Top 10 Reasons Why You Should Self-Direct Your Retirement Instead Of Investing In Mutual Funds

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There are thousands of so called financial advisors that tell you that you should invest in mutual funds, money market accounts, stocks, bonds and life insurance policies and diversify your retirement portfolio.  This is some of the worst financial advice you can get and the general public has been duped by the large investment companies like Fidelity, Charles Schwab, and the large banks for years.  These so called financial advisors that work for these big companies have very limited to no training and are not incentivized in the right ways.  They make so much money off of trading fees and annual fees that you can never get ahead even if they could outpace inflation in the first place with their investments.  Well you do not have to put up with this theft anymore.  There are retirement vehicles and custodians out there just like the Fidelities and Charles Schwab’s that enable you to self direct your retirement into almost any investment options you want and control your own financial future instead of handing it off to one of these so called financial advisors.  What is a self-directed retirement account?  It’s an account just like what you would have in Fidelity or a similar company but you can invest it in pretty much whatever you want instead of being limited to what the Fidelities of the world allow you to invest in, that they make the most fees on. So you can open an IRA, 401k, Roth IRA and HSA (Health Savings Account) that you can actually make decisions with and invest with.   Here are the top 10 reasons you should self direct your own retirement instead of giving it to one of these large companies that basically steal your money in fees.

(1)    Self-directing your retirement account is the only way to protect your own retirement.  If you do not take control of your own retirement investing and educate yourself on alternative investment options you will lose purchasing power and your retirement accounts will probably lose another 30% – 40% like we just saw with some of the major economic problems we are seeing.  Massive inflation is looming so you have to invest in assets that produce a higher return.

(2)    Self-directed custodians typically have fee structures that do not completely deplete your returns like the traditional IRA and retirement companies.  Typically you have much smaller transaction fees, much smaller annual fees and you can find ways to cut down on fees even more as a percentage of your retirement account.  You want to keep the interest and returns you make, not pay them back in fees which can significantly hinder your retirement’s growth.

(3)    You can build your retirement a 1000% faster by self directing your retirement than not.  If you are investing in traditional investments like mutual funds and stocks you are only going to make the long term historical average of those investments at best depending upon the economic stability of the market.  The long term historical averages are close to 8% – 10%.  With inflation historically at 3% – 3.5% and even higher inflation expected that is not a high enough return.  By investing in alternative investment options like real estate you can make 15%+ returns on your money without even using leverage.  You can even leverage real estate (get a loan for real estate) inside your own retirement account increasing your returns to 20% plus.  Now that is power especially when you can do it safely with the right risk mitigation techniques in place. 

(4)    By self directing your own retirement account you can actually actively control your investments.  When investing the traditional way you have absolutely no control and have a significant amount of risk when investing in mutual funds and stocks.  You are at the mercy of what the market does.  When you self direct your own retirement you can control the assets inside your account.  You can structure the investments so that no matter what the market does you are making residual cash flow inside your account so you do not have to worry about market fluctuations.  You also have the power to increase the value of the assets inside our account.  Also, if you buy discounted real estate inside your IRA not only can you then go sell for a huge profit but you are building your retirement account tax free.

(5)    Tax free investing is one of the largest benefits of investing in a self directed IRA.  Can you imagine buying a rental property worth $100,000 for $75,000, renting it out for $1,000 per month, having all of the income going back to your retirement account tax free and then when you go to sell the property for $100,000 the $25,000 in profit is tax free also.  No capital gains taxes and no taxation on the rental income.  This can compound the growth of your retirement accounts at an amazing pace.

(6)    Building an annuity inside your retirement account is crucial to your retirement plan.  For example, if you need $5,000 a month to live on during retirement and are able to make a conservative 10% on your money inside your account you need $600,000 in your retirement account in order to retire and NEVER deplete your principal.  If you leverage your investments and make 15% on your money inside your retirement account you only need $400,000 in your retirement accounts.  So unlike what most financial planners will tell you, you don’t need $10,000,000 dollars inside your retirement account to retire.  Now keep in mind if your expenses are $5,000 per month, you want to be making $7,500 per month passively so that you can continue to build your income and protect yourself from the loss of purchasing power due to inflation.

(7)    Current tax planning and saving on current taxes is a huge advantage for self directed investments.  If you invest in an IRA your current contribution limit is $5,000 and $16,000 for a 401k.  This can bring a big tax advantage because the contribution directly decreases your taxable income dollar for dollar.  If you setup a solo (k) plan or pension plan you can contribute close to $100,000 per year and reduce your taxable income by $100,000!  This is unreal.  You are saving $35,000 per year by doing this if you are in a 35% tax bracket.  Tax rates are rising because the government and states are broke so it’s even more crucial to plan for taxes.  You can then go take that $100,000, invest in passive cash flow investment property right and have the income making you 15% plus on your money.  With both combined you just made $50,000 ($35,000 tax savings + $15,000 interest) on your $100,000 that year.  Now if that is not going to get you to your goals I don’t know what will.

(8)    Self directed investing increases your education and ability to protect yourself instead of relying on someone else for your retirement.  By self directing your retirement you are now taking control of your own retirement.  With that comes the need for you to educate yourself on additional investment options and the risks and rewards of those options.  This education is going to be key to your future financial success and stability.  The more you educate yourself the more stable you will be because as economic changes happened you will be in a better position to protect yourself and adjust your retirement portfolio according to those changes. 

(9)    Additional investment options are needed in order to secure your future.  There are so many investments that produce additional returns.  You can still invest in stocks, bonds, mutual funds like traditional companies allow you to invest in but you can also invest in real estate, promissory notes secured by real estate, tax liens, businesses, syndicated and structured investments and much, much more.  Your options are limitless. 

(10)Your piece of mind knowing that you have been able to structure yourself to protect against economic fluctuations is HUGE.  Now you can rest easy knowing that you have educated yourself correctly, have invested in vehicles that can give you higher returns, and have the power to control your own financial destiny is the best benefit you can ask for.  Most people have little to no financial knowledge and that is why most people are broke.  The more you educate yourself the more successful you will be. 

There are many companies out there that can help you self direct your retirement account and many companies out there that can help you structure your self-directed IRA into multiple cash flow streams.  Learn from those companies and push yourself to take action on your own financial future instead of relying on so called financial advisors to do it for you, but are failing at an alarming pace.

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