HOLIDAY CLOSURE: Our offices will be closed on Wednesday, June 19, 2024, in observance of the Juneteenth holiday. We will reopen for regular business hours on Thursday, June 20, 2024. 

Mid-Year IRA Investment Review

The 4th of July holiday marks the “middle of summer” for many people, but it is also the middle of the calendar year. July 2 is the exact half-way date in the year; there are only 182 days left in 2021 after this date. Now is the time to check in on your IRA investments and the rest of your retirement savings portfolio to make sure your investments are on track with your objectives.

Alternative Assets in Your Self-Directed IRA

The investment options within self-directed IRAs are vast, from limited liability companies to structured settlements to real estate to precious metals. This freedom to diversify your investments from those that correlate to the stock market is likely what drew you to a self-directed IRA in the first place. But because the economic factors that affect the value and growth potential of your specific self-directed IRA investment may differ from the factors that drive the price of mutual funds up or down, it can be more challenging to assess the current value and/or prognosis of an alternative investment. If you want additional expertise evaluating how your investment’s performance so far this year or if the short or long-term outlook has changed, be sure to engage a financial professional or an expert that can help you make that assessment.

Although year-end feels like it’s far away, time is of the essence if you need to make any changes to your investments. If you determine that you want to sell an asset before the end of this year, find out the timeline for valuing and liquidating the asset so you can plan accordingly. You may need to engage professionals to value the asset and sell it. Finding a buyer can take time for investments not sold on a public exchange or that are considered high risk. On the other hand, if you want to make a new investment, you may want to engage a professional who can help you conduct the due diligence to make sure you are comfortable with the risks as well as the possible reward. You will also want to plan for any additional expenses related to acquiring the asset or maintaining the asset (e.g., property insurance) once it’s in your IRA. These investment expenses must be paid from assets in your IRA.

Mutual Funds and Other Investments in IRAs and Retirement Plans

If you have retirement savings in an employer’s 401(k) plan or in other IRAs, your investment options are most likely limited to mutual funds, ETFs, and bonds. These investments have generally recovered from the volatility caused by the pandemic, but, as always, there are concerns about how long the bear market will last. Market speculators are projecting that increasing inflation could drive stock prices down and suggest that retirees at least have some inflation protection in their portfolios. But it is a good idea to periodically check your asset allocations to make sure you are appropriately invested based on your risk tolerance and investment strategy. If your allocations among asset classes and investment types have strayed further than your comfort zone, be sure to rebalance your allocations to your targets.  

If you want to mitigate some of your investment risk by diversifying from investments tied to the stock market, you may also want to consider transferring or rolling over some of your other IRA or employer plan savings to your self-directed IRA, where you have the freedom to invest in alternative assets. The process of moving money from one retirement savings vehicle to another can take time depending on whether your savings are currently held in an employer’s plan and the type of investment you want to sell or purchase. Allow yourself enough time to research your options and start the distribution request process to ensure your savings are moved and re-invested timely.

Income & Tax Status

Mid-year is also a good time to reflect on your expected income and tax status for 2021. If you filed your 2020 income tax return, did you owe more than you had in past years or than you expected to owe? This surprise can happen when children age out of the child tax deduction or when payroll tax withholding changes. If you want to reduce your tax liability for 2021 and grow your self-directed IRA, consider making a Traditional IRA contribution if you are eligible to take a deduction.

Questions About Investments?

If you want more information about investing in a specific type of asset with a STRATA Trust self-directed IRA, visit our website at Investment Options.


Tags: 2021 IRA Contribution, 401k, all things retirement, alternative investments, IRA investments, self-directed ira