Someone once asked Albert Einstein, “What is the most powerful force in the universe?” He remarked, “Compound interest.”
Whether or not that anecdote is true, it is absolutely true that compound interest is a mind-blowing key to building wealth.
And when you combine that with tax-deferral, the results can be staggering, according to Adam Bergman, the founder of IRA Financial Group in New York City. Bergman is also the managing partner of the law firm The Bergman Law Group, LLC.
Bergman appeared on Fried On Business to discuss his specialty – the self-directed IRA, an industry which services some $7 trillion in 49 million accounts.
In a self-directed IRA, he said, you can use your retirement money to invest in almost anything except life insurance, collectibles, or anything that directly or indirectly benefits you – such as personal real estate.
Beyond that, Bergman said, there are plenty of options and lots of ways to get big money into your self-directed IRA, like real estate, hedge funds, private equity, gold, hard money lending, and more.
“There’s a slew of investment opportunities that you can use your IRA for. It’s a great diversification play. You can team it up with your equities, your ETFs, your mutual funds,” he said.
“You can invest in something you know and understand, and hopefully reap some rewarding benefits for your retirement account.”
Bergman said many people – and it cuts across the generations – are not aware of the wealth-building power of tax deferral.
That’s unfortunate, I think, because the fact is we’re living longer, and we’re likely to need a good deal of financial capital post-retirement.
Bergman said new stats from the National Institute on Retirement Security indicate that nearly 40% of working households with members aged 25 to 60 have no retirement savings whatsoever.
“To me, it’s scary,” he said. “There is no reason that someone cannot put a dollar or two dollars away. No matter what your financial position is, the beauty of tax deferral will allow you to have a solid nest egg upon retirement by just putting a few dollars away.”
Now, if tax deferral and compounding are powerful forces in a traditional IRA, you can only imagine what they provide in a Roth IRA – where the growth is tax-free.
Bergman is also an accomplished author. His most-recent book – In God We Trust, In Roth We Prosper – is aimed at the Millennial generation, the folks who should start saving NOW.
His other books include:
– The Checkbook IRA, which focuses on self-directed IRAs.
– Turning Retirement Funds into Start-Up Dreams, which explores how to use your retirement money to start a business.
– Going Solo: America’s Best-Kept Secret for the Self-Employed, which talks about the Solo 401k.
Bergman is very accessible. He can be reached at irafinancialgroup.com, 800-472-0646, or adamb@irafinancialgroup.com. He is the founder of the BergmanIRAReport.com and the Bergman401KReport.com.
We talked about a lot more, including the most interesting investments Bergman has seen in a self-directed IRA.
Click here to listen to the full interview with Adam Bergman, founder of IRA Financial Group.
