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To get the highest Roth IRA rate of returns, you need to make smart investment choices. If you let your banker or your broker pick for you, your annual yield is not likely to keep up with inflation. While there is an official Roth IRA income limit, when it comes to contributions, there is no limit to how much income the account can earn and it’s all tax-free.
#1 – National Average
Let’s look at the current national averages. A 5 year IRA-CD is earning 4.01%. By laddering, you can earn a little more, but your maximum earning potential for a 5-year $5000 investment is $1500. Your account could earn that much in a month, if you make other choices.
$5000 is the current maximum contribution for 2008. The Roth IRA income limit is $101,000 for a single filer, to make the maximum contribution. That’s why I chose that amount for the example above.
The average Roth IRA rate of returns for those who invest in the stock market historically averages between 4 and 9% per year. If you are seeing that kind of return this year, you are one of the lucky ones. Only a handful of stocks are performing that well.
How about treasury bills? They are often recommended as a very “safe” investment choice, since they are backed by the federal government. Right now, the 30-year note is up to 4.17%, a response to people pulling their cash out of the stock market and stowing it away in T-bills.
If you are within the Roth IRA income limit, you could make the change to T-bills, right now, but your account earnings would be similar to what you would make with a certificate of deposit. Unless something changes drastically, these investment choices are not enough to keep up with inflation. It’s like earning zero dollars.
#2 – How To Get The Best Rates of Return
The best Roth IRA rate of returns, today, is seen in self-directed accounts, particularly in those that are invested in real estate. As I mentioned above, it is not unusual to earn $1500 or more per month. You have accounts earning rental income, holding mortgages, making profits through re-selling and other kinds of earnings. The potential in this market is truly unlimited.
#3 – Roth IRA Income Limit for Couples
Couples face a unique problem, when it comes to the IRS Roth IRA income limit. Those who are married, but filing separately, cannot make a qualified contribution to this type of account. Congress does not explain the reasoning behind this rule, but it’s there just the same.
#4 – How To Take Maximum Advantage
So, if you and your spouse want to take advantage of the tax sheltered nature of this account and enjoy some of the highest Roth IRA rate of returns, you must file jointly. As long as your combined “modified adjusted gross income” is not more than $159,000, you can make the maximum yearly contribution.
It’s best to get some advice from experienced investors Before immersing in the housing market. Even if we see some of the high rate of return of Roth IRA in this market, there are many aspects to consider. Happy investing!