Many individuals have the desire to invest but not the financial knowledge of ways to fund this process. For new investors this task can be overwhelming and can even become a deal breaker. It is not complicated as long as the investor is open minded and understands that there are options. One option that stands out and that has proven to make sense due to the current state of the market is investing with a self-directed IRA. But, what does this mean and how is it possible to do this?
A self-directed IRA is a retirement plan that allows individuals to invest into non-traditional investments such as real estate, tax liens, franchises, partnerships and others assets as permitted under IRA regulations. It offers tax advantages that can create a security cushion that most retirement plans cannot even compare to. In stark contrast to the 401K, this type of retirement plan gives total control back to the individual by allowing the selection and control over the investment option of their choice.
Traditionally, individuals work hard, open up a traditional retirement savings plan (RSP), and follow the investment guidance established by the traditional RSP administrator. But, this process offers no security for changes and volatility in the financial market. We have recently experienced a significant downfall in the market as well as spending power of the dollar, and many have been affected.
So, based on this information, does one continue to lose money in a down market by investing in pre-determined options that are bound to crash and continue to lower retirement savings? Or maybe we should look into the facts on investing in real estate, risk, and securing properties at a much lower price than they were 3 years ago to create a monthly cash flow and increase capitol while we are at it. This just makes more sense.
There are ways to improve on situations like losing tons of money saved on a retirement savings plan due to a down fall in the market. The choice is in the hands of each individual. Once the decision is made to stop being complacent with the cards we are dealt with, the choice is all ours. If you currently have a traditional 401K (AKA as RSP account) you can still take advantage of the opportunity to invest money wisely in real estate properties that can give you a much higher rate of return and less risky than the investments available through these retirement savings accounts.
How to Rollover 401K funds to an IRA in order to invest in Real Estate?
Once the decision is made, there are small steps that will need to take place in order to complete a roll-over. For starters, an IRA account will need to be opened with a financial institution that not only offers IRAs but that offers the type of investments desired. A thorough research on financial institutions and their offerings will need to happen in order for an investor to take full advantage of the investment opportunities wanted.
Once the IRA account has been opened, the 401K financial carrier must be contacted and made aware of the desired to transfer the funds. Forms will need to be completed authorizing this transferred. This direct transferred (also known as trustee-to-trustee transfer) is highly recommended since this will allow for the 20% tax withholding to be waived. A 20% is charged if the funds are handed over to the account owner directly with the agreement that funds will be deposited to a qualified tax-deferred account within 60 days of receipt.
Once the transfer is complete, and the IRA account is in place you can begin to invest. It will be wise to begin by putting together an asset allocation plan that can show the repayment of different properties which ultimately will allow for a better decision making. If the uncertainty is overwhelming, it will be a good idea to consult a professional to help guide you through the RE investment process and answer your questions.