Retirement accounts hold trillions of dollars of assets. Almost all of it is in the hands of Wall Street through stocks, bonds, mutual funds and annuities. For those who want to move their money closer to Main Street, real estate, precious metals and private placements are appealing alternatives.
But even though many real estate investors have already discovered the powerful benefits of self-directed retirement account investing, the vast majority of U.S. investors falsely believe that Wall Street is their only option. And even those familiar with the idea of self-direction may not be up to speed on the latest and greatest innovations.
It’s been several years since we’ve examined this topic in depth, but notwithstanding the latest pullback attributed to the government shutdown and looming debt ceiling debate, stocks have been at bubble like highs. So if you or your prospective investors are looking to move from paper assets to something more tangible, self-directed retirement account investing could be just what the doctor ordered!
On location in Orlando, Florida probing the depths of self-directed retirement account investing:
- Your Doctor of Dialog and host, Robert Helms
- Your analytical co-host, Russell Gray
- Self-directed Retirement Account expert, Glen Mather
Glen Mather has been helping people all over the U.S. convert their rollover 401ks into self-directed individual retirement accounts. So we figure he’s the perfect person to brief us on fundamentals of self-directed retirement account investing.
We open up talking to Glen about the psychology of investors when it comes to their retirement accounts. Not only does retirement seem far away, so there’s no sense of urgency, but people have been conditioned to think that the government, their employer, or even their financial guru, will take care if it. Of course, you’re not the complacent type or you wouldn’t be reading this blog. But that doesn’t mean you aren’t surrounded by people who are – and maybe YOU can help those people by partnering with their retirement accounts for deals you put together.
To make sure no investor is left behind, Glen describes the roots of individual retirement accounts from WAY back in the 70’s. Back then, Uncle Sam realized that Social Security was going to be broke at some point in the future (now), so it was important to get citizens more engaged in building an asset base capable of providing for their own retirement. Great idea!
Big corporate employers liked it because it took the Defined Benefit monkey off their back. Now an employer could set up a 401k and even toss in some matching funds and have ZERO exposure to the investment results. From the corporation’s perspective, this turned out to be a great move when the stock market tanked in 2000 and again in 2008. Investors got the shaft, while corporations were in the clear.
So the burden of asset management was transferred from professional pension plan managers and handed to the individual. For those who put in the time and effort to get educated, it opens up a world of opportunity. For those who don’t, they become dependent upon a growing army of Wall Street salespeople.
Wall Street liked it because now they had a short path to private investors. Just go in and sell the employer a 401k package and get all the individuals’ retirement assets. And to make it simple for the sales guy and the employer, most offer simple plans with few options.
Don’t get us wrong. We know people who make a lot of money playing the stock market. And we know a few Wall Street folks that are good guys, who are working hard to help people achieve their financial goals. We’re not slamming those people (at least, not badly).
But for those investors who want to understand what they’re investing in, have a reasonable amount of control, and choose from the widest selection of options, Wall Street is probably not the best fit. That’s where a self-directed retirement account can be a great tool for the educated investor.
Now there’s a few rules you MUST be aware of to do self-directed retirement account investing right. But it’s easier to talk about what you CAN’T do because the list is short.
You can’t invest in life insurance or collectibles. Everything else is fair game. So real estate, private notes, shares of pre-IPO or other non-public entities (private placements), precious metals, oil; PLUS all those paper assets you’re used to from Wall Street.
Also, you can’t do business with a disqualified person or entity, which is also a short list including you, your spouse, or your ascendents and descendents.
Last, you can’t enjoy a current benefit. Everything you do must be for the benefit of the retirement account. You have to wait until retirement to partake.
So again, the list of what not to do is pretty short. And there’s more good news. Opening a self-directed account and making your investments isn’t rocket science. It’s actually pretty straight forward, though you might get some push back from your current custodian. No one likes to lose customers.
But before you print out this blog and use it as your guide (please don’t…we’re just two guys on the radio, so be sure to use a quality custodian and consult with your tax advisor), Glen was nice enough to put together an FAQ which you can request by clicking here now.
For now, listen to this episode and discover how you can harness the power of individual retirement accounts to help yourself and others grow retirement portfolios with real assets.
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