Is it a great time to open a Self-Directed IRA? To be clear, this is not a good time for most people. There are a lot of people suffering during the COVID-19 epidemic. Hospitals are overwhelmed. Health care workers are making enormous sacrifices. Businesses are shuttering and laying off workers. For anyone with a Self-Directed IRA, these are very real concerns that mean more than a financial benefit can ever mean.
Long-term retirement investing is built on principles of mathematics. And for anyone considering a Self-Directed IRA, investing during times of crisis can be difficult. But that does not mean it is impossible. Opening a Self-Directed IRA may also help investors with tax deductions that lessen their burden during what appears to be an impending recession. Here are some fresh ways to think about the Self-Directed IRA in difficult economic circumstances:
A Self-Directed IRA Can Help Working Families Save Money
With pessimistic unemployment numbers looming on the horizon, it is only fair to say that American families should keep as much of their money as they can. And while priority should go to keeping the lights on and the kitchen table stocked with food, there may be some ways for investors to maximize their current income—even if they are working from home.
Putting aside money during an economic crisis like that presented by COVID-19 is not easy. But if it is possible for some families, a Self-Directed IRA offers flexibility. Using a Self-Directed IRA such as a Traditional IRA means using tax-deferred money towards retirement investing.
That is not to say that investors should expect immediate returns. With the economy undergoing its greatest challenge since the 2008 financial crisis, investors have to be wary about what they spend and where they spend it. But for those investors who can put aside a little cash towards retirement, a Self-Directed IRA is a powerful way to ensure that as much of that cash goes towards long-term growth as possible—without affecting their day-to-day lives during tough economic circumstances.
How the COVID-19 Epidemic Highlights the Need for a Diversified Retirement Plan
If there is one thing that is clear, it is that investing in one stock market is not a diversified retirement plan. When the stock market takes a sudden dive—and when it dives, you’d better believe it tends to be sudden—it creates a great deal of uncertainty in the economy. People with traditional retirement plans see those plans crater. They check their accounts and see that they are losing four and even five figures per day. They do not understand how they are supposed to keep a cool head about them when the world seems to be in such dire straits.
The answer is diversification through asset allocation.
That means that investment diversification is not just achieved when you have a variety of stocks in a portfolio. It comes through having multiple types of assets in the portfolio. For example, precious metals often go up even when the stock market does not. Real estate serves as a hedge against inflation. These are powerful tools for retirement investment that many people do not keep protected in a Self-Directed IRA simply because they do not even know they have the option.
Is Now the Time for a Self-Directed IRA?
We at American IRA are not your financial advisors; we are a Self-Directed IRA administration firm that makes it possible for retirement investors to expand their retirement investing freedom. But if you want to diversify your assets and cast a wider net for your retirement portfolio, a Self-Directed IRA may just be the ideal tool.