When it comes to retiring, most Americans dream of having passive income to cover their vacations, trips and golf outings. In reality, reports by the National Institute on Retirement Security show most people have insufficient retirement savings. In fact, most Americans on the cusp of retirement struggle with a retirement balance of just about $14,000. If you find yourself in a similar predicament, consider opening up a self-directed IRA with checkbook control so you can position yourself for a more secure retirement. By contributing to a self-directed IRA, you gain the same tax advantages as you gain with any retirement plan. Your gains remain tax deferred, which means you don’t have to pay taxes when your account grows. With a traditional account, you pay taxes when you take out the money in retirement. With a Roth self-directed IRA, you use after-tax money so there is no tax consequence down the road. As far as retirement goals, consider a few of the best retirement wealth-building tips for greater choices and independence.
Gaining a financial custodian
One of your retirement goals is to own a retirement account that offers flexibility. You need a financial custodian, but one that is not as powerful and controlling. You take back the power and control with a custodian that executes your wishes as the self-directed IRA account holder. With that added checkbook control, you actually have direct control. A truly self-directed IRA means you don’t need to wait for a custodian to process your transactions.
Increasing your choices
Most people strive to accumulate at least $1 million for retirement. The number of $1 million is far above that $14,000 the average pre-retiree has put aside for retirement. At the same time, $14,000 is a fine starting point, especially for real estate investors. A self-directed IRA with checkbook control lets you put a down payment on a rental property for your retirement portfolio. Under the self-directed IRA setup, you also have the choice to invest in private limited liability companies, trust deeds, corporate debt, precious metals and other alternative investments.
Rolling over forgotten accounts
Through the years, you like switched jobs. Some pre-retirees forget they have old 401(k) plans and rollover IRA accounts left neglected for years or decades. By rolling over old retirement plans into a self-directed IRA, you bring new energy to your retirement savings goals. Staying organized is a great retirement goal. When it comes to finances, many people lose money simply because they lose track of their assets. After paying off consumer debt, enjoy the joy of decent returns on your money.
Knowing the rules of the game
Investing in rental properties works for a lot of retirees who want passive income. In order to make a self-directed IRA plan work in yourfavor, make it a retirement goal to follow the rules. It’s important to avoid taking title of your self-directed checkbook IRA in your own name. You would disqualify yourself for a retirement account if you use your name as opposed to a LLC set up. Also, follow the rule of paying expenses out of the account as opposed with your personal checking or savings. The rental income that comes in has to go back into your retirement account. Of course, once you reach retirement age, it’s perfectly fine to withdrawal your money. Depending on what kind of account, you may or may not owe taxes.
With a self-directed IRA, you can’t receive benefits from the account until you reach retirement age unless you pay the penalties for early withdrawal. Experts remind people to never live in a rental property or vacation home owned by your self-directed IRA. Don’t make the mistake of breaking a rule and having the IRA treat your entire account as a distribution. When you are older, you can convert a rental into a personal home as long as you pay the taxes upon retirement required with a traditional account.
At New Standard IRA, we pride ourselves on helping our clients meet their retirement goals. We are self-directed IRA providers who understand the self-directed LLC IRA set up. For more information on investing in real estate and other alternative investments to meet retirement goals, please contact us.