Self-directed retirement plans are growing more popular as individuals discover they can choose their own investments and manage their own retirement plans. Doing so allows a great amount of freedom to invest in things you know and understand. This eliminates the third party broker who makes those choices for you, and typically invests your funds in traditional assets, like stocks and bonds. Self-directed retirement plans are a cut above the norm, giving those who self-direct the chance to use alternative assets to build wealth for retirement.
Everyone who owns a retirement account understands the typical holdings include stocks, bonds, and
mutual funds. These traditional assets certainly have their value, and every portfolio should hold a percentage of these assets. Depending on your level of comfort, as well as the amount of time you have to build a healthy retirement nest egg, traditional assets should not be ignored.
However, if you’re looking for true diversity in your portfolio and the opportunity to potentially build that wealth at a faster pace than the traditional norm, you should take a closer look at self-directed investing and the opportunity these accounts represent.
Clients of Advanta IRA use many different alternative investments to grow retirement income. There are some more popular choices we see our clients leaning toward. These are by no means investments we suggest for you. The beauty of self-direction is that you can invest in what YOU know best, which is exactly what our clients do.
The Top Five Most Popular Self-Directed IRA Investments
- Real Estate: In this category rentals or rehab-and-flips are preferred choices of many of our clients. Rentals, whether commercial or residential, provide consistent and tax-sheltered income through monthly rental payments. Rehabs present the potential to produce a quick and sometimes substantial profit that’s diverted directly into the real estate IRA on a tax-sheltered basis.
- Private Loans: Notes and mortgages can be extended using retirement funds to individuals, businesses, or other entities for various purposes. Income is derived from interest on the repayment of the loan and the terms are set by the IRA owner. In many cases, collateral (such as a house if the loan is a private mortgage) is appointed to protect the lender in case the borrower defaults on the loan.
- Private Placements: These assets include investing in private companies, hedge funds, and other investment funds. Typically, private placements are reserved for sophisticated and accredited investors who have experience and wealth to withstand potential losses. However, in recent years, SEC rulings have created opportunities for less experienced investors to participate in crowdfunding options that work in much the same way.
- Checkbook IRAs: These account structures allow self-directed investors even more control over their retirement funds by giving account owners checkbook control. Here, the IRA forms an LLC in which the IRA owner is the single member. The LLC opens a bank account that is funded with capital from the retirement account, and the IRA owner is able to write checks directly from that account to score investments on a timely basis. Checkbook IRAs are advantageous, but can be somewhat complex. It’s important you understand all elements involved and consult with a CPA or other advisor proficient in the rules and regulations required to maintain your IRA’s tax-sheltered status.
- Foreign currency trading accounts: Also known as forex, these assets involve the fast-paced and ever-changing trade of currency across the globe. You can invest with minimal funds, basing your acquisition and selling position on whether you think the value of the currency you’re dealing with is about to rise or fall. Self-directed forex trading accounts are used by many of our clients, but, again, seek the advice of a pro in this area if you aren’t experienced enough to go it on your own.
So, there you have it—just a few of the different alternative investments our clients use to build wealth for retirement. Keep in mind that Advanta IRA neither sells investments nor do we give investing advice. We are a self-directed retirement plan administrator serving clients across the nation who choose their own assets and make their own decisions. We simply facilitate their accounts on a professional yet personal level to ensure compliance within IRS standards.
There are an incredible number of other alternatives to choose from if you decide to self-direct your own retirement plan. If you’re interested in learning more, contact Advanta IRA today.