Self-Directed IRA

Saving for Retirement?  Have you found inflation has reduced your retirement savings? Is self-direction for you?

 
Many individuals work diligently each and every day to put the allowable pre-tax amounts under the Internal Revenue Code.  For a typical IRA that means $5500 for or $6500 annually is invested pre-tax.  For business owners and employees who have a SEP plan employers can contribute to the SEP plan up to $53,000 or 25% of the employee’s compensation, the lesser thereof, with  certain restrictions.  For a SIMPLE plan the limits are $12,500 (with catch up contributions age 50 and older of $3000).  In a typical 401(k) the employee can contribute $18,000 annually plus an additional $6000 if over age 50 and the employer can contribute up to $53,000 or more.  For Health Savings Accounts for those subject to high deductible heath plans we have an additional $3400 or $66750 per family with $1000 additional catch up for those age 55 and older, and in an Educational Savings Accounts you may contribute up to $2000 per year per child, however their are limits based on income.

When most of us look at the typical growth of our funds in these plans over a period of time, we may or may not be pleased with how they have performed.  Over the years I have seen many clients who have retired and who have realized that their retirement savings can be extinguished or depleted substantially, or that they did not in fact grow to the extent predicted particularly when the stock market fluctuates substantially due to factors beyond the investors control, and now they are retired on a very tight budget with savings that is much smaller than expected.
Diversification is the the ultimate goal in any investment plan.  In diversifying their portfolios, many individuals buy real estate and other alternative assets such as precious metals etc. and they do so by self-directing or taking control of their investments and take responsibility for the management of their performance.  Self-directed investing has many pros and cons but it may be one way to diversify your current portfolio.  Many real estate investors are using this self-direction to substantially increase their portfolios by flipping, buying and holding rental properties or by lending to others for the purpose of real estate investing.  Instead of the ups and downs of the stock market or into a low interest cd investors are choosing real estate and other alternative assets where they have the ability to have input into the structure of the deal, as well as being able to monitor and drive performance of the investment which may help them reach their goals faster.
All limits are subject to specific limitations and restrictions placed on each plan and are merely an example of plan terms-seek the advice of a tax professional, attorney and plan administrator before investing.  Annual contributions to all of your accounts (including elective deferrals, employee contributions, employer matching and discretionary contributions may not exceed the lesser of 100% of your compensation or $54000 for 2017).  Your compensation amount is also taken into consideration and may not exceed certain limits, in certain cases ($270,000 for 2017).

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Posted by: lesliequinn on October 13, 2017