs, are a tax-deferred retirement savings vehicle.  You contribute pre-tax dollars to the account and don’t have to pay the taxes until you start taking distributions during retirement.  But what if you are comfortable during retirement and don’t need the money?  Well, you’re out of luck there, since once you reach a certain age, you have to start withdrawing money from your IRA, therefore giving the government the tax dollars they want.  Here is some basic information about required minimum distributions, or RMDs.

First off, who has to take RMDs?  As far as IRAs are concerned, those who have a traditional plan (as described above) and those that inherit both traditional and Roth IRAs.  Note: if you have a Roth IRA that was not inherited, you do not have to deal with RMDs.  Roth plans are funded with after-tax money, so Uncle Sam already took their share before you contributed to the plan.

Then, when do you have to start taking RMDs?  Once you reach age 70 1/2, you have until April 1st of the following year to take you first distribution.  For every year after (including the very next year), all distributions must be taken by December 31st.  Your birthday (and subsequent half birthday) can mean all the difference.  If you were born in June or earlier, your half birthday occurs during the same year.  If your birthday is July 1st or later, your half birthday doesn’t occur until the following year.  For example, if you turned 70 on July 1st, you don’t turn 70 1/2 until January 1st, 2014 meaning you don’t need to take your first RMD until April 1st, 2015.

How much do you have to withdraw?  The IRS issues a table each year based on your life expectancy.  Further, if your spouse is your beneficiary and is ten years younger than you, you would use the joint life and last survivor expectancy table which leads to a lower RMD.  Failure to take the full amount will come with a 50% penalty on any amount that is less than the full amount you are supposed to take.  For example, if you turned 70 this year (before July 1st), your life expectancy is 27.4 years.  If you have a $100,000 2012 year-end balance, you would divide that by 27.4 which is $3,650.  You must take that amount by next April 1st or face the penalty.  All distributions count as income, so if you wait until the following year to take you first RMD, you’ll take two for the year (including next year’s RMD) which could put you in a higher tax bracket.  It might be better to take your first RMD before the end of the year.

If you have an IRA, you must take RMDs.Now, if you’ve inherited an IRA, you face slightly different rules.  If you are the decedent’s spouse, you may choose to rollover the new IRA into your own name and treat it as it was always yours.  Non-spouse beneficiaries who take RMDs have to start taking them by December 31st the year following the death of the original IRA holder.  The rules are the same if you inherited a Roth IRA as well.  Roth distributions are usually tax-free, but you can still be hit with the 50% penalty for not taking the RMD.

Finally, there are a few rules when dealing with multiple accounts (and multiple RMDs).  If you have two or more IRAs and need to take RMDs, you first figure out the RMD from each account and then may choose to withdraw money from just one or any or all of your accounts.  You cannot count any of your withdrawal as your spouse’s RMD.  Each person must withdraw from his or her account.  Inherited IRA RMDs cannot be combined with other RMDs.  Lastly, traditional and Roth IRAs cannot be aggregated.

If you have any questions about RMDs or anything else IRA-related, contact one of the tax experts at the IRA Financial Group @ 800.472.0646.  They are there to help you with your specific and unique situation!

Sep 16

Watch Out for High IRA Fees

Ever since last year, 401(k) fees and expenses have to be disclosed to all plan participants.  With this, many Americans now realize how much their workplace retirement plans are costing them each year.  Further, it exposed plans that are fee gouging.  However, what about IRA fees?  In some cases, IRA fees may be higher than those seen in 401(k) plans.

Be wary of high IRA fees“IRAs, where 401(k) assets unfortunately end up, have as high if not even higher fees on average,” said Mercer Bullard, a law professor at the University of Mississippi School of Law.  In fact, IRA plan assets are larger than 401(k) assets as of 2012 ($5.4 trillion v. $5.1 trillion).  As more baby boomers retire, more money is being transferred from defined benefit plans into IRAs.

Regulators always thought of IRAs as supplements to 401(k) plans and never thought they would rule the retirement savings game.  Says Francis Vitagliano, research consultant at Boston College’s Center for Retirement Research: “”The market has focused on the growth of 401(k)s and the fees, but what has been kind of overlooked is the IRA rollover market.  The same light shined on 401(k) assets and fees should be directed at rollover IRAs.”

When you retire from a job, most people roll over his/her 401(k) to an IRA.  This takes you from a fiduciary-sponsored plan to an individual plan with a broker.  Since company plans have many participants with more assets, they can usually negotiate lower fees.  If you then go on your own and open a brokerage account, fees will likely be higher, depending on your assets.

Read more about retirement plan fees with these two articles from CNBC: one & two.

One solution to get rid of high IRA fees is to open up a self-directed IRA.  You can control the plan assets and what investments you want to make.  For more info about this and other retirement plans, contact a tax expert at the IRA Financial Group @ 800.472.0646 today!

Sep 13

Strength in Small Bank Lending Helping Self-Directed IRA Real Estate Clients Finance Real Estate Transactions

Self-Directed IRA & Solo 401(k) Plan investors taking advantage of looser lending standard from smaller banks

IRA Financial Group, the leading facilitator of self-directed IRA LLC & Solo 401(k) plan solutions, announces the finding of its internal survey which showed that an increase in small bank lending has helped self-directed IRA real estate and Solo 401(k) plan retirement investors finance and close on attractive real estate transactions throughout the United States. “We have seen a trend in self-directed IRA and Solo 401(k) plan investors attaining nonrecourse financing from smaller U.S. banks in order to finance real estate transactions, “ stated Adam Bergman, a tax attorney with the IRA Financial Group. The Federal Reserve defines a large bank as one of the top 25 largest institutions ranked by assets. Small banks, according to the Fed, are all banks below that threshold. “It appears that the small banks have had more success than larger banks with dealing with the new rules which are hampering banks’ efforts to lend by requiring them to hold more capital, “ stated Mr. Bergman. In addition, according to Mr. Bergman, “some big banks are still cautious about making risky loans, having been burned in the financial crisis, which has opened up lending opportunities for small banks and has helped contribute to financing opportunities for IRA real estate investors”.

Strength in Small Bank Lending Helping Self-Directed IRA Real Estate Clients Finance Real Estate TransactionsThe IRS has always permitted an IRA to purchase or hold domestic or foreign real estate or raw land. Making a real estate investment is as simple as writing a check with a Self Directed IRA – also known as a Self Directed IRA Real Estate LLC. The Self Directed IRA Real Estate LLC structure, which works the same way as the Self Directed IRA LLC structure, is used for tax-free investing IRA funds in real estate.

With IRA Financial Group’s Self-Directed IRA LLC, a special purpose limited liability company (“LLC”) is created which is owned 100% by the IRA and managed by you or any third-person. The advantage of using an LLC to make the investment is that an LLC is treated as a passthrough entity for tax purposes meaning the owner of the LLC would be subject to the tax not the LLC itself. However, as per Internal revenue Code Section 408, IRAs are exempt from tax. As a result, in most cases, all income and gains generated by the IRA LLC would flow back to the IRA tax-free. In addition, the LLC investment vehicle allows the IRA owner to take more control of his or her retirement funds by keeping the IRA funds at a LLC bank account and not with a far away custodian offering “checkbook control” and greater flexibility to make investments quick and without delay.

However, using a solo 401(k) Plan to make real estate investments involving leverage offers a direct tax advantage over an IRA. With a real estate IRA that is leveraged with mortgage financing, it creates Unrelated Debt Financed Income (“UDFI”) – a type of Unrelated Business Taxable Income (also known as “UBTI or UBIT”) on which taxes must be paid. The UBTI tax is approximately 35%. But, with a Solo 401(k) plan, you can use leverage without being subject to the UDFI rules and UBTI tax. This exemption provides significant tax advantages for using a Solo 401(k) Plan versus an IRA to purchase real estate.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading “checkbook control Self Directed IRA and Solo 401(k) Plan provider. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at or call 800-472-0646.

Sep 10

Back to Basics – Transferring a Traditional IRA to a Roth IRA

The major difference between traditional IRAs and Roth options is when taxes are paid.  Traditional plans are funded with pre-tax money, usually coming with a tax break by reducing contributions from taxable income.  When you withdraw the money during retirement, the money is then taxed as ordinary income.  On the other hand, Roth IRAs are funded with after-tax money.  You don’t get the immediate tax break, however all qualified distributions (both principle and earnings) are tax free.  Therefore, if you decide to change plans, there will be tax consequences.

Any money that is taken from a traditional plan is reported as income.  Thus, it will be taxed as ordinary income based upon your particular tax bracket.  But when moving the money into a Roth IRA, there is no 10% early withdrawal penalty when you transfer it before age 59 1/2.

Transferring a traditional IRA to a Roth IRA comes with tax consequencesThere are a few different ways to move your money from a traditional plan to a Roth one.  If the trustee holding your traditional plan also offers a Roth option, the trustee can simply re-designate the account as a Roth.  If you need (or want) to change trustees, you can simply perform a trustee to trustee transfer.  The money is then moved from your old institution directly to the new one, without it ever coming into your possession.  Thirdly, you may take the money from the old plan and move it to the Roth IRA yourself.  This “rollover” must be done within sixty days however.  Failure to comply and the rollover will be considered a distribution and be taxed as income and any penalties (such as early withdrawal) will apply.

There are other tax implications that you need to consider as well.  Any funds converted to a Roth is subject to ordinary income.  This is true even for stock, mutual funds or other investments that would usually be taxed at the lower capital gain rate.  The value in terms of taxation is calculated the day they exit the traditional IRA, not what it was when purchased.

For many people, the reason to switch to a Roth IRA is all about current and future tax rates.  If you expect to be in a higher bracket come retirement, then it may be shrewd to pay the taxes now at your current, lower rate.  Keep in mind that when converting a large IRA, that may push you into a higher bracket during the year you convert causing higher taxes.  Further, you usually need to pay taxes on other funds meaning you cannot deduct them from the IRA without facing penalties.

The decision to move funds from a traditional IRA to a Roth plan should not be taken lightly.  The tax consequences might be too much to make the move worth it.  Since everyone’s situation is unique, it’s best to speak with an expert.  Contact a tax professional at the IRA Financial Group who can help walk you through the necessary steps.

Sep 09

Why You Shouldn’t Wait to Contribute to a Roth IRA


While most investors rely on their 401(k) to save for retirement, the Roth IRA represents a great tool for retirement investing as well. And yet the Roth IRA is woefully ignored by many. The Roth IRA is a great tool for retirement planning, and every year an individual goes without contributing to one is a lost year.

Here’s what you stand to gain from a Roth IRA, along with a few stocks that are ideal for the Roth.

Reap the Roth’s rewards
The beauty of a Roth IRA is simple: the opportunity to reap decades of completely tax-free returns. Provided you follow the Roth’s rules, all dividends and capital gains are tax-free. Plus, whereas the traditional IRA requires participants to take required minimum distributions upon reaching age 70 and a half, there are no required withdrawals with a Roth.

Of course, nothing is perfect. The downside of a Roth is that you can’t deduct your annual contributions from your income taxes, as you can with a traditional IRA.

Reasons you need a Roth IRAHowever, the long-term rewards handily outweigh the short-term costs. Historically, the stock market’s long-term average return stands around 10%. Imagine the benefits of decades’ worth of tax-free capital gains and reinvested dividends that a Roth IRA can provide.

Speaking of dividends…
On the subject of dividends, it’s been well-stated that those quarterly payouts really add up over long periods of time. According to Standard & Poor’s, from December 1926 to December 2012, dividends accounted for 34% of the market’s total return.

Reinvesting dividends, whereby you use each distribution to buy more shares of a stock, makes the results even more impressive. That’s because reinvesting dividends allows compounding interest to work its magic.

Without dividends, the S&P 500 price return index, with a value of one point on Jan. 1, 1930, would have grown to 66.48 by the end of 2012. During the same time period, a total-return index with dividends reinvested would have finished at a value of 1,832.45. In short, the Standard & Poor’s report shows that during that time frame, an investor who reinvested dividends would have reaped nearly 30 times the gains of one who did not.

Investing ideas for the Roth IRA
Of course, no discussion of the tantalizing benefits of the Roth IRA would be complete without some investing ideas.

If dividend-paying stocks are in focus, then there’s no denying the merits of dividend stalwarts like Procter & Gamble (NYSE: PG  ) and McDonald’s (NYSE: MCD  ) . These two blue-chip stocks are both Dow Jones industrial average components and represent the best of what dividend stocks can offer.

Earlier this year, P&G increased its dividend by 7%. 2013 marks the 123rd year in a row of consecutive dividend payments since the company’s incorporation in 1890. Furthermore, P&G has increased its dividend for 57 years in a row and now yields 3%.

Meanwhile, McDonald’s has increased its dividend every year since its very first dividend payment in 1976. At recent prices, McDonald’s yields 3.3% and has delivered five years in a row of strong double-digit percentage increases to its distribution.

If picking individual stocks isn’t your preferred method of investing, there are many excellent dividend-focused funds to choose from. In particular, the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG  ) is a low-cost exchange-traded fund that seeks to invest in stocks with a long track record of increasing dividends over time.

The Vanguard Dividend Appreciation ETF counts P&G and McDonald’s among its top-10 holdings, along with several other high-quality blue-chip dividend-raisers.

At its current levels, the ETF yields slightly more than 2% — about on par with the yield on the broader stock market. However, by focusing on the market’s highest-quality dividend stocks, this fund should provide greater dividend growth over time than the overall market.

Enjoy decades of tax-free returns with a Roth IRA
If you own dividend stocks in a taxable account, you’ll have to fork over 15% of those distributions in taxes every year.

If you fill your Roth with high-quality dividend stocks and low-cost ETFs such as these, you’ll reap the rewards of tax-free compounding for decades. In short, the Roth IRA quite simply offers one of the best ways to enjoy many years of tax-free gains.

Investors looking to save for retirement and escape the greedy claws of Uncle Sam: Do yourself a huge favor by opening a Roth IRA.

For more information about Roth IRAs or to open one for yourself, contact the tax experts at the IRA Financial Group today @ 800.472.0646!  With decades of experience, they’ll help decide what’s best for unique situation and retirement goals.