This year-end, perhaps more than any other, Americans whose retirement savings have been devastated by the financial crisis are going to be taking stock of where they stand and trying to figure out what they should be doing. One of the most important decisions people may be making is whether they should stick with their traditional IRAs and managed retirement accounts, or whether should they should be managing their own money without a professional's help.
Craig Holmgren, a mortgage and financial expert with San Francisco Bay- area firm Holmgren & Associates, is one who believes that there is enough anger and resentment out there to fuel a serious move toward solo investing. On average, Americans have lost between 30% and 50% of their retirement savings, he says, so it's only natural that they are gun-shy of keeping their money in a managed retirement account and are looking for something different.
"People want to take what they have left and keep it in a tax-deferred status by self-directing their IRAs," he says. "Self-directed IRAs have great appeal because of the tremendous number of available investment alternatives, particularly if you want to buy or invest in real estate."
Indeed, with property prices gone so far down that they may have nowhere to go but up, and the rental market on a clear rise, many are looking to real estate as the sector to be in. According to Pensco Trust Company, an IRA custodian located in San Francisco, there has been a 23% increase in self-directed real estate investments since 2007. Saunders believes this rise will continue, driven by the retirement savings market. The eligibility criteria for an IRA real estate loan are not that stringent as it is only the property that has to be deemed revenue-generating, he says, and not the creditworthiness of the individual that counts. So at a time when it's impossible to get a house loan, an IRA loan might be the way for individuals to purchase property, in particular secondary residences.
"Self-directed IRAs were on the back burner, they were kind of hush-hush," Holmgren says. "Maybe about 90% of peoples' IRAs were in mutual funds, but overall now, more and more people are interested in doing it themselves."
Another option some might consider if their retirement plans will allow them early withdrawal is to transfer some of their savings into an annuity like Ameritas's No-Load Variable Annuity with a Guaranteed Lifetime Withdrawal Benefit, a product that offers a predictable monthly income what and also allows for participation in market upside.
