Have you turned to a self-directed IRA for a smart real estate investment? Nearly all Americans have heard about the looming retirement crisis. Figures such as “53% of the civilian workforce participates in or contributes to a retirement plan,” according to U.S. News and only 48% contribute to retirement accounts in the private sector, are sobering. When it comes down to it, the biggest problem may not be Americans’ inability or unwillingness to contribute to retirement funds and options; the real problem is the lack of knowledge about the topic. The vast majority of Americans do not know about valuable alternatives to 401K and traditional IRA plans. Very few know about self-directed IRA plans, non-recourse lenders, and IRA loans, for example.

Let’s Start With The Basics: What Are Self-Directed IRAs?

In many cases, the funds in traditional individual retirement accounts (IRAs) stay in the account until retirement. Borrowing against a traditional IRA prematurely may result in a fee and/or fines, especially if Americans surpass a predetermined dollar amount. For example, Americans can borrow up to $10,000 from IRA accounts to fund the purchase of their first home. Borrowing more results in a penalty. Self-directed IRAs, on the other hand, are not so limiting. In fact, it is common for investors to tap into these funds well before retirement, and to use them as various types of collateral.

Options And Flexibility Beyond Retirement

Self-directed IRAs account for $94 billion of total IRA funds; that’s a large chunk of money — and Americans are investing this way with good reason. Real estate investments or non recourse real estate loans are just one option available, thanks to the IRA alternative. “Investing in real estate can be one of the best ways to take advantage of the tax benefits of an IRA,” a Feb. 27 Fox News report reveals. Lenders are able to use self-direct IRA funds to take out a mortgage (sometimes up to 30 years!); whether lenders live in the home, rent it out, or otherwise use the property as an investment, the unique loan type grants unique tax benefits, enabling that specific income to be tax-free or tax deferred.

While traditional IRA funds can be wise, they do not offer the flexibility of self-directed accounts. Investors have much more to gain when using self-directed funds as collateral, and they have more flexibility while doing it.