Take Control of Your Retirement – Discover the power of self-directed IRAs

Do you remember the lyrics of Peggy Lee – Is That All There Is? Investors often shake their heads in amazement after meeting a financial planner who talks about “diversification” and “don’t put all your eggs in one basket.” Great concepts, but what about something beyond stocks, bonds, and mutual funds?

Well, as the announcer says at the end of this TV commercial – But wait, there’s more!

Did you know that nearly $4.2 trillion in IRA and retirement account balances can be invested in much more than the typical investment opportunities offered by big box investment companies?

Since the inception of IRAs in the 1970s, investors have been permitted to invest in a range of alternatives in the stock market, including non-publicly traded assets such as real estate, debt securities and loans, private equity and tax liens. But not many financial advisors, and even fewer investors, are aware of the possibilities.

Legendary investor Warren Buffett uses a simple rule of success: Invest in what you know and understand. Diversification offers risk protection. And what better way to diversify than owning something you have experience with, like real estate or a company.

You may find greater portfolio diversification and a return on investment that may better align with your individual goals if you consider investing in what you know from experience.

Any IRA, including Traditional IRAs, SEP, Roth IRAs, Coverdell Education Savings Accounts, and Solo 401(k), can use a portion of the IRA funds to purchase shares in these various stock market alternatives. Essentially, an investor determines the amount and source of funds, transfers them to an independent third-party custodian for custody, and then instructs the custodian to release funds to purchase an investment in one or more alternatives. The custodian also holds for the investor any income derived from the investment.

The “rules of the road” can be complex, but not impossible to navigate with the right guidance. Basically, an investor, spouse, direct descendant, or fiduciary advisor is a “Prohibited Person” and cannot engage in “self-business” or personal use of the property. With few exceptions, a “Prohibited Person” cannot work for an IRA investment or earn income from an IRA investment.

What can an investor do? Combine multiple IRAs from many people along with personal funds to buy properties as co-tenants, for example.

It’s easier to list the things that a self-directed IRA can’t use as potential investments. These include 1.) collector’s items, 2.) life insurance policies, and 3.) shares in an “S” subchapter company. Almost everything else is fair game.

When properly structured, the self-directed IRA can act as a lender to facilitate a real estate transaction. Self-directed IRAs can invest as a member of an LLC, or as a shareholder in a C-Corporation, or even as a Limited Partner. This is a way to add some level of asset protection to an investment.

Harnessing the power of a self-directed IRA can offer an investor a whole new way to invest and get their retirement dreams back on track.