Q: What do the following three things have in common: the European Union, Presidential policy, and High Frequency Traders?
A: You can’t control them and yet they can all move the stock market.
That’s not necessarily good for the stock market, and it’s definitely not good for your retirement. If you are like most Americans, then you have your retirement funds housed in a standard IRA or 401(k) with the likes of Vanguard or Fidelity. Those are solid companies, but the products they’re offering, retirement plans based on the performance of the stock market, leave a lot to be desired. The market dips and swings according to the vagaries of politics and traders, and seeing your fund’s monthly recap is often a stress-inducing roller coaster ride. Even the most solid of providers can’t remove the frustration of watching your retirement slowly slip away.
So what are your options? The simple answer is to move your retirement funds out of Wall Street products, and instead invest them in assets that you personally understand. Do you have a feel for local property? Do you have professional knowledge that gives you insight into a specific business? Do you think that precious metals are a safe hedge against the economy? In all of these cases, a platform exists which will give you the control to invest your retirement funds in a sensible manner. That platform is the Self Directed IRA.
A Self Directed IRA allows you to choose which specific assets you would like to be part of your retirement portfolio, and then invest in them accordingly. These platforms come in two basic flavors: Custodian and Checkbook Control. In the Custodian model, the Custodian actually holds the retirement funds and makes all investments and transactions. This is generally not advantageous for the investor as the process is chock full of paperwork, can involve significant delays, and is generally fee heavy. In the Checkbook Control model, the investor controls the funds through a checking account at the bank of his/her choosing. This effectively gets rid of the middle-man custodian, thereby eliminating the paperwork, delays, and transaction fees. For these reasons, Checkbook Control model is quickly emerging as the favored model in the self-directed arena.
A sister product to the Self Directed IRA is available for self-employed individuals and is known as the Solo 401(k). It functions in the same manner as the IRA with the power of Checkbook Control and the ability to invest in alternative assets. In addition to these benefits, the Solo 401(k) also offers the possibility of a personal loan up to $50,000 and allows for much higher annual contributions. You don’t have to be fully self-employed to qualify for a Solo 401(k). Even a minimal of self-employed income each year, (e.g. a little side consulting,) can qualify you for this platform.
Whichever route you choose, just remember that running your own self-directed IRA is not like picking a few stocks and forgetting about it. You will be more involved as you actively grow your retirement funds and secure your financial future. However, it’s that involvement which is the secret to the platform’s success. You will be investing in those areas that you understand, and you will be caring for your funds like only you can. In a very real sense you’ll be creating your own prosperity.
Broad Financial specializes in Self Directed IRAs and Solo 401(k)s with Checkbook Control. They can be reached at 800.395.5200.