If you invested in the stock market at the bottom of the bear market during the Great Recession, you would have profited greatly by selling at the right time. With the recent stock market selloff, many investors lost their gains. Real estate often stands out as a more stable and predictable way to enjoy both appreciation and income. With real estate, there is less market timing involved. While many pre-retirees and retirees invest in stocks, mutual funds, exchange-traded funds and CDs, there are many alternative investments available for independent-minded investors. If you like to assert control over your finances, consider the advantages of a real estate IRA. When it comes to self-directed IRA options, there are many tax advantages as well as other hidden benefits. The younger you are when you move money from traditional retirement accounts into a self-directed IRA account, the more time you have for tax-deferred and tax-free profits. Consider the advantage of a real estate IRA when you see a rental property you want to buy in an up-and-coming neighborhood or a commercial real estate investment that perks your interest.
Diversify your retirement portfolio
Without a self-directed IRA, it is difficult to truly diversify your retirement portfolio. Most 401(k) plans only allow employees to invest in mutual funds or target-date funds. Experts often criticize target-date funds for having too many fees. Your 401(k) could also eat up a lot of your investment returns in the form of hidden fees. Even though new laws aim at making the fees more transparent, you could lose out with a heavily managed retirement account. When you open a self-directed IRA, you can choose alternative investments without paying a lot of fees. By owning rental properties in your IRA, you don’t have to worry about stock market crashes. With a real estate IRA, you can invest in commercial and residential real estate as well as industries that aren’t affected by negative economic trends. Some ways to achieve true diversification include real estate investing as well as offshore investing, loans and tax liens and deeds.
Protect your assets from bankruptcy
You protect your real estate investments including rental properties from law suits and investments because retirement accounts enjoy special protection from creditors and others. Self-directed IRAs enjoy the federal bankruptcy protection if you ever face financial problems. Your primary residence receives protection under homestead exemption laws, according to the state where you reside. However, real estate investments not inside an IRA account are often fair game to creditors and federal bankruptcy court.
Defer paying taxes or never pay taxes
If you use money from a Roth account for your self-directed IRA real estate investments, you don’t pay taxes after reaching the appropriate retirement age. You don’t pay taxes later with a Roth because you made contributions with after-tax dollars. Even with a traditional IRA or 401(k), you defer taxes until you take your minimum required distributions. Experts say tax-deferred accounts create massive future wealth.
Giving to your beneficiaries
In some cases, you can pass on your assets after death through a real estate IRA. When you leave an inheritance tied to little or no tax consequences, your children and grandchildren enjoy wealth for decades to come.
At New Standard IRA, we help investors prepare for retirement and other financial goals with lucrative alternative investments. We appeal to independent and aggressive investors looking for maximum control over their financial futures. With an IRA LLC set-up, you have greater options. For checkbook control, flexibility, simplicity and asset protection, consider a real estate IRA in the IRA LLC format. For more information on self-directed IRA accounts, please contact us.