A self-directed IRA is a retirement plan that allows investors to purchase a wide array of alternative investments aside from stocks, bonds, and mutual funds within a tax sheltered account. All self-directed accounts including Roth, traditional, SEP, Simple, and 401(k) s qualify to purchase non-traditional assets. Some investments that are permissible inside a self-directed IRA are real estate, notes and mortgages, single-member LLCs, private placements, and more. There are many advantages of investing using a self-directed IRA. Below are three primary reasons people invest within a self-directed retirement account.
- A self-directed IRA is an alternative source of funding. When you are considering investments in real estate, private loans, private companies, etc., you may not realize that IRA funds can facilitate those investments. You may be under the impression that you can only use your personal funds to purchase the investment. However, you are allowed to use funds from a self-directed IRA to make these investments and more. By doing so, you may find a potentially large source of additional monies to make these different types of investments.
- Are you looking for higher returns? Most retirement funds (close to 95 percent) are invested in accounts through a brokerage firm or bank, which offers limited investment choices. The majority of people have been conditioned to think that securitized investments like stocks, bonds, and mutual funds are the only options for investing their retirement dollars. Individuals who are unsatisfied with the returns these accounts earn often look for alternative investments, leading them to discover the self-directed IRA. Additionally, individuals learn that by using self-directed IRAs, they can invest in other types of assets they possibly understand much better than those offered at more traditional institutions. Investing in what you know and understand can lead to higher returns within the retirement account.
- Self-directed IRAs enjoy the benefit of tax-free or tax-deferred growth. The time value of money simplified is the assumption that at the present time, money is worth more than the same amount will be worth in the future. Why would you want to pay the IRS capital gain taxes after each investment sale when you have the ability through an IRA to pay taxes later? The money you save in taxes can be invested to create even higher wealth. By choosing to invest in alternative assets, an IRA owner can potentially earn greater returns through these assets that may help the IRA grow at a fast pace, resulting in higher account values within a shorter time frame.
Investing using a self-directed IRA is simple and it’s a great way to diversify your retirement portfolio. To learn more or to start IRA investing, call Midland IRA at (239) 333-1032 or visit www.MidlandIRA.com.