Ready or Not, Retirement Will Come! Part 2

Published on February 27, 2012

Hmmm . . . no pensions, a volatile stock market, not enough Social Security income, expensive medical care, a poor return from 401(k)s and other retirement plans that were decimated during the recent financial crisis . . . it doesn’t paint a pretty picture for people facing retirement, especially the huge number of baby boomers. In fact, The Center for Retirement Research at Boston College states that 45% of baby boomers are at risk of not having enough income to maintain their living standards after they retire.

What to do? One way to be more aggressive about your retirement savings is to take control of your retirement account through self-direction. With a self-directed IRA, you, the account holder, make the decisions about what those funds are invested in—and you can select from a diverse array of nontraditional investments normally restricted from other retirement plans. For example, if you are already investing in real estate outside of your IRA, you can choose to do so through a self-directed IRA, and grow your retirement savings that way. How about lending money to friends or relatives, or becoming a silent partner in a start-up business? You can do this with funds from your self-directed retirement account, at terms you determine, which will produce a higher rate of return than any current CD or money market account available today, plus the returns on these investments grow tax-advantaged in your IRA.

While this retirement savings strategy is not for everyone, it is well suited to individuals who are knowledgeable about certain kinds of investments and are comfortable managing those investments themselves. Self direction provides an opportunity to build a more aggressive retirement portfolio and it doesn’t take much to get started. You can open a self-directed retirement account any time, at any age or phase of your work life, and start investing with just a few thousand dollars.

You know your retirement is coming whether or not you are financially ready for it today. A visit to your financial planner will help you develop a strategy for whatever phase of life you are in now and whatever your lifestyle needs dictate. If you are already investing in or knowledgeable about some of the nontraditional investments allowed through a self-directed retirement plan, you might find that instead of feeling like you’re falling behind, you’re ready to take the lead on your retirement savings strategy through self-direction.