Real Daily, which seeks to enrich, enlighten and empower readers to make informed choices that will positively impact their financial lives, recently published the article, “5 Reasons You Need a Self-Directed IRA.” The piece, which cites insight from McManus & Associates Founding Principal John O. McManus, begins with an overview:
· Self-directed retirement accounts, known as a self-directed individual retirement arrangement (IRA), were created in 1999 by an act of Congress after intensive lobbying of small business owners and associations.
· The beauty of a self-directed IRA is it allows you to invest up to $6,500 into a tax-deferred account where you control the investments. Many of those investments include alternative vehicles not available in a traditional IRA.
· These alternative investments include real estate, private mortgages, private company stock, oil and gas limited partnerships, precious metals, horses, and intellectual property.
The first reason why one should consider opening a self-directed IRA is higher returns. Per the article, “The number one reason investors use self-directed IRA accounts is the ability to pursue much higher returns compared to stocks and bonds. If you make a 25% return on a real estate investment and are able to build on that profit cumulatively for 10, 30, or 30 years it can be life-changing.” The story goes on to quote McManus:
“If you understand investments, particularly in certain segments, you can take advantage of higher yields and maybe less volatility,” John O. McManus of the estate-planning firm McManus & Associates in New York and New Providence, New Jersey told NerdWallet.
McManus has invested in real estate and other assets through a self-directed IRA for about 15 years, he says.
A self-directed IRA also lets McManus invest in companies that aren’t publicly traded, which “a mutual fund will not allow you to do,” he says. But, he warns, “this is not a game for the unsophisticated.”
The following four reasons to consider a self-directed IRA include:
· Better diversification
· Investing in private equity
· Putting assets to work
· Investing in cryptocurrencies
Click here to read the full article, including more information about the five arguments in favor of a self-directed IRA, as well as the risks of self-directed IRAs.
To discuss your investment strategy as it relates to your wealth management plan, call McManus & Associates at 908-898-0100.
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