All signs are pointing towards Mitt Romney becoming the GOP elect candidate for the upcoming 2012 presidential election against incumbent Barack Obama. It’s no surprise that Mr. Romney’s wealth status and success at Bain Capital has been highly scrutinized. Whether you agree with his political views or not, there is no doubt that Mitt knows how to make money in a capitalistic society such as ours. What you may not know is Mitt has been living an alternative financial lifestyle. No, its not what you might be thinking as far as alternative lifestyles go. Mr. Romney uses his traditional IRA to buy alternative investments or non-traditional assets such as real estate and private equity.
Pensco Trust Co., a self-directed IRA custodian based in San Francisco used the information about Mr. Romney’s IRA to remind investors about how non-standard, high-return assets can help IRAs swell in size. In a news release, Pensco Trust noted that multi-million dollar IRAs aren’t uncommon and that it holds several IRAs each with more than $100 million.
So, why do people buy non-traditional assets with their IRA? Because regular IRAs are limited to investments in stocks, bonds and mutual funds. Self-directed IRAs, on the other hand, are specialized accounts that allow their holders to invest in anything except for life insurance, collectibles and investments that would personally benefit them or close family members, as restricted by the IRS.
As millions of baby boomers approach retirement, pensions are unsustainable and Social Security’s future is uncertain at best. That leaves many people depending heavily on their retirement accounts to fund their retirements. “As people live longer, you know, retire at 65, live to 85, that’s 20 years they’ve got to provide for themselves,” Tom W. Anderson, CEO and founder of PENSCO Trust Company, a self-directed IRA custodian, said. “No longer can you just park your money in a retirement account and expect to get by.”
Here are three more reasons to look into self-directed IRA’s:
1) Diversification: One example is that real estate within self-directed IRAs can be purchased in cash. If the real estate is a rental property, the rental income generated is pure profit back into the IRA which allows the purchaser to have consistent cash flow off the retirement investment.
2) Leverage: Account holders are allowed to use leverage, meaning a bank will lend money to the IRA using the real estate as security and not require a personal guarantee. This can be a great wealth-building tool.
3) Invest in your core competency: If you understand private equity, you can invest in business from start-ups to publicly held companies. If you understand real estate, you can access limited partnerships, or purchase real estate outright. The options are many, however self-directed IRAs require extensive due diligence and knowledge, because the account holders themselves make each investment decision, unlike traditional IRAs.
I personally am looking forward to the upcoming election. Candidates whose views empower people to make their own financial decisions about their own futures will provide our country with a sense of pride and accomplishment and will lead to a stronger economy.
Resort Realty Capital is currently searching for value-add and opportunistic acquisitions in Aspen and 10 other Rocky Mountain markets through our broker partners. If you would like to learn more, please contact us.
Darren Nakos, CCIM
Resort Realty Capital
111 Main Street
Frisco, CO 80443-0630
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