What’s Popular Isn’t Always Most Effective: Why You Need a Self-Directed IRA

Famous investment guru Benjamin Graham once said: “You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.” If someone were to ask you what the most popular way to fund retirement was, you would probably hear some version of the same response: find a wealth manager, use retirement accounts, and keep saving. And that is great. For some people, it is very effective. But what if there are tweaks along the way that could potentially boost your ROI in significant amounts, further bolstering your chances at a fully-funded retirement? The Self-Directed IRA is one such path.

Unfortunately, a recent article in WorldFinance.com—while offering plenty of insight about retirement—did not spend any of its time talking about the Self-Directed IRA. And while they talked about the five most popular ways to finance retirement, it is important to remember one basic fact: effectiveness and popularity are two different things entirely.

Why a Self-Directed IRA Makes Sense

The first item on the list at WorldFinance.com makes a lot of sense: taking advantage of retirement accounts to maximize investment growth. Putting aside money in this fashion allows investors all over the country to build wealth easily and passively. The article went into detail about the types of accounts—including SEP-IRAs—but never addressed what happens when an investor self-directs their own retirement.

A Self-Directed IRA is just that: an account that you control. And while the second item on the list at WorldFinance.com addresses real estate, there is little time spent pointing out that it is possible to hold real estate within a Self-Directed IRA account. Given that real estate is one of the most powerful ways to generate returns on investment, it is clear that what is “popular” is not always the total picture.

Understanding the Self-Directed IRA Landscape

Why is Self-Direction so powerful? It not only helps investors avoid the often-expensive management fees associated with money managers, but it allows investors to tap into those investments they would otherwise make through general accounts. For example, if an investor is strong in real estate, they would typically make the investment using the simple, routine processes of real estate investing. But with a Self-Directed IRA, they can hold real estate within a retirement account.

This does mean that there are some important regulations to keep track of. One cannot simply purchase a home and live in it through a Self-Directed IRA—the IRS prohibits these kinds of investments from being used within a retirement account. A Self-Directed IRA is considered a separate entity from the investor, which means that the property itself will also have to remain separate.

There are other options, such as investing in precious metals.  This opens up the possibilities of a more diversified investment portfolio. See our section on Investing to find out what these are.

Popularity vs. Effectiveness in Retirement Planning

There is nothing wrong with a strategy being popular. The concept of buying and holding mutual funds in an IRA is popular because it is effective, it works. Over the long-term, this can generate amazing returns for investors who have the patience to withstand challenging market conditions.

But that does not mean that what is popular is also the end of the available options, especially in the world of retirement investing. There is more to consider. There are other advantages investors can use. There are different asset classes that can potentially bring wealth to investors who understand them well. It is vital for investors to broaden their horizons so they know each and every potential advantage they can use on the path to financial independence in retirement age.

Want more information about Self-Directed IRAs? Visit our section on Self-Directed IRA accounts or call American IRA at 866-7500-IRA.

Self-Directed IRA Retirement Tips You Need to Hear

Self-Directed IRA Retirement Tips You Need to Hear

When you think about retirement, what are the conventional tips you receive? Diversify. Think about the long-term. But when it comes to a Self-Directed IRA, you’d be surprised at how many important tips even so-called experts might leave out. In order to get a better handle on how you can build wealth for the long term, let’s look at some retirement tips that apply to holding a Self-Directed IRA:

Tip #1: True diversification is about asset classes.

You’ve heard it a thousand times: diversification is the key way to avoid excess risk. You don’t want to put all of your eggs in one basket. So why is it such common advice to do exactly that by putting all of your money in the stock market in one form or another?

Here’s something you might already know: if all you own are mutual funds, there’s a good chance you’re not as well-diversified as you think. Diversification is about asset classes, not just different assets within each class. And while it’s great to own a mutual fund rather than an individual stock, smart investors will think beyond even that in order to achieve true diversification—and more financial security.

Tip #2: Utilize your specific expertise with a Self-Directed IRA.

Know a lot about real estate? Then why, when it comes to your retirement plans, does real estate fall by the wayside? With a Self-Directed IRA you can invest in real estate. Sure, the rules are different—but so are the protections. That means you can have plenty of wealth stored away in an IRA that’s better-protected than any ordinary real estate investment. If you know a lot about real estate and know how to spot a good investment when you see one, holding real estate in an IRA is a great way to build wealth for your nest egg.

Tip #3: Taxes matter—a lot.

When it comes to retirement, you’re talking about compounding interest. That’s a powerful tool in building wealth, because it means you can expand your holdings simply by being patient. But compounding interest works both ways too. The more you lose to taxes now, the more devastating it is for your ultimate retirement nest egg.

Everyone should work hard to comply with all tax rules and laws. But that also means that you should take advantage of the tax protections the government affords you. This includes keeping some holdings in an IRA—and not necessarily just stock funds, either.

If you want your money to grow as efficiently as possible, you have to take taxes into account. IRAs are some of the best ways to reduce your tax burden while your money grows.

Tip #4: Massive growth is possible with the right investments.

The typical idea of holding money in the long-term is that compounding will be responsible for the massive growth. But using a Self-Directed IRA for something like a private company is a different way to get access to massive growth opportunities. Holding private equity in a company before an IPO, for example, can be a tremendous way to yield plenty of value in an IRA.

This isn’t to say that any private investment is a guarantee of massive growth. All investments carry some degree of risk. But holding a Self-Directed IRA can give you the IRA protection you need for investments that really pay off in the long run.

Want to know more about Self-Directed IRAs? Then it’s time to explore. Continue reading our materials here at www.AmericanIRA.com or call us at 866-7500-IRA to learn more about how the Self-Directed IRA works.

Foreclosure Properties in your Real Estate IRA

Buying distressed or foreclosed real estate at a discount and then either fixing and flipping or renting it out as a long-term income property is a tried and true investment strategy for both conventional real estate investors and real estate IRA owners. Real estate IRA owners have the advantage of tax-deferred rental income (within a traditional real estate IRA) or tax-free income (for Roth Accounts.)

But it’s getting trickier in recent months for real estate IRA investors in many markets to find a promising deal at a meaningful discount to intrinsic value – one of the keys to long-term profits at acceptable risk, according to no less an authority than Warren Buffet, chairman of Berkshire Hathaway and one of the most successful investors in history.

The reason things are getting dicey: As the economy improves, the supply of distressed and foreclosure deals is drying up. Fewer people are losing their jobs, more people are getting back to work, and naturally fewer homes are falling to foreclosure, and fewer homeowners are forced into short sales. Banks are also less likely to agree to short sales, because they are more assured of getting a decent price for them if they go to auction.

In all, distressed sales, including foreclosures, short sales, third-party foreclosure auctions and direct SEO sales now comprise 12.5 percent of all home sales, as of the end of the third quarter. That’s the lowest level we’ve seen since Q3 2007, according to the Q3 2017 Home Sales Report from ATTOM Dada Solutions.

So it’s critical for real estate IRA owners to understand this and go into an auction with all their ducks in a row. Here’s why:

    • Discounts are narrower. This means that auction participants have to bid higher prices to pick up properties.
    • Less margin for error. A few years ago, foreclosure properties were selling at relatively large discounts compared to the level of expenditures needed to bring them up to a rentable condition, or to prep them for sale to a retail homebuyer. That left a comfortable margin for mistakes. If you anticipate spending $10,000 to fix a new investment property up and the real number turns out to be $20,000 by the time all is said and done, you wouldn’t be happy about it, but at least you still had a fighting chance to make at least some money on the deal. In today’s market, making a mistake like that can mean the difference beween profit and loss.
    • More competition for a limited number of properties. The total number of distressed/foreclosed properties is down. But there are still lots of investors out there bidding on them! When you show up to an auction, you may find quite a number of other bidders there. The more bidders there are, the more you will have to sweeten your offer, in most cases, in order to maximize your chances of winning the deal.

If you’re out there bidding on foreclosed properties in this environment, consider making these adjustments to improve your odds of bidding and winning on quality properties at a reasonable price.

  1. Show up with proof of funds. Either have a cashier’s check from the bank or a letter verifying funds ready to go when you come to the auction. If you win the bid but can’t prove you have funds that same day (and in many jurisdictions by lunchtime that same day), the auctioneer will cancel your bid and contact the next highest bidder.
  2. Be ready when the high bidder backs out. Sometimes the high bidder can’t show proof of funds, or gets cold feet for some other reason. In any case, be ready to answer your phone for a few days after the auction – especially if you’re the number 2 or 3 bidder.

What Most Investors Don’t Know About the Real Estate IRA

What Most Investors Don’t Know About the Real Estate IRA

You might know that real estate can be a great investment. You might even know that it can be a vital part of a retirement portfolio. But you’d be surprised at just how few people understand the Real Estate IRA and what it entails in terms of protections, limitations, and opportunities for growth.

As the old saying goes, however: “knowledge is power.” If you want to expand the range of possibilities for your portfolio, it’s time to learn what most investors don’t know about the Real Estate IRA:

Real Estate IRA Investment Options and Capabilities

Let’s start with the fun stuff—what you can do when buying real estate through a Self-Directed IRA:

  • Borrowing money. You can borrow money any time you can convince a bank to lend you some, of course. But what many investors don’t know is that they can borrow money within a Real Estate IRA to purchase the real estate. This happens through non-recourse loans, which is a limitation, but also a protection: it means the bank can’t come for the rest of your assets should the IRA default on the loan. It’s rare that you see opportunities and protections packaged into one interaction, but with the Real Estate IRA, it’s possible.
  • Property managing. You don’t have to do it. In fact, you won’t be doing it, as the property manager will be collecting income and handling expenses while any profit left over will go into your retirement account. This keeps the property hands-off for the investor while any profits roll in on a passive basis.
  • Selling property. When you sell property within your Real Estate IRA, it will be a bit like selling stock within an IRA—you’re not going to have to pay capital gains taxes that year. This is a tremendous benefit for investors who are operating on thin margins and need to squeeze profit out of their investments while they build long-term equity.
  • Partnership is still possible. Partnering with others and even yourself can be done when you acquire the asset, although it’s always a good idea to talk to an expert to make sure you’re following all the rules.

Of course, even a great account like an IRA has its limitations.

Real Estate IRA Restrictions and Limitations

Why doesn’t everyone invest in real estate using their IRA? Because there are restrictions designed to keep these investments aimed at long-term growth. Otherwise, any real estate investor could use the IRA for their house-flipping business. Here are some vital limitations to keep in mind:

  • You cannot use the property. Sorry, no owning your own home through a Real Estate IRA—it has to be for investment purposes only.
  • All legal documents should be “vested” in the name of your IRA. Although you own the IRA, the IRA itself is considered a separate entity for a variety of legal and financial purposes. This is why there are some separation limitations, such as…
  • You cannot fix the property yourself. If you want to use a real estate investment to satisfy your DIY nature, you can’t do it within a Real Estate IRA.

These limitations and protections are for keeping your real estate investments as exactly that—investments. Using them in personal ways flies in the face of keeping that separate entity for your retirement investment purposes.

To learn more about Real Estate IRAs and both the limitations and opportunities packed with them, visit our Real Estate IRA guide. The more you learn, the better you’ll be able to make real estate work for your retirement strategy.

Down to the Wire: Top Tips for Self-Directed IRA Owners About to Retire

The time went by fast, didn’t it? It seems like yesterday we were just starting out, thinking it would be forever when the older people were us. Now the bluehairs are the kids! If you’re approaching retirement age, it’s time to take some important steps to set yourselves up for a successful retirement. That means getting in all the tax-advantaged contributions you can, hitting your Medicare deadlines, and taking an honest look at your expected income and expenses.

  1. Assess your situation. Now’s the time for a realistic assessment of how much you can expect to receive per month and per year, on a sustainable basis from your retirement accounts, personal savings, pensions, taxable investments and Social Security benefits, as well as your required monthly and annual expenses. With interest rates still relatively low, most planners are using a 4 percent withdrawal rate as a rough rule of thumb. Rates much above that amount quickly increase the likelihood that you may outlive your retirement savings. However, owning rental real estate in a Self-Directed IRA, or investments designed to kick off a significant income such as REITs, annuities, preferred stock and the like may help increase those odds.

A good financial planner can help you with those projections.

Whatever income you project for yourself, discount it to account for inflation, and then try to live on that amount for a year or two. No cheating! Let’s see how it goes!

2. Get in your last-minute retirement plan contributions. For IRAs, including Self-Directed IRAs, you have until your tax filing deadline next year to make your contributions for the current year. But you don’t get that break for employer-sponsored plans. If you are participating in a 401(k) plan via an employer (even if you are the owner-employee of your own company), you must complete all your contributions by the end of the calendar year. Time to boost your contribution rate to the maximum possible.

3. Take advantage of ‘catch-up’ contributions. Whether you have a conventional IRA or a Self-Directed IRA, those taxpayers over age 50 are allowed to contribute an extra $1,000 toward retirement. So if you were planning on contributing the maximum of $5,500 per year to your IRA or Self-Directed IRA this year, and you turned 50 or older this year, you can contribute an additional $1,000, for a total of $6,500.

If you’re participating in a 401(k) plan, you get an additional $6,000 in allowable salary deferral contributions if you’re age 50 or older this year – for a total allowable employee contribution of $24,000.

4. Roll back your risk exposure. It’s been nearly 10 years since the stock market collapse in the Great Recession, sparked by the collapse in real estate and mortgage lending. Yes, the stock market has more than recovered since then. And so have most real estate markets (but not all). But back then, you had another ten years or more before you were looking at retirement in the face. You had time to recover. Do you have time to recover from a similar economic dislocation now? Chances are you don’t have the same amount of time. Your time horizon to retirement is now 9 years shorter than it was at this point in 2008. Depending on your situation, it may be time to take a good look at your risk exposure, asset allocation and increase your diversification. Self-Directed IRAs may help you increase diversification and decrease overall investment risk, depending on how you use them. While some Self-Directed IRA investors target quite risky asset classes, it’s also possible to use Self-Directed strategies and alternative asset classes to reduce portfolio risk as well, by picking up assets that may not be closely correlated with the broad U.S. stock market.

5. Don’t miss Medicare Supplement Open Enrollment. If you turned age 65 in the next year and you want to protect your savings against unexpected medical costs, be sure to make your Medicare decisions during your initial open enrollment period. That window opens up three months before the month in which you turn age 65 and enroll in Medicare Part Band closes three months after the month in which you turn 65 and enroll in Medicare Part B.

If you miss this enrollment period, you’ll have to pay higher premiums for Medicare Part B and you may not be able to enroll in Medicare Supplement (Medigap) or Medicare Part C (Medicare Advantage Plans), or you may need to pay higher penalty premiums.

If you don’t enroll, then you face the risk of having to pay significant out-of-pocket costs in the event of a hospitalization.

Common Mistakes in Self-Directed IRA LLC Operating Agreements

Every LLC you put in a Self-Directed IRA needs an operating agreement. But if you don’t draft the operating agreement properly, you could make your LLC nearly impossible to run, and even endanger your Self-Directed IRA’s eligibility for the federal tax advantages we normally associate with these accounts. This could result in substantial taxes and penalties.

Here are several of the most common mistakes LLC principles who own these entities within Self-Directed IRAs make:

Failure to limit compensation to owners. LLCs in IRAs cannot pay compensation to owners outside of the IRA. That means they can’t pay you a salary, no matter how much labor you’re doing and how much consulting you’re doing for your LLC, as long as it’s in the IRA. The same goes for your spouse, your children, grandchildren, parents, grandparents and those of your spouse, as well as any professional advising you on your LLC in a fiduciary capacity.

Prohibited transactions are governed by IRC § 408(e)(2), which disallows most transactions between the IRA and disqualified persons. “Prohibited transactions” and “disqualified persons” are defined in § 4975(c)(1) and § 4975(e)(2).

You should put language to that effect in your LLC operating agreement.

Failure to limit investments. If you own your LLC within a Self-Directed IRA or 401(k), you should specify in your operating agreement that you cannot invest directly in prohibited investments like collectibles, life insurance contracts, alcoholic beverages, jewelry, gems and certain precious metal coins and bullion of inconsistent or insufficient purity.

Failure to plan for the endgame. All operating agreements, in and out of the Self-Directed IRA, should contain language specifying what to do with the interests of any owner in the event that owner dies or becomes disabled. Too many owners fail to come to an agreement, and are asking for trouble if the unthinkable should happen. Think the unthinkable – and plan for it.

Failure to restrict debt to non-recourse. IRA rules strictly prohibit owners from signing personal guarantees on loans or pledging anything outside of the IRA itself as collateral for a loan. Creditors must have no claim on any assets outside of the IRA. Failure to abide by these rules could result in some or all of your IRA’s tax status being revoked, resulting in significant taxes and possible penalties – plus likely legal bills. If you own an LLC within an IRA, 401(k) or any other tax-advantaged retirement account, your operating agreement should reflect these restrictions.

Failure to define “units.” This is a particularly important mistake when there are multiple owners of an LLC, and/or when people are making contributions of capital that are not readily defined. Also, if you ever want to sell an interest in your LLC – or sell the whole business outright – it’s important to define who gets what. LLCs don’t come pre-subdivided the way corporations are with shares. Owners/partners in LLCs must define how the fractional interest of the company is broken up – and the tool for doing this is the operating agreement.

Otherwise, if the company ever issues a dividend, no one will know who is supposed to get how much!

As Stocks Soar, Advisors Suggest Diversifying with Self-Directed IRAs

As major U.S. stock indices continue to climb to ever greater record highs, more financial planners are encouraging their clients to direct a portion of their retirement portfolios to self-directed IRA strategies. Why? Diversification. The higher stocks go, the more potentially dangerous the market becomes for risk-sensitive investors. The time has come to take some of these recent stock market gains and spread them around to asset classes that may still be available at a more reasonable price, with better risk-adjusted expected returns.

One advisor, Miami, Florida-based Michael Rose of Rose Capital Advisors, suggests self-directed IRA strategies to some wealthy clients in order to “get exposure to these asset classes they might not be able to hold at traditional custodians,” according to this piece by Financial Planner magazine.

By going through a boutique custodian or third-party administrator that specializes in self-directed IRAs and other retirement accounts, it’s quite easy for investors to diversify their stock-heavy retirement portfolios into a vast array of different investments that may help diversify their holdings and potentially lower exposure to risk if and when equity markets turn sour.

Common asset classes that self-directed IRA investors seek out that aren’t generally available using traditional Wall Street brokerage and investment firms include:

  • Hedge funds
  • Private equity placements
  • Private credit placements and debentures
  • Direct ownership of real estate
  • Raw land purchase
  • Farming and ranching lands
  • LLCs
  • Partnerships
  • Gold and precious metals
  • Overseas real estate
  • Private lending
  • Closely-held corporations (other than S-corps)

…And many others.

Holding some alternative assets within a self-directed IRA or other tax-advantaged retirement account may have especially attractive benefits for investors in higher tax brackets – particularly for income-oriented investments such as real estate, LLCs and lending. If you hold these assets in a taxable account, federal, state and local taxes will eat up a substantial fraction of the investment’s interest or dividend yield. Holding the asset within a self-directed IRA allows income to compound tax-free. There’s no need to send a sizeable fraction of your yield off to the IRS every year. You can reinvest earnings right back into the company, or elsewhere in your IRA as you see fit. You pay income taxes only on the amount you take out, or on income attributable to borrowed money.

The downside is, you lose the right to have your capital gains taxed at lower capital gains tax rates. Taxes on income and capital gains are deferred until the year in which you take the money out of your self-directed IRA. You also don’t get to take depreciation deductions on real property or business capital investments you put to use, because there is no tax on the earnings to deduct against!

Another Good Reason to Buy Rentals In Your Real Estate IRA

Another Good Reason to Buy Rentals in Your Real Estate IRA

With Bitcoin currently making some investors thrilled and others nervous—not to mention a bull market that seems to have no end in sight—it seems the perfect time to diversify one’s portfolio with a Real Estate IRA. The consistent growth and income that can yield from a well-placed investment in real estate is an undeniable tool for building wealth, especially when held in a tax-protected account. Recently, USA Today pointed to a marked growth in the demand for rental properties that could suggest this is the ideal time to focus on real estate as a retirement investment strategy. Here’s why.

Single-Family Rentals: A Reason to Think About the Real Estate IRA?

According to the article in USA Today, single family rentals have seen an uptick in demand, developing “faster than any other portion of the market.” This is even outpacing single family home purchases, which points to a generational change in the way millennials think about housing. With renting becoming more and more the norm, it’s possible that now is an ideal time to enter the market by funding a real estate purchase through a Real Estate IRA.

Within the last three years, the article notes, single family rentals have gone up some 30%. That points to an increased demand worth noticing, especially as investors look for returns out of the stock market. Diversification is the name of the game here, and if there are solid returns to be had that can help a retirement investor increase the breadth of their portfolio, it’s always worth consideration.

Markets Skittish After the Housing Bubble?

The collapse of the housing bubble in 2007-2008 saw many people change their perception of real estate. The old idea used to be that even purchasing one’s own home was an investment. And that sentiment still exists. But the article in USA Today pointed to a change in perception—that perhaps securing a stable source of housing is the ultimate goal, not necessarily home ownership.

This can be an advantage to anyone who does believe that real estate is a great way to invest, because it means there is plenty of demand for rentals on single family homes. With single-family rental homes making up some 35% of the millions of rental units across the country, according to USA Today, that means there are plenty of opportunities for Real Estate IRA investors to consider.

What Every Real Estate IRA Investor Should Know

While this kind of demand is a major positive for anyone who wants to build wealth for retirement and believes in real estate as a vehicle to accomplish that, there are certain rules and regulations that every investor should know. First and foremost is the separation of a Real Estate IRA—and the real estate it holds—from the personal life of the investor. For example, an investor cannot rent from themselves, living in the real estate they hold through the IRA.

It’s important that investors know to treat these single family rental homes as separate entities, just as they would view a stock holding. Having a property manager handle much of it is a great step forward in achieving that goal. These and other rules are easy to follow—but it requires foreknowledge to ensure that they’re all met.

When done the proper way, owning a single family rental unit can be a tremendous boon to an investor’s bottom line. But it’s important to know all the facts as well. Continue reading up on Real Estate IRAs here, or call 866-7500-IRA for more information.

Why You Need Rental Income in a Self-Directed Roth IRA

Why You Need Rental Income in a Self-Directed Roth IRA

What is a Roth IRA, and why do investment professionals recommend it so vigorously? If you’re new to retirement advice, you’ve probably heard this phrase “Roth IRA” and rolled your eyes. It sounds complicated. It sounds like another worry in your life. Yet when you realize the potential in a Self-Directed Roth IRA, you might just begin to feel excited about your potential for building a strong retirement nest egg.

Why? Because the Self-Directed IRA comes with a number of benefits that you might not have considered:

Money in a Self-Directed Roth IRA Grows Tax-Free

When you put money in a Roth IRA, you’re putting in your own after-tax dollars. That means these dollars have already been taxed. The tax protections in a Roth IRA then allow these dollars to grow tax-free with the full protections of an IRA. This is a reversal of the typical situation in which you withdraw retirement money and pay taxes on it then.

When you withdraw your money from your Roth IRA past the appropriate age, that money will be tax-free. It’s not difficult to see why this might help you save thousands—and maybe more—in the future.

Money within a Self-Directed Roth IRA Includes Tax Protections

A Roth IRA is a type of account the government approves for certain tax protections, encouraging people to save for retirement.

Usually, people take advantage of this account by investing in stocks and mutual funds. But with a Self-Directed IRA, you can do much more. You can even invest in real estate. And the real estate you invest in through a Self-Directed IRA allows your rental income to go to that Roth IRA, where it will receive protections.

That means you’re not paying taxes on your rental income, which gives you more flexibility for making a profit on your real estate investments.

Hedging Yourself Against Future Rises in Taxes

When you earn a lot of income from investments, you face the possibility of a higher tax burden. By placing your rental income in a tax-protected Roth IRA, however, you hedge against the possibility of future tax hikes and give yourself some freedom and flexibility for your retirement investments.

The good news about Roth IRAs is that you’ll also have the ability to continue contributions so long as you have paycheck or even contract work. So even as you protect yourself against future tax hikes and a potentially higher tax burden, you can still find ways to place some legal protections on yourself and your nest egg.

The Older You Get, the More Powerful a Roth IRA Becomes

Perhaps the most important feature of the Roth IRA is that it means paying your taxes upfront. As the investments grow tax-free, and you earn more money, you would likely have a higher tax burden. But withdrawing from your Roth IRA past the approved age is easy to do and tax-free. That gives you potential for a tax-free income in retirement, which is essentially like creating your own retirement program or pension.

Real estate is particularly effective in a Roth IRA because it has such high potential to grow—and a Roth IRA is great at protecting assets that grow. If you’re looking into retirement investment or even just real estate investment, it’s always a good idea to consider a Self-Directed Roth IRA.

Like what you’re reading? You can find more information as you browse www.AmericanIRA.com or simply give us a ring at 1-866-7500-IRA(472). We’ll be glad to talk to you about what this means and what American IRA can do to help you along the way.

The Best and Worst Cities for Retiring with a Real Estate IRA

The Best and Worst Cities for Retiring with a Real Estate IRA

USA Today recently released its list of the best and worst cities for retirement, and the results are in: according to the newspaper, Pittsburgh, PA is the best place to retire, followed by the Boston metro area and the Los Angeles metro area. Although many investors are familiar with these lists, we at American IRA wanted to go a step further: what might be the best place to retire with a Real Estate IRA—and would that list differ from what you see in the news?

How to Gauge the Best Places to Retire with a Real Estate IRA

The first question is simple: how does one determine what makes a great place to retire in the first place—particularly when it comes to Real Estate IRAs? There are the obvious demographics, such as home prices. But that alone doesn’t tell the whole tale. One area with inflated home prices might be far inferior to another area with prices that are still low relative to the value of the real estate.

The key is to consider the full range of variables here, including:

  • Crime levels. An area with a high rate of crime tends to inhibit the potential for real estate growth, even if the other statistics are strong.
  • Weather. A great local climate is always a way to attract new investment and renters, which in turn creates a built-in demand for the local real estate.
  • Tax burden. For anyone living on a planned or fixed income, the tax burden is an essential variable to consider. A high tax burden can have enormous fallout, especially with large estates where one percentage point can represent a large portion of money. Property taxes are just as important to consider, because they can affect the perception of property in a locale.
  • Health care. Access to quality health care is important not just because health facilities create high-quality jobs and attract highly-educated workers, but because old age puts you at higher risk for health complications. Those retiring with or without a Real Estate IRA would have to consider access to good health care an essential variable.

Given this information, there’s a good chance you’ll find that areas like Pittsburgh and Boston—highlighted in the USA Today article—stack up strong. But that’s not the only consideration for those with a Real Estate IRA, either.

What Makes a Real Estate IRA so Attractive for Retirement?

The reason a Real Estate IRA can be so potentially attractive for future retirees is the same reason real estate investments are so attractive themselves—they create opportunities for tremendous growth, particularly if you find yourself in a hot area with plenty of demand for quality rental real estate.

The protections afforded by holding real estate within an IRA can also dramatically expand the potential returns for anyone putting aside money for retirement. While it’s not possible to live in a house you hold within a Real Estate IRA, there are other advantages to these tax-protected accounts that make them tremendously beneficial, particularly if you live in an area with lots of real estate buzz, like Pittsburgh.

The tax protections possible when investing in an IRA are tremendous, but they also require knowledge of what the IRS requires and what your own responsibilities will be. For those who are considering where they might want to retire, it’s important to ask questions about specific locations, taking all of the variables listed above into account. For more information on how Real Estate IRA plans work, be sure to contact us here at American IRA at 866-7500-IRA.