Roth IRA Investments – Why a Self Directed Roth IRA May Be the Best Choice

Decisions about Roth IRA investments must be made carefully. Less than 5% of all account owners choose a self directed Roth IRA. But, we are learning that this is likely the best choice. Here’s a look at “why”.

The Affect of Inflation

Inflation drives down the buying power of your dollars and cents by 3-5% per year. Today’s $100 bill will buy $97 worth of merchandise next year. So, when you put a hundred dollar bill in a non-interest bearing account, it eventually becomes worthless.

If you want your Roth IRA investments to have the same buying power in twenty years, you have to earn at least a 5% return on your investment. Bank CDs don’t meet that requirement. The volatility of the stock market makes it impossible to predict if earnings there will keep up with inflation or not. With a self directed Roth IRA, you have other options.

Real Values

Dollars don’t have any “real” value. Their value is determined by “what” they buy. Most things “de-value” over time. Cars and household furniture are examples. Other things “hold” their value and some become even more valuable over time.

Gold bullion, for example, holds its value. So, in order to protect the value of their money, some investors choose gold. Historically, the value of real estate has increased dramatically. We’ve seen recent losses in the housing market, but on the long-term, a self directed Roth IRA invested in real estate continues to grow in value.

More Choices

In general, account providers allow you to hold mutual funds and other stocks as Roth IRA investments. But, the government allows practically anything, except antiquities and collectibles.

So, if you choose a custodial company that offers a truly self directed Roth IRA, you can invest in things like gold bullion and real estate. Once your account value is high enough, you can offer hard money loans, mortgage notes and start earning interest that we normally end up paying to a banker.

Smart investors know that the most profitable investing vehicles should be considered for Roth IRA investments, simply because no capital gains taxes or income taxes are charged. That’s equivalent to earning 25% more on their better deals.

A New Option

For those who are inexperienced in the real estate market, there are management teams that are willing to do the majority of the work for you. They’ll find the deals and find the buyers, while your account earns the profits.

Experienced flippers, rehabbers and other real estate investors know that the whole process can require a lot of foot work and worry. It’s just as easy to lose money on a deal, as it is to make a profit. So, when a team can guarantee a profit, that’s impressive.

You can only get in on these guaranteed deals with a self directed Roth IRA. You need to compare what custodians offer carefully, if you want to make the most our of your Roth IRA investments.

Michael Warner is a financial manager in the public sector and is an avid researcher of personal financial planning information with a goal to secure his financial future through conservative investing. Discover how you can set up a self-directed IRA [] that guarantees at least double the return-on-investment in the next 12 months than you earned in the past 12 months, all done through socially conscious investing.

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