How to Be Smart in a World of Dumb Investments: an Argument for an IRA LLC

An IRA LLC, also known as a Self-Directed IRA is a financial instrument designed for independent thinkers, someone who likes to make their own decisions when it comes to creating income in their retirement funds.

Unfortunately, this type of investment choice is something that is not freely discussed should you be a naive investor who asks a broker for the best type of IRA to start for your retirement.

However, a self directed IRA is not for the faint-of-heart, someone who would like nothing better than to pass their financial decision making to someone else, a broker representing the interests of his or her financial institution.

If you choose to get a Self-Directed IRA it will be because, unlike a traditional IRA, you want to limit custodian interference on where, when, and how to invest your money. When it comes to making a financial decision, you are most likely to be someone who dislikes the frustration of a bureaucratic process. Moreover, you will probably feel strongly opposed to paying a fee for asking permission to pursue an investment that you know, from years of personal experience, is highly likely to offer an excellent return on investment.

You will also most likely lean toward this type of IRA because it will limit your liability and offer true asset protection. As the IRA owner, you will be able to have full checkbook control. Of course this freedom is based on the understanding that you know how to use your funds wisely to avoid conflict with IRS rules and regulations in regards to the nature of self dealing IRA investments.

Tax Advantage When Working out of Self Directed IRA

Another reason, of course, to choose this type of retirement account is the tax benefits associated with an IRA LLC. These tax benefits provide either a tax-deferred or tax-free option depending on whether your IRA is set up as a ROTH or as an IRA.

The taxes flow through the entity just like a regular LLC. Since the owner of the LLC is the IRA, then you receive a tax holiday so to speak.  This is because the funds are either gained tax deferred until age 70 1/2 as is the case with an IRA or tax free  - indicative of a ROTH. in the end, your tax advisor can keep all this straight for you and we recommend that you have one on your team, especially once you decide to change your IRA to a self directed one.

Three other reasons to consider an IRA LLC and perhaps a smarter way to accumulate funds for your retirement is: the delineation of clear boundaries, the competitive edge, and the speed with which you can make an investment.

With clear boundaries, you can separate your IRA investments from your personal investments and possibly other investments done with the exact same broker.

With a competitive edge, you can compete for any margin. This is because as an IRA investor you carry a tax advantage over other rival investors. This is especially useful when it comes to closing a long-term real estate deal with many buyers or a securing an asset in a highly competitive financial market.

Finally, with the power to make timely investments, there is no time lag when it comes to capturing a time sensitive investment. This is because with checkbook control, you do not have to wait for a custodian to decide if you should get permission for the investment. Sometimes great investments are rewarded to the investor who has the highest level of liquidity and can snap up the opportunities.

However, in order to appreciate all these benefits, you need to contrast them with what you would get if you opted for a traditional IRA.

A traditional IRA would limit the money you place for your retirement.

For instance, a custodian would decide what you can and cannot invest in, and this decision would be based on how much commission the financial institution would make from any transactions you made. You cannot, for example, put money into foreign assets or real estate property, although these may be lucrative markets. This constraint will be imposed on you even if you are a professional in that field of investment and have a solid record of accomplishments. It will exist even if the opportunity doesn’t have any drawbacks. It will also exist if you’ve got the correct quantity of funds to secure the opportunity before anybody else gets it. Instead of being allowed to pursue investments that you know, from experience, may offer great opportunities, you will be limited to in-house securities and investment choices — even if they maybe less profitable than the other options you have carefully researched, analyzed and have experience with.

Another way a traditional IRA will hamper the growth of your retirement funds is bureaucracy. You will have a great deal of paperwork to deal with that will reduce your efficacy. This is because you will constantly be seeking permission to invest. This slow processing of filling out paperwork and waiting for approval will prevent you from acting on time-sensitive investments. Making the most of your retirement is about having maximum flexibility. When you cannot get in and out of multiple markets with the right timing, you may be hindered and not able to grow your funds at the pace you like. Moreover, you will be paying a fee for every aspect of your transactions. So instead of making money, you will be reducing the amount you save for retirement.

In conclusion, a self directed IRA is for someone who has desire to think independently and act smartly.

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