Many financial advisors will recommend annuities for retirement planning and other savings goals.  There is a better investment to be made as anything that an annuity can do for an individual, rental real estate held in a retirement account can do better…much, much better.Is your retirement account working hard for you?

An annuity is an obligation from an insurance company to pay you a stream of income.  It is the flow of payments that attract investors to annuities.  To purchase annuities can require a significant sum of money.  In addition, an annuity is only as secure as the financial strength of the insurance company issuing it.  There have been many failures of the insurance companies that have issued annuities.

Rental real estate can be purchased and placed in a retirement account such as a 401(k) or individual retirement account (IRA) for much less than many annuities.  Rather than worry about the financial foundation of an insurance company (remember AIG from The Great Recession), the strength or rental real estate comes in large part from where it is located.  If it is in a college town, the demand for rentals will be robust, will be the strength of the real estate market for that area.

Which entity has the most secure future an ongoing economic concern: an insurance company that is highly leveraged or a state university?

In addition to a secure future, rental real estate will provide a stream of increasing rental payments.  The rent could easily be increased yearly.  Do not expect that from an annuity.

That rising rental income is also tax free when the investment property is held in a retirement account.  The income and any profits from the sale of an asset in an IRA or 401(k) are not taxed.  That is a tremendous advantage that real estate in a retirement account has over any asset not held in one.IRA retirement private investing.

Just as lucrative can be lending the money for others to buy rental real estate through a private mortgage. .  According to Jerry Cohen, President of EquityBuild, a premier private mortgage investment firm, “There are two methods for getting started in private mortgages: Mortgage Pools and Direct Lending.  Mortgage pools are like the mutual funds of private mortgages. Each investor's money is pooled with the other investors participating in the pool and the money is used for private lending.

Cohen, who was just awarded the prestigious “Moving America Forward” honor for the success of EquityBuild and EquityBuild Finance, its financial arm, furthered that, “Direct lending is typically reserved for seasoned real estate professionals due to the level of expertise that is needed to identify undervalued properties...”

Another advantage is that you can sell real estate or private mortgage notes that you own in your retirement account anytime that you want.  Should you wish to cash out your annuity to get your money back because you fear for the health of the issuing insurance company or other reasons, there could be a very hefty penalty, known as a “surrender charge.”

Any sound investment portfolio should have a wide range of investments to achieve the objectives of the individual.  Purchasing rental real estate and participating in private mortgage accounts from a retirement account can achieve many of these in a far superior manner.  The income provided by rental real estate or a private mortgage note in a retirement can be more secure with higher growth potential than an annuity.

by, Jonathan Yates: EquityBuild News Contributor