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By Ty Hallsted
Putting some of your savings into an IRA is a real no-brainer. So much so that, according to the latest figures, the average IRA account today contains well over $25,000.
But no matter which kind of IRA you have — traditional, simple, SEP, Roth, (not to mention 401K or Keogh plans), chances are your money’s invested entirely in
holdings stocks, bonds, and mutual funds.
The reason for this is simple; almost all IRA plans share one common attribute –: they’re administered by someone
. Employer-sponsored plans are run by a company-designated custodian, and normally offer a limited choice of places for you to invest an assortment of mutual funds, for example.
Even a privately-held IRA will usually be administered by your broker, banker, or financial advisor so it’s no surprise that the investment options available will be the ones they’re most familiar with (and can most easily earn commissions on!).
But in order to derive maximum benefit from their tax-deferred status, your retirement savings have to be invested for maximum
. And limiting your IRA to market-oriented vehicles may not be the best way to achieve this.
What long-term average return can you reasonably expect from stocks? According to some experts, a reasonable estimate is currently no more than 7% to 8%. No less an authority than Berkshire Hathaway founder Warren Buffett touts the following formula: “3 to 4% for real GDP growth + 2% for inflation + 2% for dividend yield = 7 to 8% long-term total return on stocks.” And, in his most recent annual letter to shareholders, Buffett said he’s “found very few attractive securities to buy.”
doesn’t think he can make much money in the stock market, what chance does he
guy have? If you decide it’s time to diversify your IRA beyond stocks, bonds and mutuals, the next question is
With a Self-Directed IRA (SDIRA).
SDIRAs are nothing new they’ve been an available IRA option right from the start. But not many people are aware of all the features of an SDIRA that just might make it the perfect choice for your retirement nest egg.
You may think you already have a Self-Directed IRA – after all, you can choose which stocks, bonds or mutual funds to purchase, right? But what if you found out about a house down the street that was going on the market for half its value. or a private company paying 15% for a short-term bridge loan? Could you invest in either of
from your current IRA? With a
Self-Directed IRA you could.
As the name implies, the administrator of this IRA is you.
decide how your money is invested. And your available choices are much wider besides the usual securities, you can also expand into real estate, tax liens, judgments, and a long list of other “non-traditional” but lucrative investments.
Does this mean “anything goes”? No – remember, Uncle Sam intended your IRA account to be a good, safe place to save for your eventual retirement so even SDIRAs include constraints on what’s considered a suitable investment choice. But your SDIRA will definitely give you more latitude to diversify your holdings.
Setting up your SDIRA is about as involved as opening a bank account. There are a few forms to fill out to open and fund your account. You can do this easily, once youve decided on a custodian and received their forms.
Is a Self-Directed IRA right for you? If you wouldn’t invest in anything but stocks, bonds and mutual funds anyway then, no. Stick with your current IRA.
But if you’re ready to expand your IRA
these traditional investments then you need a Self-Directed IRA. You can “rollover” some or all of your current IRA funds into it then take advantage of the myriad other investment options now available.
For a list of custodians that offer Self-Directed IRAs go to the Resources page of the link below. This link also discusses LandBanking, which may be the single best investment available, for IRA or non-IRA funds. It offers real estate appreciation without the normal hassles of real estate – finding the property, dealing with tenants and contractors, long, tedious closings etc. Just a simple, affordable and passive investment with
The best part? If your IRA falls into the “average” range mentioned above of $25,000 you
have more than enough to participate in and benefit from LandBanking!
The difference between 8% and 20, 30 or 40% adds up quickly, especially when tax deferred. Don’t let the opportunities available from a Self-Directed IRA pass you by. Click below for more info:
About the Author: Ty Hallsted is a software developer and real estate investor who has had a Self-Directed IRA since the mid-’90s. In 2006 he and his wife became IRA LandBankers. Click below for more info: