One of the most complicated aspects of a career is figuring out how to make a graceful exit from it. Work is a joy for many and a pain for others, but for most working class Americans it is a goal to someday punch out for the last time and relax for the rest of their days, maybe on a beach somewhere or at least somewhere cozy. Making this dream a reality is more complicated that one might think though. It’s all well and good to say that you don’t plan on working again, but following through with that plan requires some source of money, whether it’s savings or an investment. While there are many ways to go about securing that kind of money, some ways are better than others, and many people make the mistake of choosing a given retirement plan by default without putting too much thought into it. The truth of the matter is that not all retirement plans are created equally; some retirement plans are definitely sounder than others. Here are three reasons to choose a self-directed IRA over the other plans:
1. More Flexibility
A self-directed IRA is, as the name suggests, a plan that allows the subject of the plan more say in what happens to their money. By allowing the would-be retirees to make the calls about where their retirement funds do and do not go, they are allotted more influence over their financial situation during that retirement. As the person whose life depends on that financial situation involving a decent amount of money, it seems clear that the retiree has the most motivation to ensure the plan goes, well, according to plan. If they want to go about using self directed IRA to buy real estate with a non recourse mortgage loan, no one can stop them. They’ve literally invested their future in this plan; it is definitely safest in their control.
2. Higher Success Rate
About two percent of current retirees in the United States are currently in the market for a job. Even worse, about twenty four percent of retirees are still working full time even after their plans should have allowed them to start their leisure! A self-directed IRA could have allowed those retirees to avoid that fate. Even if their funds had run dry for some reason, a careful investment like using self directed IRA to buy real estate could have allowed them a second source of income that would allow them to jump start their retirement with a shorter period of work.
Finally, a self-directed IRA is just safer than other retirement plans. These IRAs function with nonrecourse loans from non recourse lenders. For those asking “what is a non recourse loan”, this essentially means what while the property used for collateral in these loans can be repossessed if things go south, all the rest of the retirees assets would be safe. For example, using self directed IRA to buy real estate might put the real estate at risk, but not the borrower’s car. Generally it’s a system with much less risk than others! Anyway, what are your plans for retirement? More on this.