Be honest. When you hear the phrase “Self-Directed IRA,” you think about one thing: it sounds like a lot of work. After all, who wants to direct an IRA when they are hardly a financial expert? Who wants to manage a fund like they are a hedge fund CEO, rather than simply putting money away in a retirement account and hoping for good returns over the long haul? Are Self-Directed IRAs just for assertive, active investors who like to pore over lots of financial homework and dig into the financials of each investment?
In a word, no. The beauty of Self-Directed IRAs is that they are highly customizable to just about any strategy you want to implement. If you want a largely passive brokerage account within a Self-Directed IRA, that is something you can set up. If you want to take an active role in spotting real estate assets that you can put in a Self-Directed IRA, you can take that active role as well. You can even use a Checkbook IRA to take as active a role in your retirement investing as possible.
If you have been told that Self-Directed IRAs are only for people who love investing, you have been told wrong. Here is why.
Using a Self-Directed IRA to Find Passive Investing Opportunities
Many of us are busy. We have to think about working hard during the short-term to generate the income necessary to invest in the long-term. And with the onset of COVID-19 and what it means for the world economy, not many of us have time to think about the distant future.
But passive investing opportunities do not all have to be of one type, either. There are multiple ways you can attain more freedom in your portfolio while building a largely passive investment strategy. One of those ways is to utilize a Self-Directed IRA, in which you can use alternative retirement assets including real estate, precious metals, and even tax liens.
Sound complicated? It does not have to be. Here are some examples of a more passive investment strategy:
- Real estate. With a Self-Directed IRA, you can make real estate purchases, but then use a property management company to handle the collection of rent and the incidentals of the property itself. In fact, you will be expected not to use the property in a Self-Directed IRA for personal use. This means that you can have a hands-off approach to real estate within your retirement portfolio, even if it is important that you do your due diligence in selecting the proper investment for your portfolio.
- Precious metals. There may be no investment asset class that’s more passive than precious metals. It is important to keep in mind that there are specific rules to handling precious metals within an IRA—such as how you store them—but once you make sure that these rules are met, precious metals are an easy investment to hold on to. Even on difficult days in the stock market, these precious metals often hold on to their value, giving investors more confidence in their long-term strategy.
- Brokerage account. Using a brokerage account within a Self-Directed IRA makes it possible for investors to select ETFs, stocks, and other assets that can pay out dividends or simply be held for long-term growth. In a brokerage account, it is possible for investors to choose just how much they want to poke around with their portfolio on a regular basis.