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Is Your Retirement One Dimensional?

Is Your Retirement One Dimensional?

In an uncertain world, why not diversify into real estate for your retirement?

Most retirement accounts are invested in stocks, bonds, and mutual funds. Given the volatility in the markets, holding real estate is a safe bet in the long term. For many years IRS regulations have allowed ‘self-directed IRAs’ to hold alternative investments such as secured notes, precious metals, and real estate.

Opening a self-directed IRA will allow you to hold real estate investments for retirement. This could be land purchased for future value appreciation, or property with an income stream such as multi-family apartments, retail or office. The income accumulates in your account, as will the proceeds when the property is sold, and taxes are deferred until distribution. Alternately a Roth IRA can be used, set up with after tax funds, and the income profits will be tax free.

To set up an account, funds can be transferred from an existing retirement account — perhaps a 401(k) from a former employer — and annual contributions can be made, according to your age bracket. Real estate is purchased by the IRA, and all expenses for the properties are paid from the account.

The IRA account can also get a loan to purchase the real estate, or the IRA can partner with other individuals or entities to purchase property. A self-directed IRA offers freedom and flexibility for a real estate purchase.

Of course, there are rules, regulations to be followed in order to maintain your tax advantages. As well as risk. The Securities and Exchange Commission has released an investor alert addressing Self-Directed IRAs and the risk of fraud. Consequently, it’s important to work with a reputable real estate broker, closing attorney — and an IRA custodian — who understand how self-directed IRAs work. 

Contact the experienced team at CBT Commercial today to learn more.

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