One of the best ways to achieving financial security during retirement is to start sooner because the sooner you start, the more you save! And the biggest perk of starting early lies in the power of compounding interest which multiplies your money massively over a long duration of time.
So if you want to build tremendous wealth and retire rich, then a self directed IRA will bring you the freedom to diversify your investments beyond stocks and bonds.
Here are 5 more reasons to build your retirement reserve using a self directed IRA:
1. Big tax savings
Setting up a self directed IRA has huge tax advantages. Whether you are opening a Roth IRA or a traditional IRA, both will help you grow your retirement nest egg in the long haul. But while a traditional IRA gives you tax-deferred growth, a Roth IRA will allow you to make tax-free withdrawals during your retirement!
With a Roth IRA, you need to pay all your taxes up front so no matter the size of your contribution, every bit will help you build your retirement reserve. And as your earnings get bigger with time, you can keep adding your millennial money to the nest egg.
Unlike a traditional IRA account that restricts you from diversifying your financial portfolio and locks you into required withdrawals, Roth IRA is a tax-advantaged and lets you start saving even if your salary is low.
2. No minimum contribution needed
Unlike traditional IRA, a Roth IRA does not require you to make minimum required contribution. There is no rule that binds you to contribute a specific amount so you can start with any amount and increase it as your cash flow increases. Also, you can dip into your funds if you need them in case of an emergency.
There are certain situations where you are allowed to withdraw from your Roth IRA without inviting any tax penalties. You can take withdrawals tax-free when you retire and after retirement, the required minimum distribution also does not apply.
3. Complete asset protection
It becomes difficult to save if you are always anxious about a financial crisis. But by opening a Roth IRA and putting money into it, you get to hold on to your hard-earned money. And, if you are tight on your budget, you don’t have to worry about the contributions.
All the contributions that you make to your Roth IRA are kept safe even if you have cash flow issues. Even if someone declares bankruptcy, the funds in the IRA are not considered as a part of your personal account. So if you have invested in Roth IRA, your savings are safe from creditors!
4. Checkbook control
Self directed Roth IRAs are a great investment tool because they give you checkbook control over your funds. With a self directed IRA, you get to decide how much you want to invest, where you want to invest and also make changes whenever you want to. As the owner of a Roth IRA, you can choose the assets you want to invest in, diversify your financial portfolio and decide where you want to allocate your funds depending on your budget. Under the guidance of an IRA custodian, you can plan your investments and maximise your returns.
5. More IRA investment options with enhanced security
With a self directed IRA, you have the ability to invest your IRA funds in a wide range of assets and exercise checkbook control over your savings. The freedom to choose the right investments when profitable opportunities are created, enables you to boost your financial security.
By investing in alternative assets like real-estate, tax lien certificates, precious metals, and private placements, account holders can ensure a steady stream of income in the long-term. Account holders can also opt for a self-directed IRA to safeguard the assets in their retirement account from creditors and get added cover through limited liability.
Why self directed Roth IRA is the best bet for millennials
Apart from the common perception that millennials don’t save, they are also believed to be more conservative than other generations when it comes to finances. This is because most millennials who have dealt with economic downturns and loss of job, did not really have a choice.
Self-directed IRA accounts are designed to suit the investing style of millennials as they give complete control over funds, enhanced asset security, and the flexibility needed to deal to financial uncertainties. So why invest elsewhere when a self directed Roth IRA lets you make investment decisions based on your unique financial goals, investing experience, and preferred investing style.