Baby Boomers, coming upon their retirement years, like my husband and I were a few years ago, have been discovering a powerful secret: that “self-directed” IRA custodians are an excellent way to invest in real estate and other assets and to grow their retirement wealth at a much faster pace.
In our case, we became frustrated with the losses our IRAs and 401Ks were taking during the 2008-2009 financial crisis. All of our retirement savings was dependent on the volatility of the market and suddenly we were hit with the realization that this was not working for us. With only 8 years left before retirement, we were told by our financial advisor not to worry since the market typically recovers every 10 years. Added to this was our distrust in the reliability of social security, our pensions or any other government program to take care of us, we decided we needed to take control.
Although I knew very little about investments, there were two things I did know. I knew most of the richest people in the world made their wealth through real estate and that the best way to grow our money was to keep it from being taxed. So our learning began. When I found out that we could transfer our retirement savings to Self-Directed retirement accounts that also allow for alternative asset investing such as real estate, tax liens, promissory notes and much more, moving our salvaged retirement savings to self-directed IRAs was a no-brainer. Looking back, I would say now that this was the single-most powerful decision that affected the course of our financial future and saved our plan to retire in eight years.
We started investing small amounts in tax liens with some success but the real money came in from making private or hard money loans to other real estate investors in our area who couldn’t get traditional bank financing to rehab and flip houses. Our IRA would lend money to them using their property as collateral for the loan often earning 13% to 20% for the length of the note. For me, I was more comfortable using an experienced third party mortgage lender to broker our deals and underwrite the borrower, the property and the note. This strategy not only saves me a lot of the due diligence needed to reduce our risk but it also allows us to sleep at night.
My #1 advice to anyone wishing to grow your retirement wealth?
Take control of your future by growing your money tax free and diversify your investments beyond the volatility of the Market. One powerful way of doing this is with a Self-Directed IRA.
Susan Jensen is Executive Director of the Metrolina Real Estate Investors Association, which provides education, mentoring, and networking for real estate investing in the Charlotte region. She can be contacted at susan@MetrolinaREIA.org. For more information, visit www.MetrolinaREIA.org.