You might have seen on our website that a Self-Directed IRA can be a key to financial freedom. But what does this mean exactly? And how might a Self-Directed IRA serve as something that can unlock something as profound and life changing as financial freedom? In this article, we’ll look at the various features of Self-Directed IRAs that make it possible for investors to use them for greater financial freedom, as well as how investors can establish the right habits for continuing to turn this key throughout their investing lifetimes.
How a Self-Directed IRA is Like a “Key”
First, let’s take the example of the key. A key is something small and simple, but with a purpose that allows far greater things. The metaphor here works for the Self-Directed IRA. On its own, the Self-Directed IRA isn’t much, because it’s simply a tool you use for investing. It’s in the investing—in the application of the Self-Directed IRA—that you begin to yield its benefits.
Let’s take a look at a few characteristics of the Self-Directed IRA that allow you to leverage it in even greater ways:
- Nontraditional retirement assets. Using a Self-Directed IRA makes it easier for you to invest in nontraditional retirement assets like rental real estate properties. That means that you have the potential to use your Self-Directed IRA to attain a level of financial freedom far beyond anything that you could get if you were to invest in just one type of asset class such as the stock market. By broadening your horizons, you’ll be able to have the security of casting a wider net—and hopefully, catching more fish.
- Retirement and tax benefits. Putting nontraditional retirement assets in a Self-Directed IRA means you’ll have access to retirement and tax benefits that you wouldn’t normally have if you were to invest with personal funds in, say, precious metals or real estate. If you were to invest using a Roth IRA, on the other hand, then you would be able to use the profits within that account that grows over time to reinvest. And since you fund a Roth IRA on the front end, you don’t have to pay taxes on this money when you take distributions.
Needless to say, Self-Directed IRAs can be a powerful way to achieve more financial freedom. But there’s still one essential missing element: the person who’s turning the key.
Habits to Help Ensure Financial Freedom Through Self-Directed IRAs
A Self-Directed IRA may function like a “key” for financial freedom, but is it enough? Here are some additional habits that will be good for anyone seeking financial independence in retirement:
- Education. We at American IRA regularly put out content such as webinars and YouTube videos to help people learn all that Self-Directed IRAs have to offer. As a Self-Directed IRA administration firm, we are not in the business of giving financial advice or telling people how to invest their money specifically, but we know the value of financial education. By educating people about the possibilities of a Self-Directed IRA, we empower investors to take a greater hold of their own finances, which helps them unlock additional ways to financial freedom.
- Research. With a Self-Directed IRA, you’re going to be the one calling the shots. That’s a lot of power. It’s also a lot of responsibility. That’s why it’s important for you to understand how it pays to be well-informed. For example, should you invest in the first rental real estate property opportunity you, see?