With summer quickly approaching and the midpoint of 2025 near, it's a great time to celebrate our progress so far! Now that most of us have successfully filed our tax returns and organized our IRA documentation, we have the perfect opportunity to focus on our IRA investments. The past few months have been filled with dynamic economic changes—shifting tariffs, federal workforce reforms, and evolving fiscal policies—creating exciting opportunities for us to review and optimize our retirement savings strategy. Embracing these changes can empower us to make confident, informed decisions for a brighter financial future.
Market Volatility and Self-Directed IRAs
Individuals who invest in alternative assets within their self-directed IRAs (SDIRAs) are typically well aware of the potential benefits of these assets. As the S&P 500 stock index dropped nearly 20% from its February peak, SDIRA investors may have breathed a sigh of relief—if they had hedged their investments well. Market fluctuations are common, often influenced by trade dynamics or global events, and sometimes arise without any obvious or predictable cause. Historically, diversified stock portfolios have yielded robust long-term returns over the past century. Additionally, a wealth of opportunities awaits in alternative investments, presenting a promising avenue for growth and stability. Whether you use alternative investments as a hedge against traditional investments and their occasional market downturns or simply as a relatively sure way to increase your net worth, your options are legion. However, there are risks that every investor should be aware of. Therefore, it is advisable to seek sound advice, regardless of the investment direction you choose.
Thoughtful Investing in Alternative Assets
A stunning array of investments is available in self-directed IRAs. Real estate, promissory notes, limited liability companies, precious metals—the list is nearly endless. The only investments that are not allowed are those explicitly banned by the IRS (such as "collectibles") or assets acquired through prohibited transactions (such as buying assets from a "disqualified person," like a close family member). Because permissible investments are so broad, you should consider important factors when making decisions.
Risk tolerance—Maybe the best way to describe this concept is, "Can you sleep at night with this investment in your portfolio?"
Investment objectives – Are you using your SDIRA as a hedge against other investments in your larger portfolio? Or maybe you're viewing inherited IRA funds as a windfall to invest more adventurously.
Time horizon – Are you approaching retirement or in retirement? Are you in your thirties, with perhaps many decades to invest? Your “years till distribution” may affect your investment decisions.
Opportunities and expertise—You may have a special interest or knowledge in particular types of real estate, for example. You may consider parlaying this expertise into an investment opportunity.
Of course, all these factors are interrelated. Your competent financial advisor will likely mention other considerations as well. For example, remembering that your retirement account is, in fact, for retirement may help you choose your investments with a longer-term goal in mind. Day trading is not for most IRA owners, and it certainly has little value for most investors seeking to bolster their retirement nest egg.
Mid-Year Considerations for Your SDIRA
It may be human nature to procrastinate. There may even be circumstances where postponing certain tasks is advantageous. However, enough SDIRA owners have been tripped up by delaying actions on their accounts that the smarter move is to act now, especially on the following matters.
- Beneficiaries – Have you married, divorced, had children, or has a named beneficiary died? If so, review the beneficiaries on your SDIRA and consider making any necessary changes. For example, maybe you named a trust beneficiary for minor children who are now adults. Do you need to reevaluate whether this designation is still appropriate?
- Liquidity—Alternative investments often create expenses that must be paid by the SDIRA, not by the SDIRA owner. For example, a real estate holding may require regular maintenance, as well as the payment of property taxes and insurance. Now is a good time to ensure your SDIRA has sufficient liquid assets to pay such costs.
- Valuation – If you hold hard-to-value assets in your SDIRA, you may need to arrange for an independent appraiser to provide a year-end value so the custodian can report an accurate figure on IRS Form 5498. Making plans for this valuation now will avoid the stress (and extra cost) of seeking a last-minute appraisal.
Investment Questions?
As summer arrives, now may be a great time to review your SDIRA investments and take other maintenance action. Visit our website at Investment Options for more information about investing in specific asset types with a STRATA self-directed IRA. For other general information, visit our Knowledge Center or contact one of our SDIRA Experts.
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