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Self-Directed IRA: Your Window to a Worry-Free Retirement

76% of the baby boomers feel that they do not have enough savings to make it through the retirement.

What’s even more shocking is that 1 out of every 3 Americans have $0 savings allocated for their retirement.

Fidelity estimates that a retiring couple will spend an estimated $245,000 on their healthcare alone.

Spending your Golden Years stress-free will become a myth, unless you TAKE CONTROL TODAY!

Clearly, the majority of Americans are grossly underprepared for their retirement. If you want to maintain your current lifestyle once you retire, strict financial planning and strong discipline are essential. Thankfully, a minority of Americans are good planners. We have our money invested in tax-deferred retirement investments like Individual Retirement Accounts (IRA). An IRA allows tax-deferred money to grow with relative safety using both active and passive investing models.

But, did you know that you can grow your money faster, much faster?

By leveraging Self-Directed IRAs (SD-IRA), you can be in full control of your retirement, achieve a significantly higher rate of return than what is possible with the Traditional IRAs, and avoid significant fees to boot.

 

Wait, What Is Self-Directed IRA?

A Self-Directed IRA (SD-IRA) is not very different from a Traditional IRA. Yet, you can achieve significant and accelerated growth using the SD-IRA approach.

One of the primary differences between the two is that the Traditional IRA has strict restrictions. These restrictions allow IRA funds to be invested in a select few and approved financial instruments like mutual funds, exchange-traded funds (ETF), and so on. These investments grow in a tax-deferred environment, allowing them to accumulate significant wealth without any tax deductions over the years.

A SD-IRA can also invest in similar instruments; however, the investment instruments are expanded to include gold, hard-money lending, real estate, notes, tax lien certificates, and many other instruments.

Before you start fervently researching SD-IRAs or rolling over your retirement accounts, let me make this thing very clear – SD-IRAs are not For Everyone!

Then, why should you consider SD-IRAs? Because, SD-IRAs offer several advantages over the Traditional IRAs. Here are some of them:

  • They give their owners complete control of their financial future and freedom
  • They allow their owners to invest their money in assets that offer the highest rate of return
  • By investing your retirement savings in real estate related assets and precious metals, you can shield yourself from the fluctuations of inflation and the stock markets

 

So, What Should You Do?

There are two primary reasons why you should go for SD-IRAs – risk management and high growth.

Ask yourself this question – Do you want all your money to be managed by the same guys responsible for the Great Recession of 2008?

Putting all your money into Wall Street is not the smartest thing to do. Let me clarify this statement. Wall Street definitely provides good returns over the LONG TERM. If you are able to diversify your portfolio reasonably well, then you will likely get decent returns over the many years. Even if there is a recession in between, the successive financial cycles will average out your returns for a modest level of growth. Such returns on what’s mostly Passive Investments aren’t exactly bad.

That said, the more you diversify your portfolio, the lower your returns. If you wish to achieve higher growth, then you will have to get more aggressive with your investments. That’s how the capital markets work. Rewards come with Risk!

Thankfully, there are alternatives to increase the returns on investments without significantly increasing your risk.

Outside of the stock markets, there are a great number of investment opportunities that offer you an excellent rate of return without exposing your wealth to extreme levels of risk. That’s why you might want to take the SD-IRA route.

When you do decide to go the SD-IRA route, real estate investments could be your best choice for several reasons.

 

SD-IRAs using Real Estate Investments

Real estate investments are proven wealth accumulators over many decades. The best part? Your real estate investments will not evaporate into thin air as experienced with stocks during the Great Recession. Even in the rare event, the property prices take a nosedive, the asset will eventually recover once the economy turns. You just need to be patient.

Real estate investments, especially commercial rental properties i.e. Multifamily or Apartments, offer a faster rate of growth using Forced Appreciation, Depreciation and Amortization at the expense of liquidity as experienced with Traditional IRA investments such as mutual funds or money market accounts. However, there are obvious challenges with real estate investments.

  1. Real estate is not cheap, so you require a significant amount of capital. This challenge can be managed through Crowdfunding platform and/or Syndications. Value Investment Partners can pool your money with that of others to make group investments. They’ll also help you invest your money in multiple real estate opportunities.
  2. Who’s to say that your property won’t suffer a permanent loss in value due to unforeseen circumstances like earthquakes, landslides, local economic busts (think Detroit!), and so on? However, this risk is mitigated with insurance.

 

A Word of Caution: It’s Not for Everyone

If your SD-IRA is NOT invested in properly, your earnings can get taxed, and in worse cases, penalties can be levied.

An experienced Self-Directed IRA custodian can help you to setup your SD-IRA and begin the journey to take control of your retirement. A reputable custodian will also provide guidance on how to avoid going into the danger zone of Self Dealing.

SD-IRA investing is rife with pitfalls. It’s easy to break the tax-deferment conditions and find yourself on the wrong side of the Department of Labor and ERISA. Therefore, it’s critical that you choose a reputable custodian for making intelligent investments decisions.

 

Conclusion

An SD-IRA could just be the magic wand that can turn an impending train wreck of a retirement into a well-designed, high-growth investment strategy. Of course, you have a thousand questions to ask, a million other factors to consider, and a very important decision to make.

Get in touch with Value Investment Partners to learn how you can grow your wealth and become a Passive Investing partner in our commercial real estate opportunities.

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