With inevitable changes in the economy upcoming, investing in traditional investments like stocks and bonds has becoming a less appealing way to save for retirement by investors around the country. Looking into alternative asset types is quickly becoming the smart move for those who want to invest in certainty. One of the most beneficial alternative assets to consider is using a self-directed IRA to invest in real estate.

Often called a real estate IRA, the common term actually refers to a self-directed IRA in which real estate is one of possibly many assets. There are several aspects to consider before investing in a real estate IRA, which you can read about in one of our articles, however the advantages of investing your savings in real estate are numerous.

Protect Your Assets with the Real Estate Market’s Stability

Whether you’re making a direct purchase of property, leveraging property, holding interest in an LLC (limited liability company), or any other real estate related IRA investment, the real estate market is historically a more reliable option than the uncertainty and instability of the stock market. Because of this, the low-risk real estate alternative has steadily grown over the years for those wishing to grow their retirement savings in comparison to investing in stocks and bonds.

Delay Taxes on Real Estate Income

Normally, when people look to invest in real estate properties not associated with their retirement savings, they’re unaware that they are missing out on substantial tax benefits that real estate IRA provides. Without a self-directed IRA, you immediately owe tax on any income you make from property related income, including if the owner tries to sell the property. However with an IRA, taxes on the same real estate are delayed – but only if your money remains in your retirement account. Looking at the long term, this method can help self directed IRA owners earn far more with their real estate holdings.

Increase Your Funds Through Rental Income

As noted above, there are many tax benefits involved when working with real estate through a self directed IRA. With real estate property comes the option to generate rental income. That additional income, which is available after helping pay off several real estate expenses including the property’s mortgage, can remain in your IRA tax-deferred to grow your retirement savings. Even after retirement, the consistent income that rentals bring in throughout your lifetime are extremely beneficial to boost your savings.

Pay Off Your Future Home Years Before Retiring

One of the biggest benefits that many investors aren’t aware of is how a self-directed IRA can help finance your future home after retirement. If you purchase a property you’d like to eventually retire to through an IRA and use it as a rental property, the rental income can be used to pay off the mortgage via the IRA tax-deferred savings. Upon retirement, investors need simply to withdraw the property from their IRA before relocation to the new home. An additional benefit to this option is that if you wait at least till the age of 59 ½ to remove the property from your IRA, you can sidestep the 10% early withdrawal penalty. As long as you don’t live on the property while it’s still in your IRA, which would lead to tax dilemmas, you can successfully pay off your future home as part of your retirement plan.

Final Note

There are many options to consider when it comes to alternative assets. If properly researched and executed, it’s undeniable that investing your self-directed IRA in real estate properties can lead to a more secure future for your retirement savings. If you’re ready to open a self-directed IRA to take control of your retirement investing, IRA Innovations can help you make the switch.

Get started with a Real Estate IRA by downloading our free guide.