Self-Directed IRAs Increasing Investments in COVID-19 Crisis

LAS VEGAS, NV / ACCESSWIRE / May 12, 2020 / Individual retirement accounts (IRAs) are not the first thing on many people’s minds amid the turmoil being caused by the Coronavirus / COVID-19 crisis. However, there are some savvy investors and investment-minded individuals looking for safe and secure investment options, rather than be in retreat mode and sit on the sidelines. Self-directed IRAs are becoming even more popular during this economic crisis as their tool of choice.

A well-known powerful investment vehicle is the familiar traditional IRA. But, did you know there are also other various forms of IRAs available, not only for investing in stocks and mutual funds, but also commercial or residential real estate?

The Big 3 Types of Individual Retirement Accounts (IRA’s)

Three popular forms of IRAs used for saving towards retirement are the:

– Traditional IRA

– Roth IRA

– Self-Directed IRA (SDIRA)

Individual retirement accounts (IRAs) are tax-advantage savings for future retirement. Image Credit: / Vitaliy Vodolazskyy.

What is a ‘Traditional’ Individual Retirement Account (IRA)?

For most people saving towards retirement, a traditional IRA is a key part of their savings process. An IRA is a type of savings or investment account that comes with great income tax advantages that gives someone the ability to save with pre-tax dollars. For every dollar you save, it will lower your annual taxable income. You will only pay taxes when you withdraw money in the future.

IRA accounts are available at most banks and brokerage firms.

IRA Retirement Millionaires

Can you really become a millionaire with a traditional IRA?

In a recent Bloomberg News article titled “Retirement Millionaires Surge to Record in Roaring Market,” Fidelity reported that 208,000 of its IRA holders had retirement accounts worth seven-figures or more in 2020. This was a 14% increase over 2019.

Fidelity Investments Inc. (FMR LLC) is one of the world’s largest mutual fund firms, with over 30 million individual customers, 30.6 million brokerage accounts, 625,200 commissionable trades per day and over $8.3 trillion in assets under management (AUM).

What is a Roth IRA?

A Roth IRA offers many benefits to saving for retirement. Although it requires the individual account holder to pay taxes on the money prior to going in, it does allow for qualified earnings to be withdrawn tax-free. Individuals may contribute to a tax-advantaged account, let the money grow tax-free and then never have to pay taxes again on the money withdrawn which many prefer when in their retirement years when on ‘fixed income’.

That is just one of the ways a Roth IRA beats a traditional IRA.

Best Roth IRA Accounts to Open at Top Brokerages

Besides Fidelity, there are several other major brokerages that are popular with consumers to have their Roth IRA accounts with.

According to’s Best IRA Accounts to Open in 2020, here are several that made the list.

Charles Schwab Corporation (SCHW) was named the “Best Overall” with a current market cap of $45.5B and $3.3 trillion of assets under management (AUM).

The “Best Robo-Advisor” goes to Betterment Holdings, Inc. with $16.4 billion in AUM.

Interactive Brokers Group, Inc. (IBKR) claimed the title “Best for Active Traders” with a current market cap of $16 billion and $162 billion in AUM.

“Best for Low Costs” The Vanguard Group is one of the world’s largest investment companies, offering 131 low-cost mutual funds and 74 exchange-traded funds (ETFs) with $6.2 trillion in global assets under management (AUM).

Finally, Merrill Edge was named “Best for In-Person Help” by Merrill Edge and Merrill Lynch are both owned by Bank of America Corporation (BAC), currently with a $192.4 billion market cap. Merrill Edge has over $200 billion in AUM, while Merrill Lynch has $1.4 trillion in AUM.

Financial Advisor discussing with clients the main advantages of changing to a self-directed IRA vs. a traditional IRA or Roth IRA. Image Credit: / Goodluz.

What is a Self-Directed IRA (SDIRA)?

A self-directed individual retirement account (SDIRA) is a type of IRA that can hold a variety of alternative investments, including real estate, not typically allowed with traditional or Roth IRAs. SDIRAs are directly managed by the account holder, thus “self-directed,” although the account itself is administered by a custodian or trustee, which is a specialized firm that offers SDIRA custody services.

SDIRAs are best suited for more educated investors who already understand the alternative niche investments not available in the other IRA’s and who want to diversify in a tax-advantaged account. Self-directed IRAs can be a wise choice for an investor looking for more diversification and higher returns than an average investment in individual stocks, bonds or ETFs.

Self-directed IRA custodians are not allowed to give financial or investment advice. The burden of research, due diligence and management of assets rests solely with the account holder.

Finding the Right Custodian for a Self-Directed IRA Retirement Plan

The Internal Revenue Service (IRS) maintains an updated monthly list of Approved Nonbank Trustees and Custodians under Treasury Regulation Section 1.408-2(e), to serve as nonbank trustees or custodians.

Almost 70 Custodians are currently approved by the IRS, and these companies are updated monthly.

Top 10 Recognizable Self-Directed IRA Trustee and Custodian Companies

From the most recent April 2020 IRS approved list, here are ten of the most recognizable companies, along with their original IRS approval dates.

Charles Schwab & Co., Inc. (1/8/1982), Citigroup Global Markets, Inc. (7/22/1985), Deutsche Bank Securities Inc. (4/11/1994), Edward D. Jones & Co., L.P. (5/30/1985), E*Trade Securities LLC (8/2/2016), J.P. Morgan Securities LLC (6/9/2016), Merrill, Lynch, Pierce, Fenner & Smith, Inc. (8/3/1987), Morgan Stanley Smith Barney LLC (1/27/2010), TD Ameritrade Clearing, Inc. (4/18/1984) and finally, Wells Fargo Clearing Services, LLC approved since 7/1/2003.

Even though these companies may be highly recognizable, they may not necessarily be the best one for you, or even the most widely used for SDIRAs.

Self-Directed IRAs are Gaining in Popularity with Real Estate Investors and Entrepreneurs During the COVID-19 Crisis

SDIRA account owners can leverage the flexibility and tax advantages real estate investing offers. It is like operating a tax-free real estate business inside this retirement vehicle. And, further allows you to possibly retire early, and accelerate your overall wealth-building goals.

One specific form of real estate investing that has become popular during the COVID-19 crisis, combines both property investment and property management, is residential assisted living homes or senior care homes.

A clear distinction, not to be confused with assisted living “facilities” or nursing homes, which depending on the size of the facility, could average between 30 to 200 residents. Certain larger facilities around the country have received a lot of bad press due to COVID outbreaks.

On the other hand, smaller assisted living “homes” only average between 6 to 10 residents in total. Far quainter and more desirable for both the resident and their family members. Most families do not want their loved ones in large facilities. They want smaller, more attention to detail and quality of care.

These smaller homes are one of the businesses that are thriving during economic crises.

“Smaller senior care homes are one of the most important and under-served niches in real estate today and will be for the next 30+ years. However, with the Baby Boomer generation, 10,000 people per day are turning 65 or older, and the market is struggling to keep up with demand for smaller independent and assisted living home developments. Most quality elder care homes are highly desired and there is just not enough of them because it is difficult to get bank funding to start one, that’s where private SDIRA owners have an advantage,” said Carolyn ‘CJ’ Matthews, Co-Founder and Managing Member of The Quail House in Las Vegas, Nevada.

The Quail House, an exclusive residential senior assisted living home in Las Vegas, Nevada. Image Credit: Carolyn ‘CJ’ Matthews

Senior Care and Assisted Living Redefined

Matthews mission is to create residential assisted living homes that provide high-quality care and preserve the atmosphere residents would want for their own families. Due to the growing need for a high level of integrity in residential assisted living homes for the elderly, empathy for the residents’ needs, comfort, and care reflect in Matthews guiding principle of ‘Do good in the world.’

“For the preceding 5 years, our own research has shown occupancy in group homes resting at or above 90%. The need is there and is not going away. Real estate provides a consistent and predictable return, more dependable than traditional investments. By inserting an assisted living business into these already dependable real estate assets, the potential for profit takes a quantum leap. It is a win-win opportunity giving a self-directed IRA account a boost it needs while providing caring, dignified homes for our seniors,” said Matthews.

The Quail House is an exclusive concierge care assisted living home. Warm and spacious 7800 square foot home with 10-bedrooms, each with their own full bathroom, nestled into a full acre of land with a park-like setting. The Quail House is setting the standard for the residential assisted living industry including their all-inclusive pricing with no hidden fees or surprise costs. Virtual tours are available to see what these new investments look like.

Matthews is the Nevada state president of RALNA (Residential Assisted Living National Association) and has contacts with other respected RAL owners that provide opportunity for SDIRA owners to invest. Matthews says, “We have a nationwide group of owners dedicated to bringing in the next level in residential assisted living homes that provide that win-win for investors. Now is definitely the time to take advantage of this type of investment.”

Which Type of IRA is Right for You?

As with any type of investment, there is always the potential of financial gain or risk of monetary loss. Therefore, it is always best to consult with your financial advisor, tax advisor, certified public accountant (CPA) or attorney before making any financial decisions.

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