Grove Family Investments

How Self-Directed IRAs Can Change Your Future

We all know that saving for retirement is very important. None of us wants to end up being forced to work in our later years when we would rather be spending time with our grandchildren or doing the things that we enjoy. I always thought that putting money away for retirement was a relatively passive thing. By this, I mean that you give your money to Vanguard, Fidelity, or whomever you use, and they decide where that money goes and you have very little say in the matter aside from choosing form a predetermined list of mutual or exchange funds. It turns out this is not correct. You can control your retirement savings and direct them to investments that will be more successful at helping you reach your retirement goals earlier. An amazing vehicle for doing this is what’s known as a self-directed IRA.

Get to Know Self-Directed IRAs

First things first, a self-directed IRA works much like a regular IRA but with a broader range of investment options. For example, you can take your IRA and become a lender investing in real estate deals, you can buy crypto, gold, baseball cards, or whatever you want.

The main caveat is that you have to abide by IRS rules. As a general rule, all of the gains need to be invested back into the IRA until you reach retirement age. you can’t withdraw the funds for your personal use or you will incur a costly penalty. I am not an expert on these matters, and this does not constitute advice but can only tell you what I have learned. There are numerous companies that do this professionally and will answer specific questions related to what you would like to accomplish. Unlike the large traditional companies like Vanguard and Fidelity that only offer stocks, bonds, and mutual funds, these custodians can help you invest in whatever you would like.

How It Works

Essentially, these self-directed IRA custodians will help you set up an LLC with its own bank account. The new LLC will then make loans or buy assets using its own bank account. Separating all these transactions from your personal account is vital to avoid penalties.

As an example, if you were to work with us, you would set up an LLC with a self-directed IRA custodian and transfer money into a bank account associated with that LLC. We would find an investment home that fits with your goals. We would set up the contracts and paperwork, and at closing, you would wire money from your self-directed IRA account to the title attorney prior to closing. After that, we would make payments to you monthly which would be deposited into the account associated with the self-directed IRA LLC. If you invest for equity upon sale of the house, the proceeds will go into the self-directed IRA account. You can reinvest that money as many times as you would like. You can then withdraw it when you reach retirement age or continue to reinvest. You can continue to make tax-deferred contributions to the account until you reach retirement age.

Wrapping It Up

Setting up a self-directed IRA for real estate investment can be a game-changer for your retirement portfolio. By choosing the right custodian, doing your research, and sticking to IRS rules, you can take control of your financial future. Feel free to set up a call with us, and I can direct you to the company we use and show you how we can help you make real estate the investment you direct your IRA towards.