For over the last seventy years the United States has benefited from the highest possible debt rating – AAA. What this means is that the various ratings agencies considered the likelihood of it defaulting on its debt to be close to remote. But on August 5, 2011, after the markets closed, the Standard & Poor’s rating agency lowered the U.S. debt rating to AA+. World financial markets experienced steep declines thereafter.
In the short terms it does not appear that the U.S. debt downgrade will lead to increased interest rates. On Monday, August 8, 2011, U.S. Treasury Bills were selling quickly indicating that investors experienced no loss in confidence. The real impact of the debt downgrade is on the stock markets where it is feeling a lack of investor confidence that was always present. Many financial analysts foresee a possible stock market crash.
So what can be done to protect ones retirement funds?
Diversification. When you hear that you should diversify your investments, this means that you should diversify your investments completely and globally – now and always. The investment research literature indicates that a fully diversified, low cost investment strategy is superior. Accordingly, using a Self Directed IRA Real Estate to purchase domestic or foreign real estate is an excellent vehicle to diversify your retirement portfolio.
With a Self Directed IRA Real Estate, also known as a Self Directed IRA with checkbook control, or an Real Estate IRA, a limited liability company (“LLC”) is formed that will be owned by the IRA (care of the custodian) and managed by the IRA holder (you). As manager of the new IRA LLC, you will have checkbook control over your IRA funds allowing you to make investments quickly and without custodian consent. By using a Self Directed IRA Real Estate or Real Estate IRA, you will have the ability to diversify your retirement portfolio by investing in real estate. Since all traditional IRA custodians (i.e. Vanguard, Fidelity, Chase, etc) do not allow one to purchase real estate with retirement funds even if it is permitted by the IRS (no incentive for the banks since they don’t make money when you buy real estate), using a Self Directed IRA Real Estate or a Real Estate IRA LLC to buy real estate with IRA funds is your best bet. All income and gains generated by the real estate IRA investment will generally flow back to your IRA tax-free!
In a time where the U.S. dollar is projected to continue to weaken, the Self Directed IRA Real Estate solution offers retirement investors better protection against a weakening dollar and far greater control over his or her retirement investments.