Self-directed retirement accounts have gained popularity over the years. This is mostly due to the fact that investors are wanting more freedom when choosing investments. One of the more popular investments with these retirement accounts is real estate.
Real estate can be a good long-term investment and generate high returns for investors. With a Mountain West IRA self-directed plan, investors can choose from many real estate options. These include single-family homes, multifamily-units, apartment buildings, condominiums, improved or unimproved land, commercial property and more.
When thinking about investing in real estate through a self-directed IRA, there are some things to consider:
It can be a process. Often, opening an account can take some time. A rollover might be necessary to start the account. Then, the real estate investment must be approved, which can also take a decent amount of time.
Funds aren’t for immediate use. When the investment yields funds, there are some restrictions on how they are used. There are also restrictions on who can occupy the real estate.
It can be taxing. When investing in real estate, it can be a good decision to hire a property management company. This takes a lot of the stress off the investor’s shoulders. All of the expenses for the property will also be taken from the IRA funds.
Although this may make it sound a little daunting to invest in real estate with an IRA, the professionals at Mountain West IRA can answer questions and guide investors through the process. Self-directed retirement accounts offer a wide variety of investment options and are a great tool for investors who want more control over their retirement.
Heath Savings Accounts have gained popularity over the last few years. These accounts combine high deductible health insurance with a tax-favored savings account. Some experts aren’t sure HSAs are living up to their potential.
The recent up spike in popularity is in part due to employers adopting high-deductible health insurance plans. These plans make the employees more responsible for medical costs. They pay for most medical expenses out-of-pocket until it hits a certain deductible. To combat trying to pay out-of-pocket for medical expenses, they save money in a Health Savings Account.
Just like a Traditional IRA, contributions are 100 percent deductible. Unlike a Traditional IRA, distributions can be taken out tax-free at any time to pay for qualified medical expenses.
An Employee Financial Wellness Survey revealed that only 16 percent of employees with HSAs are planning on using it for healthcare costs in retirement. Also, only five percent have invested their HSA. They are being used more for short-term purposes of paying for medical expenses now instead of saving them for retirement.
The truth about retirement is, there will probably be a lot of medical costs. With age comes more risk of having medical issues. By contributing to a Health Savings Account and investing, retirees could grow a healthy amount of money to help with medical expenses and long-term care costs that might be necessary down the road.
Interested in contributing to a Health Savings Account? Contact Mountain West IRA.
One of the benefits of having a Mountain West IRA self-directed retirement account is the variety of investment options. One of these options is investing in real estate, whether it be residential or commercial.
Those looking to take the plunge and start investing their retirement savings in real estate should take into account the associated property taxes because they are the second largest fixed cost investors will face when calculating income from a property.
Property taxes are based on the sales price of the property and the market that it’s in. Investors shouldn’t always rely on what the previous owner’s property taxes were for calculations. If the previous owner bought it at as a distressed property or many years ago, the property taxes were most likely lower for them than they will be currently.
Depending on the estimated property taxes, investors can decide if the property is worth investing in, or if the taxes would eat up too much of the potential income. There are many tools and websites available to help investors look into this before buying a property.
By adding real estate to their portfolio, an investor will diversify and spread their risk. Real estate is also generally considered consistent with providing a stable, although not guaranteed, cash flow. Contact Mountain West IRA for more information about the rules of investing in real estate with a self-directed retirement account.
Although the goal of saving $1 million for retirement seems a little farfetched, with some planning and good decisions, it can be a reality. So here are five tips to help you get there:
- Take advantage of compounding
Starting early is the key to growing a robust retirement savings. Compound interest ends up helping investors save much more over time. Starting early also gives investors more time and keeps the stress to a minimum when thinking about the future.
- Creating a plan
Instead of going with the flow, make a solid plan for retirement savings. It helps to avoid emotional investing, such as putting more money in when the market has been going up and selling when it goes down. This can actually be hurtful to investors. Sticking with a long-term plan and not focusing on short-term market fluctuations is the best way to reach your retirement goals.
- Company sponsored plans
Saving in a company plan is especially beneficial when the employer matches your contributions, which can help push you closer to your goal even faster. If a company plan isn’t an option, Mountain West IRA has a variety of self-directed IRA options for people looking to save for retirement.
- Automatic deductions
Having retirement savings automatically deducted from paychecks takes the responsibility away from the investor. They don’t have to think about it or accidentally spend it.
Savings alone won’t help you get to $1 million. Most people invest in the stock market when saving for retirement, but there are other options. With a self-directed IRA account from Mountain west IRA, investors can explore other options such as real estate, notes, mortgages, and more.
Learning good saving habits early in life could really help individuals in the long run. Children whose parents or grandparents take the time to explain finances and saving to them will probably have a better handle on their spending and saving habits later in life. Motivating them to start saving can be tricky though. Making it a fun activity usually encourages them to become interested in finances and saving. Use these tactics to teach children about money and how long term saving is beneficial:
Having something to look forward to, is something most people, not just children, respond to well. Let children make a chart with the allotted amount of time and money it will take for them to save up for a new bike or video game that they want. Or, let them draw/cut out a picture of their goal and put it on a jar where they store their money. The visibility of the money is a reminder of how far they’ve come and how far they have left.
Often, credit unions with children’s savings accounts reward them with prizes for making a deposit. This can be a great way to also teach children about banking. Or, if they want to do their saving at home, create rewards specific to that child’s interests. It could be a trip out for ice cream or as simple as a sticker.
Children frequently mimic the behaviors of their parents. So, if parents set up a saving routine with goals or rewards for themselves and save alongside their child, it will reinforce the idea of saving. This could also be done by parents matching the child’s saving contributions, much like employers do with 401(k) accounts.
Although seemingly small steps, these tactics can create a lifetime pattern of saving and working toward long term goals for children. The adults can benefit too by putting their savings into a retirement fund.
Retirement is seen as a time to enjoy the finer things in life. Many plan on international trips, golfing every day, and living a little more luxuriously. What they don’t take into consideration, is that they will no longer have an income to replenish what these grand plans use up. Some retirees need to rethink their retirement plans and look at it a little more realistically.
Instead of increasing expenses, it is more beneficial to downsize. Moving to a less expensive residence and taking a long look at what expenses they could cut might make them feel better in the long run. A little reimagining could be the difference between living comfortably the next 20 to 30 years and feeling panicked at the lack of money in their bank account.
Of course, a way to keep those luxurious plans alive is too bump up retirement savings. Soon-to-be retirees can look into investment opportunities and try to increase what they have already saved. Self-directed IRAs can help by offering more options for investing and increasing savings. But the key here is to still be honest with themselves. Waiting until the last minute to do this won’t help much.
Mountain West IRA offers different types of plans to help everyone find the one that fits their financial situation. With self-direction, those planning for retirement have many more investment options including real estate, precious metals and more. They can help build the ultimate retirement machine.
Navigating the retirement planning waters can be tricky, especially with advice coming from all directions. However, there are a few basic mistakes one should try to avoid when saving money for retirement.
- Lack of Diversification – Keep investments diversified to spread risk. Going all in on one investment opportunity can potentially lead to a huge loss. Keep in mind the old adage: don’t put all your eggs in one basket. If one investment goes south, there are others to keep money flowing in.
- Missing Educational Opportunities – Not taking the opportunity to further education or training to help advance in a career and potentially expanding earnings is a mistake. The training or education might take money now, but will more than pay for itself down the road. Increasing one’s salary is increasing savings potential.
- Poor Time Management – Forgetting about time management could potentially hurt retirement savings. In the beginning stages of retirement savings, when there are many years to save, it is acceptable to take risks with investments, and can even be highly beneficial. However, when retirement draws nearer, it is best to take a more conservative approach, so one does not lose money right before it is needed.
- Pulling Funds – Taking money out of retirement accounts and funds early is generally not a good plan. Doing this can cause penalties and be regrettable down the line. Keep retirement savings as a priority throughout other financial decisions, such as buying a home. While it seems attractive at the moment, it could really cause issues closer to retirement.
- Lack of Planning – The biggest mistake of all is not planning for the future at all. Mountain West IRA can help find a retirement plan to get on the right track for retirement saving.
Even in a sluggish economy, bed-and-breakfasts are a popular choice for tourists seeking lodging off the beaten path. They offer guests the opportunity to socialize with other travelers in a more intimate setting. Many countries offer a variation of the bed-and-breakfast, but most are small lodging establishments with fewer than 10 bedrooms available to rent out. For retirees who love to provide hospitality, they also offer post-retirement job opportunities. And with their rebounding popularity, bed-and-breakfasts may also be an excellent investment opportunity for your self-directed IRA.
While it generally requires significant legal guidance to invest your self-directed IRA in a business you’re personally going to run, investors who want to avoid self-dealing can do so by investing in a business owned by someone else; perhaps a trusted colleague with great business sense. This helps you avoid prohibited transactions.
If you are interested in building your retirement portfolio, think about investing your self-directed IRA in nontraditional assets, whether it’s a bed-and-breakfast or another investment you’re interested in. We won’t tell you what to invest in—the beauty of self-directed IRAs is the freedom they offer you as the investor. Give us a call so we can help you get started with investing today. Now’s the time!
Retirement is looming ever closer, but is there any good way to prepare for it? After all, you’ve probably never retired before. To take some of the uncertainty out of retirement, here are 5 steps to test drive retirement before it actually arrives:
- Plan ahead—well in advance of your retirement, make a comprehensive plan that includes your budget, investments, Social Security, health care costs, provisions for common elderly concerns, and a generous rainy day fund for unforeseen events. Also, it’s not too late to start self-directing your IRA to increase your wealth.
- Get your spouse involved—these can be hard conversations, but you’ll need to discuss survivor benefits, your spouse’s intended activities, whether or not he or she will be retired, and future living arrangements.
- Take care of legal concerns—you may need to consult a lawyer or professional planner regarding items like power of attorney, wills, debts, healthcare documentation, and asset titles.
- Live on your retirement budget—to ensure you’ll have a livable retirement income, try living on your retirement budget without any exceptions for a year before you retire.
- Don’t let the cat out of the bag—don’t tell your coworkers or boss that you plan on retiring until a month before the planned date. That prevents the possibility of your boss withholding certain privileges with the knowledge you’re retiring.
While self-directed IRAs offer a wealth of investment possibilities, getting started with investing can be a daunting task for new investors. While we do not make any recommendations about investments, for six years Mountain West IRA has been showing individuals and small businesses why they should take advantage of self-directed retirement plans. Experienced investors have a wealth of investment information to offer, including these 7 tips:
- Quality over quantity—when new investors first begin investing, many of them go for every opportunity that comes their way, whether it is because of excitement or to meet a perceived target. Seasoned investors instead sit back and wait for solid investments to come along. While new investors may not have the resources to wait for deals, many experienced investors would recommend doing one quality deal rather than a multitude of average deals.
- Put your goals on paper—if you don’t develop a concrete goal for where you want to be in a year, it will be difficult to make any smart investments happen. Seasoned investment professionals often instruct neophytes to put together a plan before they even start investing. And while realistic goals are important to your investment success, it can be difficult to determine how to set those. Speaking with experienced investors in your field and asking them their honest opinions regarding profits per deal and average amount of time required to complete the deal can help you forge realistic goals. Real estate investment (REI) clubs are a good place to start for mentorship. Then, based on the information you learn and the amount of cash and credit you have on hand, create a framework for your long-term goals. Fill in short-term goals in between these long-term goals.
- Don’t limit your profits—just because you got a great deal doesn’t mean you have to pass along all of your savings to the buyer. While most investors wouldn’t recommend you gouging people, reaping profits is part of business. At some point, your profit margin may not be as large as expected, so taking advantage of large profits when they come can help secure your finances.
- Hang on to your full-time job—while it may be tempting for some investors to drop their day jobs and fully commit to investing, experienced investors recommend establishing oneself with banks and credit card companies before branching out on one’s own. Jobs provide a safety net while new investors learn the ropes of good investing.
- Start investing as early as possible—the longer investments have been established, the more growth can be obtained. So the sooner investors begin investing, the more wealth their investments build. Many experienced investors say they wish they’d gotten in the game sooner.
- Use investing partners wisely—there are plenty of eager investors out there, but smart investors choose an investing partner that complements them. This complement may be expertise, knowledge, connections, or money. However, seasoned investors would recommend against choosing a partner with little in common besides a dream or goal. If there is nothing complementary or beneficial about the partnership, it may be wise to steer clear. Again, this is business.
- Dare to dream—it’s difficult to achieve anything without dedication and perseverance. Willpower can overcome even difficult objective conditions like poor credit or little cash. If you have a dream, it’s time to enact it. Contact Mountain West IRA about setting up your self-directed IRA to achieve your dream.