By: Jeffrey Dixon, Business Development Manager, uDirect IRA Services
Retirement is a reality that most all Americans will face as few people work until they die. However only around 30% of people believe they can retire in comfort and some experts think that estimate is generously high. (1) Self-Directing can get you there.
Determining how much you will need in retirement is a difficult thing as there are many variables that make up retirement. Many people think they will be able to work longer than they actually can. Health care and the cost of living is difficult to predict for the future.
Many financial experts state you should plan on needing 80% of your pre-retirement income in order to have a comfortable retirement. While is if often assumed that expenses will be less after one retires, the Employee Benefit Research Institute found that 50% of families increase their spending after retirement. (2)
The inconsistency of the stock market often decimates a retirement plan. The morbid joke about the Great Recession was that it turned Americans’ 401k’s into 201k’s. Indeed, the nation’s 401k’s and IRAs lost about $2.4 trillion in the final two quarters of 2008, and the average loss that year for workers who had been on the job for 20 years was, according to one estimate, about 25 percent. (3)
That is why Self-Directing your retirement with a self-directed IRA can be such a valuable tool. With an SDIRA you can take control of your retirement plan by moving it out from the stock market, into hard assets like real estate, notes and private equity.
The IRS puts few limitations on the types of assets an IRA can hold. You are not permitted to own life insurance contracts or collectables in an IRA. You also can not invest in an S corporation. In addition, there are some limits on who your IRA can work with. The prohibited parties to an IRA are the account holder and their spouse, as well as their linear ascendants and descendants. Your IRA is also prohibited with working with anyone you have fiduciary relationships with. (4)
Many of the great fortunes of this country have been created and sustained by real estate. If you believe real estate or other asset classes outside of the stock market could help supercharge your retirement plan, you should consider Self-Directing with a Self-Directed IRA. (5)
(1) https://www.consumeraffairs.com/news/survey-shows-older-workers-are-postponing-retirement-042618.html
(4) https://udirectira.com/ira-rules/
(5) https://www.biggerpockets.com/renewsblog/how-the-wealthy-invest/
