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Investing In Real Estate Podcast

According to recent data from the Federal Reserve, only 40% of Americans feel like they’re on track with their retirement savings. But I’m going to let you in on a little secret: traditional retirement accounts like the 401k aren’t designed to give you confidence or financial security. If you’ve resigned your retirement to these old school plans like pensions and 401ks, you’re missing out on an incredible way to build wealth for retirement—it’s called self-direction.

On today’s show, you’re going to learn about the power of a self-directed IRA. You’ll learn why it’s a superior retirement strategy, and how you can use a self-directed IRA to buy performing assets, outpace inflation, and create a comfortable retirement.

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First, what the heck is a self-directed IRA? A self-directed IRA is an alternative retirement account. It’s set up similarly to any other IRA, but it allows for a broader range of investments inside the account. A self-directed IRA gives the control back to the investor, instead of lining the pockets of some financial advisor or employer.

Most retirement accounts you’re familiar with, like a 401k, traditional IRA, or Roth IRA, are stock-based accounts. The sad truth is, with these accounts, you have very little control. In fact, most people hardly spend any time at all considering how their funds are being allocated inside these accounts. If you were to peek behind the curtain, you’d find that your accounts are subject to a lot of fees, and the investments inside the account are likely benefitting other people and entities more than they are helping you.

You might be wondering if this is some sort of new, risky investing scheme… it’s actually not. Self-direction became a viable option in 1975 as part of The Employee Retirement Income Security Act of 1974. You just haven’t heard of self-direction because it’s not promoted by big brokerages or banks. Why? Because they don’t make any money on a self-directed IRA—you do.

A self-directed IRA can be used to buy a myriad of asset types, not limited to: rental properties, precious metals, cryptocurrency, raw land, livestock, oil and gas.. Real estate is clearly the industry I have the most experience with, so let’s talk about buying real estate inside a self-directed retirement account.

The funds inside the self-directed IRA are used to buy the property. Therefore, the IRA earns the returns from your rental income. Every single profit and expense flows through the IRA.

What are the benefits of using self-direction to fund your retirement?

  • Freedom and control. This is truly what makes the self-directed IRA stand out from any other retirement plan. The self-directed IRA is flexible and allows for a wide variety of asset types, unlike traditional plans that limit you to stocks, bonds, and mutual funds. With a self-directed IRA, there are a handful of prohibited transactions, but for the most part, you get to choose what type of asset serves you best. This means you don’t have to rely on a financial advisor or company to dictate your destiny; you have the freedom and the control to decide for yourself.
  • Diversification. Because a self-directed IRA allows you to invest in alternative asset types, it’s a great way to diversify your portfolio.
  • Protection from the swings of the market and inflation. Traditional retirement accounts are tied to the stock market, leaving your retirement funds vulnerable every time the market takes a hit. But you can buy tangible assets in your self-directed IRA, which protects you from volatility.
  • Higher returns. When you invest in a regular stock-based retirement plan, you’re vulnerable to the swings of the stock market. But because you have more control with a self-directed IRA, you can choose tangible assets with a potential for higher returns & protection from the stock market.
  • Tax-free growth. In addition to the existing tax benefits of a normal IRA, a self-directed account comes with an extra bonus. The income that you make inside of your self-directed IRA grows tax-free.

And what are the drawbacks? These are important to consider. You have to know yourself and your goals to determine if investing in a self-directed IRA is right for you.

  • Rules and regulations. While the self-directed IRA does offer a ton of freedom, it’s not a free for all. The IRS has set forth a lot of rules and regulations around self-directed IRAs. There are prohibited transactions, disqualified persons, and more. If you’re not up for that type of structure, you might want to consider another retirement strategy.
  • Lack of liquidity. When you invest in a traditional, stock-based account, you can sell your assets any day of the week. But since most self-directed IRA assets are alternative investments, they’re not very liquid.

How can you get started? If you’re interested in buying real estate or another alternative asset inside a self-directed IRA, you’ll need to work with a custodian that specializes in self-direction. A custodian is necessary, as they will facilitate every transaction and be sure that you’re in compliance with the IRS.

At Morris Invest, we have a team of self-directed IRA experts who can walk you through the entire process of buying real estate with a self-directed account. We can set up your account in as little as ten minutes and guide you through the purchase of a rental property. To learn more, you can schedule a free call at morrisinvest.com

Using a self-directed IRA to build your retirement funds is a great way to hack the outdated and broken retirement system. If you’re financially intelligent, up for the challenge of a bit of extra legwork, then consider taking responsibility for your financial future and pursuing a self-directed IRA as part of your retirement plan.

Episode Resources

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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.

AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning, at NO additional cost to you, I may earn a commission if you click through and make a purchase and/or subscribe. However, this does not impact my opinion. We recommend them because they are helpful and useful, not because of the small commissions we make if you decide to use their services. Please do not spend any money on these products unless you feel you need them or that they will help you achieve your goals.

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Posted on

February 1, 2024

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