Why You Need A Self-Directed IRA | An Artist’s Rendering

Disclaimer:  This is a fictitious depiction of actual events, it is strictly the opinion of Critical Financial and is meant to educate on the subject of Self-directed IRA’s.

There is currently $5.7 Trillion held in IRA accounts in the U.S.  That is nearly 1/3 of the national deficit held in money markets, stocks, bonds, mutual funds and all covered under the tax shelter of Roth and Traditional IRA’s.

What if:

China and Japan decide that The United States is a deadbeat creditor –er, I mean, come to the realization that we are– and decide it will never be better.  Since we currently owe them about $1.2 Trillion each, what would happen if one day they decided they were tired of us paying them back with inflated dollars, so they raise the interest rate to 7%.  Not sure that is entirely possible, but work with me here.  What would that mean for our economic future?  Well, the economy as we know it, tanks!  No more housing market recovery, no more Dow 15000+, no more living on credit cards, no more bling, no more spending!  The cost of borrowing jumps, making everything more expensive.  A ripple effect occurs making unemployment increase and therefore, Federal tax receipts drop precipitously.

What does the Government do?

Introduce a bill of course, HR 2014 to be exact.  The bill commonly known as Indemnifying the Fed Act of 2014 meant to ‘temporarily’ bridge the decreased federal receipts with the cost of running the government.  They just need to make it papitable to the American people, so how do they do that?

They sell the benefits to the American People with a salespitch which is strategically light on real data.

The President (not one in particular) climbs aboard the bully pulpit and heads to main street.  The message is:  Shared Responsibility, we are the American People we never waver, we got ourselves into this together, we’ll get ourselves out together.  This is a time of crisis, the Fed needs your help.  History has shown that we come together in times of need.  Women went to work when the men were fighting World War II, September 11th happened and we all rose up to help our neighbors.  So this can be fixed, if everyone who can; does their part.

The army that is Social Media, is tasked to broadcast the message, the evening news illustrates the benefits of the bill, Late night comedy makes it a mainstay in their opening monologue, coffee shops and water coolers become forums for changing perspective. HR 2014 becomes hip, it becomes cool to want to bail the government out.

So what does the average American do to help out?

Remember when I said that there was $5.7 trillion residing in IRA accounts, this revenue would sure help, given the dire situation we have found ourselves in.  So the solution becomes, we loan the Federal Government this $5.7 trillion, well kinda loan it, actually it becomes eminent domain, per HR 2014.  Sound familiar?  Think it cant happen?  Check out the country of Cypress.  Don’t worry though, they have every intention of paying it back, it is mentioned ad-nauseum throughout the sales process.

So what does all this’ make believe stuff’ have to do with a self-directed IRA?

Self-directed IRA’s offer the account holder the freedom to invest in things they know, or want to know.  Self-directed IRA’s offer more investment opportunities than the typical products sold on Wall Street.  If your passion is exotic tropical plants, maybe you invest in a plant farm, and this investment opportunity can be made available with a self-directed IRA.

Cash residing in money markets is low-hanging  fruit, therefore it becomes a prime target.  This cash can be forcibly ‘loaned” to the government via direct deposit, a few keystrokes takes it out of your investment account and into the government coffers.  A self -directed IRA with investments in ‘hard assets’ such as real estate, cattle, tax liens, start-up businesses, promissory notes, etc, etc are fragmented and independent making all the more difficult to infringe upon.  In the time of great societal ‘need’ people do strange things and it is better to protect yourself and your future from the possibilities.  I am not saying this is going to happen, but the fact is that many most all governments are broke and desperate times call for desperate measures.  So, if HR 2014 becomes law, be prepared by fragmenting your investments in hard assets, not liquid and easily accessible investments.  Just sayin!

So do you think you need a self-directed IRA or not?

For more on setting up the best retirement possible through IRA’s check out these great reads.

401k Plan vs. a Roth IRA
The Skinny On Self Directed IRA’s
Why I Left The Traditional IRA Market