For many members of Generation X and baby boomers, the clock is ticking for retirement. Many people in their 40s, 50s and 60s lack sufficient retirement savings, according to experts. To get the most progress, it pays to start an ambitious investing plan. Owning acheckbook control IRA allows you to invest more efficiently for retirement. Some pre-retirees prefer the flexibility of a self-directed IRA versus a traditional 401(k) or IRA. Many investors have questions about a checkbook control IRA, which is a type of self-directed IRA that gives you more control and autonomy. As the stock market experiences increased volatility, it is an ideal time to move money out of traditional accounts and into a self-directed IRA.
Setting up an LLC
When you opt for a checkbook control IRA, you receive a self-directed IRA with an ownership of an LLC (limited liability ownership.) You can invest more efficiently for retirement with an LLC because it allows you to buy real estate and other alternative investments. When you only have a decade or two left before a target retirement date, it pays to have reliable retirement income. At this time, the rental market is booming. The latest statistics show almost half of renters are people age 40 or older. Meanwhile, experts believe the stock market is on the cusp of a bear or down market. However, people who manage their own retirement money aren’t limited to stocks, bonds or a combination of the two with mutual funds and life-cycle funds.
Deferring capital gains
Another benefit of a self-directed IRA is the fact that capital gains get deferred. A self-directed IRA receives the same treatment as other retirement funds so you don’t owe taxes when your real estate goes up in value. Any rental profit income goes back into the self-directed IRA. When you reach retirement age, you ideally own an account that is worth significantly more than it did when you started. If you buy real estate or alternative investments in a self-directed Roth IRA, you can take out the money tax-free when you are retired. With a traditional self-directed IRA account, you lower your taxable income but pay taxes when you take the money out.
Serving as the manager
With a checkbook control IRA, you can write checks to buy real estate or alternative investments without any time delay. Because you don’t have any custodian involvement, you manage your financial future with hands-on control. Many independent and free-spirited baby boomers and members of Generation X rather make their own investment decisions. Some popular investments include private businesses, gold, mortgages, commercial real estate, precious metals and tax liens. A self-directed IRA that owns an LLC means you can handle transactions including the down payment on a real estate property. Experts say the LLC format significantly reduces any litigation threats because investments within your self-directed IRA remain isolated from other estate and retirement funds.
Although you manage your self-directed IRA account, the IRS does prohibit certain transactions. For example, you can’t live in yourinvestment property or use it as a vacation property. The purpose of owning a real estate property within a self-directed IRA is to makeyour retirement money grow. Close relatives such as children and parents can’t live in your investment property owned by your self-directed IRA.
At New Standard IRA, we help our clients set up checkbook control IRA accounts. With checkbook control, you remain in control of yourfinancial destiny. Whether you are new to investing or experienced, a checkbook IRA offers the maximum flexibility and freedom. For more information about alternative investments and how to invest outside of Wall Street, please contact us.
