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IRA Financial Blog

Opening Economy Presents Opportunities for Retirement Investors – Episode 233

Adam Talks

IRA Financial’s Adam Bergman discusses some investment opportunities for retirement investors as the country’s economy starts to reopen due to the COVID-19 virus.

As the country starts the process of getting “back to normal” the opening economy may present some interesting investment opportunities for investors. This is especially true for those that self-direct their retirement funds. Self-directing your IRA or 401(k) allows you to invest in alternative assets, including precious metals and real estate. Let’s look at the more popular investments as the economy starts to return to better numbers.

How the Opening Economy Can Help Your Investments

Working from home has been the new norm for those that have that ability. Obviously, unless your job exclusively consists on using a computer, telephone or similar technology, you don’t have that option. Restaurants, hobby shops, entertainment venues, etc. don’t have much of a choice, as yet. However, so long as we remain vigilant in our efforts to stop the spread of the coronavirus, more and more sectors of the country will reopen. This is good news for business owners, employees and investors alike. This will allow the economy to start growing again. With so many people out of a job right now, we need to get our citizens back to work.

How can the reopening of the economy help retirement investors?

We see a lot of people looking at investing in their own homes. No longer are they using the extra cash they have saved to spend on luxuries, such as vacations. That’s a trend that will probably hold fast for the foreseeable future. In addition, more people will flock out of large cities, such as New York, who have been hit the hardest by COVID-19. Real estate will continue to be a valuable asset for retirement investors. Add in the fact that interest rates are close to zero, and we could see a rise in first-time home buyers.

Real Estate Investing

Real estate has always been a great investment. It’s especially important now as the opening economy will demonstrate. Cash is king right now. Retirement investors have cash saved in their plans. So long as that money can be allocated, they have an opportunity to invest. The residential real estate market is prime for investors. If you have the cash to buy a property, you don’t have to have needless delays when you have a Self-Directed IRA or 401(k) plan. Whether you want to look for a house to renovate and sell or are looking for the possible surge in renters moving away from the city, the opportunities are there.

Although people will travel less in the near future, in time, people will want to start getting away. Vacation homes in desirable areas are still a good investment. The time to buy is now. You can’t wait until the demand is there because the supply will disappear. Many people will be tentative to stay in someone else’s house, however there will still be plenty who are not concerned. Of course, make sure your rental space is kept clean so you can ensure potential renters that everything is being done so they can enjoy their stay.

Hard Money Lending

Another way to have your money work for you outside of the stock market is through hard money lending. Essentially, you act as the bank and loan retirement funds to a business in need. The SBA’s PPP loan program has been widely used by small businesses. However, that program is set to expire at the end of the month. Most of the funds have already been spent on retaining employees and keeping up with other business expenses. Of course, businesses will still need capital as the economy starts to open. This is where a retirement investor comes in.

You are allowed to use your IRA or 401(k) funds to lend to another person. Of course, this assumes your plan allows for it. You can choose the amount you wish to lend and the terms of the loan, including interest rate and repayment frequency. Banks will not be quick to lend money. This will allow you to get a steady return on your funds and help someone in need at the same time.

Other Alternatives

Although the stock markets have recouped much of their losses, they are still down 5-10% year-to-date. That means people should seriously consider alternative assets in their retirement portfolios. As we just mentioned, businesses will need money. Lending is one option, but you can also look at investing in one or starting your own. This depends how much you want to be involved. Using IRA and 401(k) assets will allow you to invest in the business and get a cut. The ROBS structure will let you use those funds to start a business of your own.

Precious metals still maintain their value during financial crises. COVID-19 to cause metals to take a bit of a hit, but they continue to be a great investment. Along the same lines, cryptocurrencies, such as Bitcoin, are still an interesting investment. These digital currencies continue to defy the naysayers. After crashing at the start of the pandemic, the price of one Bitcoin stands at over $9,700 as of 6/10/20.

Of course, alternatives are not limited to those mentioned here. You can use your retirement funds to invest in anything except life insurance (in the case of an IRA, most collectibles and any investment that involved a disqualified person. As we mentioned earlier, you must have the right type of account and the right custodian.

The Opening Economy Should Open Your Eyes to Alternative

It is now as important as ever to diversify your retirement account holdings. This is why you must consider other, non-traditional investments. Finding the right provider, such as IRA Financial, is the first step. Your custodian or administrator must allow for investments outside of the usual assets, like stocks, bonds and mutual funds. By self-directing, your entire retirement fund is open to invest in just about anything you want.

Further, when you have checkbook control of your funds, the investment decisions are all yours. You never need to ask your custodian for permission, assuming you have chosen the right one of course. You can check out our blog for lots of information about how and why you can self-direct your plan.

Don’t let the opening economy dictate completely where you put your money. Speak with a financial advisor and design a plan just for you. Do the research to see where you want to put your money. For example, if you want to invest in real estate, see where you can make the most of the funds available to you. Also, what type of property (and work) you want to do. Be mindful of the IRS rules though. You don’t want to lose the tax advantages of the plan by breaking one.

Thanks for Listening!

As always, a hearty thanks to everyone who listened to the podcast. We know times are rough right now for everyone. Hopefully, the opening economy will help ease the stress this pandemic and ensuing financial crisis has had on us all.

Be sure to check out our SoundCloud page for more podcasts, where Mr. Bergman talks about all things retirement related. This includes several pods over the last month where he has welcomed special guests to the show. Of course, be safe, stay healthy, practice social distancing and let’s get prepared for the new economy!


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