Technology has changed everything. According to economists, we are headed towards a “gig economy.” What that means is that instead of contributing to the “9-5 work force,” a growing number of individuals are choosing to work in an on-demand environment. Rather than being employed with a reliably steady income, many are choosing to become self-employed. Companies such as Uber, Etsy, and Airbnb have created a new entrepreneurial platform allowing workers to be in control of when and how they earn their living. Simple to set up and popular among consumers, these small scale entrepreneurial opportunities afford many people the ability to earn a living on their own terms.
As we shift from the W2 to the 1099 tax form, one thing does not change – the need to save for retirement. Without an employer’s dependable retirement plan, it is up to you as an individual to secure your retirement finances. If you’re in complete control of your work environment, you should equally be in control of your retirement.
Individual Retirement Accounts (IRA) offer individualized options to meet your needs. Traditional and Roth IRAs are the most popular IRA options yet are placed in the care of an account custodian or broker. Traditional and Roth IRAs offer traditional investment choices such as stocks, bonds, and mutual funds. However you can only invest in what your account custodian offers you. What happens when those markets take a hit?
Lesser known and under publicized, the self-direct IRA is the most advantageous choice in saving for retirement. Self-directing your IRA investments offers you a chance to invest in what you know and understand. There are a wide variety of investment options including real estate, intellectual property, limited liability partnerships, precious metals and private company stock.
As a self-direct IRA owner you’ll have the ability to build substantial and lasting wealth for your future. With the freedom of investment choices you can diversify your portfolio and protect against market volatility or detrimental inflation rates. Tremendous tax benefits are also given to self-direct IRA owners and include tax-deferred income on contributions, tax free profits, and the potential to receive substantial tax deductions.
Once you have established your self-direct IRA, continue to be proactively involved in your retirement:
Educate yourself on investment opportunities – you have complete control of where your money is invested.
Contribute to your IRA as early in the year as you are able – the sooner the money is in your account the more time it will have to accrue compounded interest.
If you are unable to make your maximum contributions, take advantage of the time extension – You have until to April 15th of the following year to make contributions counting towards the year before.
Growing a secure retirement account doesn’t need to be associated with a traditional career path. Whether you’re a driver partnered with Uber or a traditionally employed school teacher, taking control of your retirement finances by becoming a self-direct IRA owner will give you a secure retirement in the future.