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Add a House to Your IRA: Investment Diversification through Self-Direction

Many people are unaware of all the investment choices available within their retirement plans. Most invest in traditional assets such as stocks, bonds and mutual funds. Did you know you can invest in real estate, mortgages, leases, and other asset backed

By: Lisa Moren

Business Week

11/18/02: Business Week

Many people are unaware of all the investment choices available within their retirement plans. Most invest in traditional assets such as stocks, bonds and mutual funds. Did you know you can invest in real estate, mortgages, leases, and other asset backed investments?

With a truly self directed plan you can invest in assets you know, understand, and effectively control. Whether you have a 401(k), IRA, Roth IRA, SIMPLE, or SEP, this option for diversification, continual growth and appreciation is important for you.

Now, more then ever, we need to take control of our financial future. The govern ment has increased contribution limits to allow you to take full advantage of saving for the future. Since 1975 self-directed plans have been available. This allows you to compound your assets quickly with investments you select. Remember, tax deferral increases yields by as much as 40% as a result of the lack of immediate taxation.

Three things you need to know when you self-direct your retirement plan:

• Which retirement plans are best. You can have more than one.
• What kind of investments you want to make within the plan.
• There are IRS rules prohibiting self-dealing.
• Understanding them makes self-direction easier for you.

Frequently asked questions:

• What if I have a 401(k)? You can roll your old 401(k)s into a traditional IRA or to another 401(k) plan, such as an Individual (k) with no tax consequence.

• Which self-directed plans are available to small businesses?

Business owners without common law employees may qualify for the Individual(k) allowing up to 55% of AGI income contributions to your plan. Businesses with employees, other than spouses and partners, qualify for the Flexible 401(k). SEP-IRAs and SIMPLE-IRAs are also self directable but have lesser contribution limits. For specifics on how to qualify for the Individual(k), search the Internet for Individual(k). The dollars you earn today can be put away and compounded to help you accomplish those financial dreams we all wish for. Don't wait! Now is the time to open a self-directed plan, and start investing in your future.

Insight provided by Lisa Moren, Oakland, CA

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