Often times you’ll read articles in mainstream consumer financial magazines recommending that IRA owners consolidate all their IRAs and other retirement accounts into a single IRA. They cite lower account statement fees and convenience as their reasons. And of course, it’s much easier to track a single IRA than multiple accounts with different companies. But most of the people writing and editing these magazine articles don’t have much experience with a Self-Directed IRA – or with advising people in the real world.
Here are a few reasons why Self-Directed IRA investors might want to own multiple IRA accounts:
- To save on fees. A big advantage to holding a self directed IRA with American IRA is our unusual menu-based fee structure. Unlike the vast majority of conventional investment companies, we don’t charge a percentage of assets every year to keep track of your money. Instead, you generally pay a flat fee per transaction or service.
This is an immense advantage for Self-Directed IRA owners who tend to buy an asset and let it sit unmolested for months or years. It’s much more cost efficient and many of our Self-Directed IRA investor clients save thousands and even tens of thousands of dollars per year on larger accounts, simply by switching assets out of an expense ratio or ‘wrap fee’ expense structure to our menu-based structure.
Investors who have some assets they hang onto for years, and other assets that they like to trade a lot, may benefit from moving some assets into an account with American IRA and paying the flat menu structure, rather than paying a high percentage fee every year – keeping them separate from mutual funds, annuities and other investments where an expense ratio or other percentage fee is already baked into the cake.
- To make long-term planning more intuitive. Many people use the ‘bucket’ approach to visualizing their retirement planning strategies. For example, they may imagine one ‘bucket’ of short-term money or money they want to shield from any and all market risk because they expect to need it to live on very shortly. Another bucket of money, earmarked for income needs between 1 and 5 years in the future, is for taking on moderate risk in pursuit of better returns than they can get in money markets, CDs and other risk-free investments. Another account is earmarked for more aggressive strategies and inflation protection – and still another account may be earmarked to pass on to the next generation. Each account represents a different ‘bucket’ of money. Having separate accounts helps make it easier for investors to tell at a glance just how much they have in each bucket.
In other cases, IRA owners may want to use separate IRAs for separate asset classes. They may own real estate in one, bonds in another, annuities in another, and have a separate Roth account for stocks to capture long term tax-free growth on their more aggressive, long-term holdings.
- To simplify beneficiary planning. Families with multiple heirs may want to have different beneficiaries on each account for a variety of reasons.
- To hedge against fraud or theft. Identity theft and brokerage fraud costs Americans billions of dollars per year. A 2011 study on elder financial abuse from MetLife found that financial abuse of elderly Americans cost at least $2.9 billion, and was rising at 12 percent per year. Fraud from strangers caused an average loss of over 95,000, and fraud on the part of family members, friends and neighbors cost an average of over $145,000 in losses per incident.
Holding assets in several accounts reduces the risk that criminal activity could wipe out your entire retirement savings – especially via identity theft.
- To engage more than one advisor. No single advisor or company does everything well. By dividing accounts, you may be able to engage the services of several best-in-class specialists, rather than a single general practitioner having to juggle multiple asset classes in a single account.
- To facilitate charitable giving. Many people bequeath unused IRA balances to their churches, synagogues, colleges or other favorite charities after they pass on. You may want to have a separate IRA earmarked for this purpose.
American IRA, LLC specializes in supporting Self-Directed IRA investors. With offices in Asheville and Charlotte, North Carolina, American IRA has thousands of successful Self-Directed IRA clients all over the country, almost all of whom are able to save significant amounts of money over time thanks to our advantageous fee structure.
To learn more about how this approach to retirement investing can benefit you, call us today at 866-7500-IRA(472), or visit us at www.americanira.com. We look forward to serving you.