So, when is PPP valuable to use when establishing your Self-Directed (SD) IRA or 401K? Well….always!! But, wait, what is PPP? It is simply nothing more than Productive and Prudent Planning. So, you may say to yourself, well, “Duh”, but you may be surprised how many people do not take these two simple words to heart.
You see, as more and more people find out about the ability to self-direct their retirement assets, they become enamored with the process, want to get their plans established and then ask, “Now what?” While not discouraging in any way the establishment of these plans, one must take the responsibility to not only learn everything they can about such plans (and there are some definite things to learn), but also be productive and prudent with their planning so they really hit the ground running when their account has been established or shortly thereafter. And, by running, that doesn’t necessarily mean going out and investing right away, but knowing what conditions, terms, etc. you are wanting and/or needing to be met before you make an investment into a non-traditional asset.
As an example, if one is interested in investing into Real Estate, determine what kind of real estate into which you are interested in investing. There are many types and avenues for RE investing. Are you looking at flips, rentals (single family or multi-family), commercial, etc.? Ask questions and get educated…..if you are already reading this blog on the BawldGuy’s site, you already have a great source and outlet for information. Don’t ever be afraid to ask and inquire….remember, it is your retirement funds, not monopoly money.
Also, when considering self-direction, in my humble opinion (and just an opinion of this author….you always want to do your own research and due diligence….there, how is that for a disclaimer), you absolutely want to have a plan that allows you freedom and flexibility. Let’s use two examples of where this freedom and flexibility may be vital.
1) Personal “Checkbook” Control of Your Retirement Funds –- In self-direction, IF you didn’t have “checkbook” control of your retirement funds and you had to request a check or a wire transfer every time you wished to execute a transaction, does that really provide you total flexibility and freedom? Probably not. Think of all the various examples of how that can be problematic for your investment strategy. Further, consider the potential time conflicts involved with such a process and making sure or feeling comfortable that a transaction has been executed on “your clock”, not that of the custodian.
2) Non-Traditional AND Traditional Assets within YOUR Plan -– I use this example all the time and the numbers really don’t matter. But, let’s say you had $1,000,000 in your retirement account and you wanted (as an example) to invest $200,000 in some real estate with a guy named Jeff Brown. Well, you still have $800,000 remaining that you MAY want to invest a portion of those monies into some form of stocks, bonds and mutual funds. Wouldn’t YOU want control of that process AND not have to worry about paying additional fees (over and above brokerage commissions) to a self-directed IRA or 401K custodian? Of course you would.
Bottom line is to think forward.
Whether you seek financial planning advice or not, you want to have a clear thought process on what you want to do and be disciplined in your due diligence moving forward. BUT, move forward. Remember the simple but oh so true comment: NO ONE ever cares as much about YOUR money as YOU do. It has always been true and will always continue to be true.
BawldGuy Here: Around here, we’ve call this concept Purposeful Planning — but not for more than nearly 30 years or so.