Whether or not your parents took the time to teach you how to make money and take care of money, it is your responsibility and your right to learn everything you can about it.
Considering how hard most citizens work for money most of their lives, you would think that they would want to learn more about it. Yet, somehow the knowledge of the rich is still considered mysterious, only for those born to wealth, or those who are greedy.
Most Americans are aware of only a fraction of the power IRAs hold. That includes most people who have IRAs. Ask many financial advisers how to set up a checking account for your IRA and they'll think you're joking or uneducated.
While many financial institutions use the term self-directed when describing IRA investment choices, they actually mean the ability to choose between a few investment categories such as stocks, bonds, and mutual funds - the ones they're in business to promote.
What about other investment opportunities such as real estate, funding mortgages, and buying tax certificates?
Taking advantage of these opportunities is simple when you know a.) it is possible, and b.) choose the right custodian who can give you actual control of your retirement assets.
With checkbook control of these assets (run through a business entity), you can take advantage of a hot opportunity in the real estate market, then seamlessly move your money back into more traditional securities, stocks and mutual funds when the real estate peaks.
The IRS allows you to use leverage together with your retirement money, which can increase your returns significantly by enabling you attract larger deals.
Obviously choosing the right custodian for your retirement funds is extremely important so here are a few summarized tips.
Look for a custodian who: a.) understands that a self-directed fund means you have a checkbook with access to those funds. b.) understands and can explain a multi-faceted portfolio c.) Does not restrict your use of leverage money.
Be proactive with your retirement account. Lots of people want your money even more than you do but you are the one who worked for it.
Don't wait until you retire to learn how to take care of your money. That is when it should already be taking care of you.
If you have an IRA, you need to invest the contributions in stocks, bonds or mutual funds, correct? Actually, this common perception is wrong. You can make far more money by actually investing in property such as homes, condos and so on.
The average person will always invest in the stock market in some form or another with their IRA. The question is whether you want to be average when planning for your financial future. If not, you need to think outside the box.
Every time I read about a new wealth building strategy, I do so with a healthy bit of skepticism. If it sounds to good to be true, it often is. This strategy, however, does not push any limits or validate itself because of a loophole. It is basic IRA planning.
Section 408 of the tax code states clearly you can invest IRA contribution in a variety of property. The wealthy have used this approach for a long time and more than a few now own big portfolios of commercial property, rental properties and so on through their IRAs.
To buy homes, commercial properties, rental properties and so on, you need to open a particular type of IRA. It can be a traditional or Roth version, but it must be self-directed and have a custodian. Most banks and trust companies offer them at a small cost.
Regardless, a self-directed individual retirement account works a bit different than the ones most people use. The account has a custodian who acts much like a trustee for a trust. The custodian can be a bank or other advisor and the fees are low.
Once up and running, it is time to put money into the account. How you do this is entirely dependent upon your specific situation. You can roll money in from another account or perhaps just make contributions. Consult with your financial advisor for the best answer.
With money on hand, it is time to invest in property. There are surprisingly few rules. The only limitation is on self-dealing. You cannot buy your current home or a property you already own. Most people buy second homes or rentals.
From a procedural point of view, you do no actually purchase anything. The IRA does. Technically, the custodian of the IRA will sign on behalf of the account and so on. You then relax and watch your balance grow as rental payments come in or appreciation occurs.
You might recall I mentioned the Roth option above. Yes, you can use this strategy with the Roth account. In fact, it is preferable. Why? When you retire, all distributions from the Roth will be income tax free. That makes for an excellent investment.
Using this strategy to purchase property is fairly straightforward. If you are looking to build wealth in your IRA, make sure to speak with a financial advisor familiar with this strategy.
Both Randy Gilbert & Aazdak Alisimo are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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