How does controlling more of your retirement account help you retire? With a Self-Directed IRA, the options are numerous. Using self-direction in your retirement portfolio will give you access to a wide range of non-traditional assets for retirement investing—including real estate, precious metals, private notes, and more. But how can investors leverage this knowledge into something that actually helps them build wealth over the years?
Using the Advantages of the Self-Directed IRA
The first step is to learn the advantage of the Self-Directed IRA—and how these can be leveraged into a more successful retirement portfolio. Because a Self-Directed IRA opens the possibility of investing in something that the investor is far more familiar with, particularly for investors with a lot of real estate experience, it allows for more investing freedom that leverages a particular skill set. An expert in tax lien investing, for example, would find it beneficial that a Self-Directed IRA makes it possible to invest in tax liens with retirement protection.
The Self-Directed IRA also offers some protection for the investor that helps diversify risk. For example, purchasing real estate through a Self-Directed IRA will come through the use of non-recourse loans. A non-recourse loan allows you protection from a bank coming after your private property if you are unable to make the loan payments. This adds a layer of security to your real estate transactions that hopefully you will not ever need—but if you do, it’s good to have in place.
Finally, a Self-Directed IRA opens up the possibilities of simply being smarter when it comes to diversification. Many investors believe diversification is the result of buying different types of mutual funds and stocks—for example, buying international stocks in addition to domestic stocks. But diversification can go much deeper than that. With a Self-Directed IRA, you can also have diversification of assets, which allows you to manage risk in a completely different way. By owning precious metals in an IRA, for example, you will be protected from big currency issues such as inflation.
How Does Diversification Help You Retire?
In addition to using diversification to protect your assets, you can think of diversification as a security blanket. The simple truth is that no investor has a crystal ball. Yes, we can look at the history of the stock market and appreciate its ample returns. But that doesn’t mean every scenario is going to play out the way stock investors want.
Here are some of the ways asset class diversification can help you retire:
- Inflation hedging: Real estate and precious metals—two options within a Self-Directed IRA—are two of the most powerful ways to hedge against inflation. Even if the value of the dollar were to drastically drop, holding a piece of real estate would mean that you are still holding on to your net worth. However, holding stocks denominated in dollars can sometimes be a precarious position in times of extreme inflation. This is no guarantee of extreme inflation, but hedging is important all the same.
- Long-term growth: Keeping money in more secure assets helps increase confidence. Increased confidence means sticking to a plan. Those who opt to sell their stocks and funds within an IRA during times of economic crisis may lock in lower prices, while those who are secure in their investments will be able to hold fast.
Diversification is not only a hallmark of what makes the Self-Directed IRA effective, but what gives retirement investors the peace of mind they need to be confident in their investments. Interested in learning more about Self-Directed IRAs? Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation. Download our free guides or visit us online at www.AmericanIRA.com.