Taking control of your retirement

One of the consequences of the 2007 financial meltdown is that it exposed the systemic fraud in the world financial system – fraud that continues to this day – for the world to see.

Banks and mortgage brokers would lend to anyone who could fog a mirror, package the mortgages up and sell them to Wall Street, which would then sell the toxic garbage off to unsuspecting investors.

Financial firms like Goldman Sachs sold clients mortgage-backed securities, while at the same time taking huge short positions against those very same securities, gaining at the expense of their clients.

Even that icon of American capitalism, the stock market, is now a “market” in name only – one in which seventy percent of the volume is generated by computers inside large financial institutions that ping pong equities back and forth amongst themselves, holding them for only seconds or fractions of a second at a time.

For 401K investors, the stock market, which used to be a vast market reflection of the future value of real businesses, is viewed by more and more of us as a platform in which proprietary computers drive most of the action while retail investors get taken to the cleaners.

None of this is to suggest that smart investors who invest based on fundamentals still can’t find value in stocks and even bonds.

But too many of us don’t take the time to do our research or have the confidence to do our own investing abilities. We trust Wall Street’s prognostications and the propaganda spewed by its house organ, CNBC.

If you want to take your investing decisions into your own hands, a self-directed IRA may be the way to go. Better yet, it may be the easiest way to diversify your retirement internationally.

Just as it’s important to diversify between a mix of stocks, bonds and cash (or cash equivalents), it’s also increasingly important these days to diversify into foreign investments.

And because self-directed IRA’s allow account owners to make investment decisions on behalf of their own retirement plans, international diversification becomes much easier.

With a self-directed IRA, you aren’t limited to just U.S. stocks, bonds and mutual funds. You can invest in domestic and foreign real estate, farmland, tax liens, personal loans, precious metals, foreign stocks and currencies, and even private businesses with the ease of writing a check and without transaction, holding or asset-based fees. You can even tap the purchasing power of your IRA before retirement age without incurring early distribution taxes or penalties.

There are many companies offering self-directed IRA services. I like Guidant Financial , which offers a checkbook self-directed IRA plan called iDirect.

Self-directed IRAs allow me to save money in transaction and asset-based fees by acting in essence, as my own IRA broker/custodian.

The self-directed IRA LLC account structure enables investors to:

  • Use your self-directed IRA LLC to purchase nontraditional (real estate, foreign properties, mortgage notes, etc.) and traditional (stocks, bonds, etc.) investments.
  • Purchase foreclosed properties and tax liens or make loans
  • Buy and sell domestic, foreign, commercial, residential, and rental properties as self-directed IRA investments – and realize the profits tax-deferred in your retirement account
  • Buy rental properties as a self-directed IRA investment and be your own property manager, thus saving money in upkeep expenses
  • Buy your retirement home now at today’s prices, rent it out, and then occupy it when you take your IRA distribution

All that said, self-directed IRA’s aren’t for everyone. You really do need to be committed to taking investment matters into your own hands and taking control of your retirement funds.

For one thing, if the investments you make through your self-directed IRA lose money, you can’t deduct the losses. For another, you don’t get capital gains treatment on profits when you make withdrawals.

But here’s the important point: If the financial crisis taught us anything, it was that the days of trusting banking institutions or Wall Street to be good stewards of our money are over. Resilience requires that we need to take our financial well-being into our own hands.

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