As a former banker, 22 years to be precise, I thought I knew about self-direction because mid-career my employer plan effectively disappeared, and I was told I could manage my own retirement accounts. I could even do it in real-time online. I was pretty astute, so I thought, and began trading stocks and mutual funds for the first time in my life.
To be completely honest, that initial trade was pretty scary, I was doing it online, moving “my money” electronically, and was clueless as to whether the funds would even go where they were supposed to go. Once I had the trade set up my hand hovered over that Enter key for what seemed like an eternity and finally, in spite of my fear, I pressed that key and $5,000 left my bank held IRA and went out into the digital universe.
It took a few more trades before I got comfortable and began increasing the size of my investments as well as the volume of my trades. Things went great until the tech bubble wiped out massive amounts in the equity markets (and my accounts too!). Lesson # 1 individuals cannot influence the market. In spite of fundamentals – emotions, governments, and the press wrest control from individual investors.
Fast forward to 2004, I go to a REIA meeting and the speaker is talking about what he called “true self-direction” or the freedom to invest your retirement assets in “what you know”, not just what your bank or broker has to offer. That was a new concept for me, freedom of choice over my investment classes. I like real estate, notes, mortgages, and other related income streams and could never invest in them through my other retirement accounts.
I was intrigued and my wife and I opened Roth IRAs with what would become NuView Trust. My first transaction into a real estate contract felt familiar, sort of like that very first online stock trade. I wasn’t exactly sure what I was doing but knew it needed to be done. It worked, I put a real estate asset into my IRA, and it felt good, especially because I knew the quality of the investment, the minimal risk involved and that it would likely have a great return. And, it did!
As time went on, I transacted more and more, while getting counsel from my CPA as well as my friends at NuView, as to proper documentation and avoiding disallowed transactions. At times there were three-way conference calls and unless the decision to move forward was unanimous, the transaction might still be done, just not in the IRA. Our accounts were growing nicely, more from investment gains than contributions. I liked this a lot!
As our accounts grew, we began doing private loans, options, and even partnering with our IRAs. It took about 7 years for me to muster the confidence to open a Self-Directed K plan and that has probably been the best financial decision regarding retirement I have made. The contribution limits are staggering, and can you shield significant dollars from tax and the best thing is that you can have a lot more flexibility with a Self-Directed K Plan than with an IRA. Additionally, with the help of my CPA created our plan documents to support both Traditional and well as Roth contributions. We are now invested in private placements, apartment buildings, loans and more. We’ve come a long way on this journey. Whether you are creating wealth tax-deferred or tax-free, you are getting a tremendous benefit through compounding.
When I first started working with NuView, they had about 13 employees and I think I knew pretty much all of them, today they employ a lot more people and support thousands of clients. They have been one of my best partners and have helped me to grow my retirement assets. I haven’t done everything right in choosing my investments, but I made a great decision in choosing my custodian.
The best part is yet to come because we are still writing more chapters on our journey of self-direction. Whether you are on your self-direction journey or just preparing to begin, I wish you Bon Voyage!
Augie Byllott is the founder of CreatingWealthUSA.com and Common Wealth Trust Services and the author of the Financial Freedom Formula and Protecting Your Real Estate Assets.
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