Build your financial future by maximizing your retirement assets

By Patricia Hightower, Road Home Investments LLC

Are you one of a multitude of investors who has recently experienced significant losses in your retirement account as a result of stock market decline?

In 2008 Americans were faced with the unthinkable collapse of large investment banks and corporations, combined with diabolical scandals targeting investors. The climate of fear created by scandals like the recent global Ponzi scheme masterminded by rogue Bernie Madoff, has some investors running for the proverbial hills with their nest eggs.

The Recovery Plan

Investors fed up with the shrinking of their retirement accounts and the shortcomings of financial entities entrusted with their livelihood, may want to consider taking control of their financial destiny and start building wealth with a self-directed IRA. The key advantage of the truly self-directed IRA is that the account owner is directly involved in the choosing of IRA assets. A self-directed IRA allows asset classes in both "traditional" investments such as stock, bonds and mutual funds and "non-traditional" investments like real estate (foreign and domestic), mortgages, notes, tax liens, LLCs, private placements and much more.

An increasing number of individuals are discovering the self-directed IRA, an investment vehicle that features the freedom to choose from this array of investment alternatives without being "pigeonholed" with the limitations of traditional stock market investments that brokers and bankers offer for your IRA.

The motive for Wall Street to monopolize your retirement portfolio is based on the steep "commissions" they make selling you their limited menu of financial products. Conversely, a custodian and administrator in charge of a self-directed IRA account will not (or cannot by law) sell you investment advice, financial products or charge commissions - they simply charge an annual fee of anywhere from $100 to $2000 dollars depending on the investment portfolio.

The Power of Diversification

Consider this. Most of us are familiar with the term "diversification" in regards to investing, are we not? Diversification is a concept often explained with the age old saying - "don’t put all your eggs on one basket." Harry Markowitz, thought leader and developer of the Modern Portfolio Theory stated that diversification is the "free lunch of finance."

Yes, it is deemed mission critical to maintain a diversified "mix" of investments in an investment portfolio. And the rather shocking fact is - the retirement portfolios of 96% of American investors currently held in inflexible traditional IRA accounts in banks and brokerage firms simply do not adhere to this traditional wisdom. (Buyer beware: the "self-directed IRA" offered by many banking institutions and brokerages is a "misnomer" - it is a term that implies that the account holder can only "choose" from the "menu" of stocks, bonds and mutual funds offered by the firm or institution.)

So why be limited only to stocks, bonds and mutual funds as an investment strategy to grow your assets? Should you settle for a 2 or 3% rate of return when you can reach for 20 or 30%, depending on your risk tolerance? A self-directed IRA allows for an endless variety of asset classes, with the IRS disallowing only 3 types of investments: Life Insurance, Collectibles and S Corporations. (reference: IRS Publication 590)

With optimum diversification and the reallocation of assets in a self-directed IRA, meeting your retirement goals can truly become a reality.

Get Advice

"Those that won’t be counseled can’t be helped." - Benjamin Franklin. It is imperative that after opening a self-directed IRA account you consult with experts to avoid breaking any laws or prohibited transactions pertaining to use of IRA funds. You would not want to be subject to stiff IRS penalties and losses due to lack of education and expert counsel.

In every investment portfolio, there needs to be a good mix of opportunity and risk. If you want to make money, you cannot cut out all risk, however the goal is to find an appropriate balance and every investor must decide what his or her risk tolerance is with the assistance of a trusted financial professional.

Real estate investing, for example, a historically safe and tangible investment, has created significant wealth for investors who understand the risk-return trade-off of this asset class. With real estate, a self-directed IRA investor has the security of a tangible asset, whereas the investment in a mutual fund you may not know "where" your money is actually invested. With your self-directed IRA, you can take control, choosing from a myriad of investments to round out and elevate your retirement portfolio.

The Approach

Six Steps to a building your financial future:

1. Choose a top-tier custodian and open a self-directed IRA account

2. Do your homework – continue to educate yourself on self-directed IRA investing

3. Get advice on potential investments from your informed (specifically on self-directed IRA guidelines and investing) and trusted professionals (CPA, attorney, adviser)

4. Seize higher yield investment opportunities employing investment growth strategies

5. Capitalize on the incredible tax advantages - one key objective of a self-directed is to provide a vehicle for a taxpayer to grow their wealth without being subject to income taxes on the gains

6. Be accountable, taking a proactive approach towards improving investment returns, taking advantage of a greater breadth of investment options

Take Responsibility for your Financial Future

It’s up to you.

Fewer than 4% of investors self direct their investments, are you ready to take an active role?

Taking personal responsibility in planning your financial future is more important than ever. Think about it. The amount of retirement savings you accumulate will have a direct and dramatic impact on whether you will be able to maintain your standard of living when you retire.

To maintain their standard of living, most people will need more than social security and their company retirement plan. With a self-directed IRA you have both the privilege and responsibility to make sound financial decisions for your IRA money. However, you must be prepared to educate yourself, enlisting the assistance of qualified informed professionals to achieve greater diversification and investment potential.

A self-directed IRA is an extremely valuable tool to create wealth when guidelines are followed and used efficiently with the proper allocation of assets.

If we remain proactive in educating ourselves about the various options and flexibility we have to grow our retirement dollars, we will indeed reap the benefits and prosper.

Why not take control of your financial destiny?

Invest in a brighter tomorrow with a self-directed IRA.