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Let’s go back to a time once passed.  When the earth was green and the birds would sing.  .. ..

Ya I’m talking about last summer.  Summer 2016! The moment when I took the first active step toward retirement domination.  Let me tell you a little story:

Up to that point I had, over some years, accumulated a very small amount of money into a retirement account.  The technical term being a Roth IRA through Primerica Financial Services.  I had started investing about $250 per month into mutual funds and hit some hard financial times about 9 months later so I had put the monthly increases on hold til I could manage my finances better.  There they remained on their investment roller-coaster for some years.

Now don’t get me wrong, I fully understand that in order to be successful in mutual fund investing it is best to invest consistently and not look at the result each month.  But truthfully, I knew there was a better solution for my money.  I had done my research and after watching my initial $2,250 investment grow into a total of $2,597.85 over a 5 year period it was time to make a change.  

Let’s do some math real quick.  

    2597.85
–  2250.00
      347.85
/             5
        69.57

$69.57 increase on a 2250 investment =  3.09% annual return

Hey at least it’s a return!

There have been some rough financial times as of late.  I know that.  I don’t blame the mutual funds themselves, why should I blame anything at all.  Upon reviewing the numbers I had a paradigm shift.  At of risk of losing 3% annually, surely I could come up with a better use for that money. True, it isn’t all that much when comparing it to the grand scale of investing dollars.

For example, U.S. registered investment companies managed $18.1 Trillion at the end of 2015.   My $2,600 represents  0 .0000000143% of that amount.

What can you really do with $2,600?  I mean if I can’t make at least $70 in the next year with this money, I should leave it as it is.  (Do understand that I’m only comparing to the last 5 years.  In all reality mutual funds average from 5% – 12% over a 30 year period. So if I’m being truthful I should really do my comparisons to that those numbers instead) Upon reflection I was faced with questions.

Could I do it?

What could I do with it?

How will I spend the money?   

Wait wait wait!  

We’re talking about savings.

For example. I know children that have made more than $70 running a lemonade stand.  And how many lemonade stands can I afford with $2,600?

What I decided was… what can I accomplish in 5 years?  Surely I can earn more than $350.

I could start a business managing and funding children in the neighborhood to run lemonade stands!  Haha …enough with the lemonade.  

Problems :

  1. The money was held in an account dedicated toward retirement, and there are restrictions on what I can do with the money.  
  2. As part of these restrictions the money has to be controlled by a third-party.
  3. Most custodians have specific products that limit an investment to be made into Stocks/bonds and mutual funds.

As I imagine you reading this, I can hear you saying…

“ Well that takes all the fun out of it!” and

“There goes my Lemonade Empire!” (I had to throw it in there)

Never fear, because today is your lucky day.  I learned years ago about a little thing they call Self-Directed IRA’s.  They’ve been around since I believe the 1970’s but you never hear of them because the banks make more money on other products.  “What does a Self-Directed IRA do?” you ask.  First let me say don’t run out there and pick up the first one you see.  In fact you should really counsel with your financial guru’s before making any rash decisions. But here comes the good stuff.

Solutions :

  1. The money is still dedicated toward retirement
  2. A third-party custodian still has to maintain control over the money.
  3. The custodian stays out of the decision making process and allows you to choose to invest in anything you want.  (With some restrictions) see the IRS website

Point being, if you see a business/property/stock/bond that you believe you can make money on.  The power is in your hands!

So what is the moral of the story?  Like I said in the Summer of 2016 I had to make a change.

What might be more beneficial is telling you the steps I took.  

The questions that need answered:

  • How much will it cost?
  • Difficulty of managing investments?
  • Can they be trusted?

First thing to do is find a new custodian.  When I had first learned about Self-Directed IRA’s it was from a solicitation at a meeting I attended about real-estate investing.  The speaker made a personal plug for his Self-Directed IRA custodial firm.  So now 10 years later the first step I took was research to see if his business existed.  A quick google search displayed fraud alerts from the SEC and various news publications from Utah where his business was located.  I didn’t want to affiliate my money with a fraudulent business, so my google search continued. In time I found a list of 10 – 12 custodians and began scanning their websites for answers to my questions.

I’m not going to take the time to recount a comparison of the businesses I found, because it would just be me trying to remember/ making up details for entertaining purposes.

What I will say is I settled on a company I felt was strong, educational, and trustworthy.  As of June 2016 my Primerica balance plus an annual distribution equaling about $5,000 has been transferred into an account  at American IRA .  They have a plethora of educational resources and a fixed account fee.  Each correspondence I have with them has been cordial and informative.  

I’m still in the first stages of making a deal so I can’t really add more to this post as of yet. But definitely come back for future posts!  And while you’re still here, write in the comments what you would do if you had $5,000 to invest.
Again, I don’t want you to go and sign up just because I said so.  Take some time, do the research and if it proves best for your financial situation ‘Take Action!’

*** Update ***

I’ve added a page for tracking our 2017 goals better!  Check it out!

Next Step:

Cash flow Transparency

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