Investor's and homeowners alike are favoring real estate as a preferred investment. A previous Bankrate.com survey showed 27 percent of Americans now favor real estate as their investment of choice. The second investment choice was cash at 23 percent, followed by stocks and bonds at 22 percent. The balance was "other".
For several years, real estate has taken the investment lead. This corresponds to the bottom of the market when investors, rather than homeowners, recognized the bottom of the market as the best time to buy.
Some people that are new to real estate investing are partially liquidating IRAs and 401ks to move out of stocks and bonds and into real estate. These people need better financial advice because there is no reason to liquidate retirement accounts and pay the penalties and taxes that can easily amount to 25 percent in exchange for a 14 percent profit on real estate. Probably not a good move.
Those in the know, understand that tax laws allow people to set up self-directed retirement accounts that can invest in almost anything. That certainly includes real estate. With a self-directed retirement account, the profits from the real estate investment go directly back into your retirement account (tax deferred) but you won't financially benefit until you start drawing on the account without penalty no younger than age 59 1/2.
There is a case to be made for the 401k rollover going to a new employer. That’s the right 401k rollover if you don’t want to take the time to take control of your finances. Almost certainly, a 401k rollover to a new employer will come with the same limited investing options as you had with your previous employer. All of them on Wall Street where you take the risk while the financial managers take the rewards.
For many, the better choice is rolling over your old employer accounts to invest in real estate notes paying 10% interest or investing in tax liens paying as high as 30%. You can also directly invest in residential or commercial properties. Of course, self investing your retirement savings isn’t limited to real estate but this is the preferred investment strategy.
Another reason you want to do a 401k rollover into a self-directed account instead of leaving it with your former employer are expensive administration fees. Your former employer may have an entire department administering a big 401k plan. Those fees are charged to the 401k plan and come out of everyone’s account. When your 401k rollover is to a self-directed 401k, those fees are drastically reduced. A self-directed 401k rollover makes sense on many fronts.
Consider taking advantage of the self-directed 401k benefits. This is a highly desirable retirement account for small business owners. Any small business owner. Taking advantage of self-directed 401k benefits is as easy as turning your hobby into a small business. Even if you have an employer sponsored retirement plan, you can have a separate account with more and better 401k benefits.
A short list of the 401k benefits available to you includes tax deferred profits from investments that compound into real wealth for you and your family. Among the important 401k benefits is the strong asset protection not found with other retirement accounts. The ability to invest outside of Wall Street is definitely another of the 401k benefits that attract many savvy investors. You can invest in real estate, tax liens, or anything else you think will seriously go up in value.
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Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.