Peer to Peer Lending Approaches: Regular Accounts or IRA?

Peer to Peer Lending Approaches: Regular Accounts or IRA?

So you’ve finally decided to be part of the peer to peer lending world. You know how things work, what you’re getting into, and what you expect to get out of it. What’s next is coming up with your game plan.

This is important because peer to peer lending is designed exactly to have the potential of meeting your needs (whether you’re a borrower or investor, but in this case the latter). There’s no such thing as THE approach to P2P investments
so if you want to maximize the benefits of the platform, you’ve got to take some time and think of your strategy.

An approach to peer to peer lending can be based on the kind of account the investor undertakes. A common choice would be between the regular account and the Independent Retirement Accounts or IRAs. This is quite the interesting choice: on one hand, you get to enjoy the flexibility that regular accounts give its investors. On the other hand, IRAs give higher returns because they usually don’t get taxed.

So why go for a Regular Account? Flexibility. If you’re into having control over your investment, then you’ll want this. Your money moves in and out as you wish, allowing you to affect so many things such as the amount of risk you’re willing to take at a certain period of time and the kind of investments you’ll be dealing with. You’re going for a regular account because there’s just so much freedom to it compared to an IRA.

But why would somebody go for an Independent Retirement Account? Fewer taxes, peer to peer lending is usually subject to the typical tax rate, such that any interests earned from these platforms will be subject to the same interest you’d otherwise get from a traditional bank, except that the taxes will indeed be higher because P2P lending does allow for higher rates. People who want to protect the amount of interest they earn from taxes will prefer the IRA because they’re usually tax incentivized. But of course, this will be at the cost of some freedoms you can only get with the regular accounts. There won’t be any in and out movement of money.

Now, some say there isn’t really a choice between these two because most investors will usually start with a regular account and then move on to the IRA when things get stable. This is quite logical. What normally happens is that investors will start off trying to learn the trade with little capital and let the money start rolling in. But once they reach the highest tax bracket for interests, they’ll start putting their money in the IRA and just trust peer to peer lending to reel in the returns. At this point they won’t mind losing control over their funds anymore.

But going back, this IS still a choice you’ll have to make because once you start with peer to peer lending, you’re the one that understands whether: (1) you’re ready to transition between the regular accounts and IRAs; or (2) you know if you can afford to get with the IRA even if you spent little time with the regular accounts.

Find out how P2P lending from MoneyEgg can increase your retirement funds by visiting MoneyEgg website – http://www.moneyegg.com

Are you ready to significantly boost your funds with up to 14% tax free interest using MoneyEgg? If your answer is “Yes”, then tell us your comments below and we will respond with our expert P2P lending financial advice.

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