Why the IRA Savings Vehicle is More Valuable Than Ever

Estimated reading time: 3 minutes(Last Updated On: November 30, 2018)

Over the past decade we’ve seen a great deal of change in the overall economy, as well as what our expectations are for our careers and our futures. In light of this new economic reality, the IRA savings vehicle has become increasingly more powerful and valuable.

Greatest Investment Flexibility

As the investment markets become more volatile and uncertain, many individuals are looking to alternative investment asset types in order to meet their investment goals. But with an employer-sponsored 401(k) plan, you are certain to have a severely limited menu of investment options. Even with an IRA, if your custodian is a discount broker or bank then you’re probably also prevented from directing your money into certain types of legally permissible investments.

With a self-directed IRA, and a custodian such as Quest Trust Company, you’ll have the ability to invest in the broadest possible range of permissible investments, including real estate, precious metals and various other types of private investments. Depending on your investment experience and expertise, this can be extremely valuable.

Greater Opportunity for Income Generating Investments

Over the past few years, bonds and CDs are basically non-starters when it comes to generating income for your account (or, if you’ve entered retirement, income that you need to pay for your living expenses). And many investors are uncomfortable with the valuations of large capitalization stocks that pay a somewhat respectable dividend. Using a self-directed IRA to invest in things like real estate can help to bridge this gap and generate the current level of income that you may be looking for in your retirement account.

Increasing Contribution Limits and Income Restrictions

The annual contribution limits for IRAs have recently increased, as have the income levels for which you can make contributions to a Roth IRA, or tax-deductible contributions to a traditional IRA. This means that even if your income is flat, you’ll be able to contribute to an increased amount towards your retirement future.

Flexibility to Meet Other Financial Demands

Perhaps the greatest strength of the individual retirement account is the fact that you potentially have many decades in which to contribute and have your investments grow on a tax-deferred or tax-free basis. Unfortunately, sometimes your plans change or emergencies arise, and it would be beneficial to have access to some of the funds in your IRA.

Fortunately, you always have control over the funds in your IRA. If you withdraw any money before reaching retirement age then you will generally be hit with a 10% penalty, plus any taxes that would otherwise be due. Fortunately, there are a few exceptions that allow you to make withdrawals without having to pay the 10% penalty. These include withdrawals to pay for your or your children’s college expenses, to purchase a first home, or to pay for certain medical expenses.

Note that even if you can escape the 10% penalty, you should try to avoid taking money out of your account early because you’ll forever lose the time in which it could have otherwise grown.

Quest Trust Company helps change people’s lives and financial future through self-directed IRA investment education. Quest Trust Company helps people invest in what they know best and build their financial future on their own terms.

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