Whether you are planning to retire in another 50 years or five years from today, it’s important to diversify. Diversification is to retirement savers as location is to real estate investors. When it comes to rebalancing your portfolio, consider opening a self-directed LLC IRA. With a self-directed IRA, you open up doors to invest in alternative investments. When you are young, you can afford to keep an aggressive portfolio but not everyone feels comfortable with more risk. Creating a good mix in a retirement portfolio isn’t just about your biological age, but your risk tolerance. There’s no shame in creating wealth by holding gold or real estate within a self-directed IRA.

Opening up the possibilities

With a regular brokerage account or traditional IRA account, it’s simply not possible to buy rental homes, private stock offerings, joint ventures, franchises, tax liens, precious metals and other alternative investments. By just owning a self-directed retirement account, you make it easier to achieve diversification. Rebalancing your portfolio is an investing strategy that boils down to the fact that you don’t want to put all your eggs in one basket. You reduce your investment anxiety so you can sleep at night knowing you’ve built a balanced portfolio. Rebalancing doesn’t mean you discard everything you currently own as investments. But it does often entail freeing up some funds to invest in something new or different.

Rolling over an old 401(k)

One easy way to rebalance your portfolio dominated with mutual funds or exchange-traded funds is to roll over an old 401(k) with a former employer. You can roll the account into a self-directed LLC IRA for maximum freedom and flexibility. With a diversified mix, you won’t experience sleepless nights as the stock market crashes. Even if you don’t have an old retirement account, you can start contributing to a self-directed IRA. Talk to your tax professional about whether your income and personal situation allows you to invest in a Roth versus a traditional account. Figure out whether you rather use after-tax or before-tax dollars to contribute to your self-directed LLC IRA or other retirement savings accounts.

Finding different ways to diversify

Some ways to diversify include looking at asset classes, geographic locations, industries and company size such as small capitalization versus large capitalization companies. Invest in alternative investments that pay dividends as well as some that don’t. No matter how you diversify your retirement account, you keep the same tax benefits. Money inside a self-directed LLC IRA grows tax deferred. If you choose a Roth version, you use after-tax dollars so you can withdrawal the money tax-free in retirement. Some investors like to own a Roth and a traditional account.

Choosing a target

When rebalancing, choose an asset allocation mix. If you are a more conservative investor, consider using a self-directed IRA to buy real estate in booming cities or up-and-coming suburban neighborhoods. More aggressive investors often invest in riskier investments, but few investors allocate all of their retirement money in speculative investments.

If you aren’t sure when to rebalance your portfolio, talk to a professional at New Standard IRA. Some people rebalance at tax time or the end of the year. You can set up a self-directed IRA at any time to take advantage of any timing or market trends. As far as how much to rebalance, aim to rebalance at least 5 percent of your overall retirement savings unless you have a portfolio that is extremely risky or too conservative.

At New Standard IRA, we set up self-directed IRA accounts for our clients who want more freedom and control of their futures.  For more information on the self-directed LLC IRA, please contact us.