Now is a Good Time to Assess Your Retirement Accounts

I am passionate about Self-Directed Retirement Accounts. Combine the time of year with the current market conditions and it is a good time to assess your retirement accounts and plans to get you where you want to be.

A Self-Directed Retirement Account allows you to truly diversify your retirement investments. If you stick to the standard market stocks, bonds and mutual funds as one goes up or down they all eventually follow. The investments are correlated investments. Current market conditions are a perfect example. They will move together - not identical - but together. A Self-Directed Retirement Account allows you to go outside of that market restrictions and invest in uncorrelated investments for true diversification. Real estate or commodities, fishing rights or private loans; you get to choose what your Self-Directed Retirement Account invests in.

A Self-Directed Retirement Account can be a Traditional IRA or a Roth IRA. A Traditional Self-Directed Retirement Account is funded with pre-tax money. That is, you put money into the account prior to taxes being taken out. The result is that you have more initial money to invest. Over time this grows, and when you want to take it out, the idea is that you will be in a lower tax bracket than when you put the money in. A Roth Self Directed Retirement Account is funded with post tax money. That is, you pay taxes on your money and then put it into the account. The money in your account grows tax free. When you take a normal distribution, there is no tax consequence.

Now Is a Good Time to Convert a Regular IRA to a Self Directed IRA

The economy is dismal and additional economic hardship is on the horizon with the auto industry, a second wave of defaulting mortgages, increased unemployment, businesses collapsing, and the market feeling the pain. Don't be stuck in a bad market. Think about alternative investments, investments that are not correlated. Use your team of accountant, financial planner, attorney and PropertyVestors to determine your best approach. Don't lose any more in the market.

Now Is also a Good Time to Convert a Regular IRA to a Roth IRA

While writing this article, a daily e-newsletter came into my inbox from Money and Markets. I have been following this source for economic information for over a year and appreciate the perspective it brings. So, as the e-newsletter happened to be about Roth IRAs and converting from the Traditional to the Roth, let me share the information directly from them. Remember while you read that a Self-Directed Account can be either a Traditional or Roth; it is your choice.

"Yes, I'm always talking about Roth IRAs. I can't help it ... I think they're one of the best deals going. As I've told you before, they offer you many basic advantages over other retirement plans AND they can be a great way for you to pass along wealth to heirs.

However, they've only been around for ten years. So even if you've been maxing out a Roth since the beginning, it's unlikely that you've been able to build a huge amount of money in your account.

No problem. You can always convert your traditional IRAs into Roth IRAs. And given the market's recent slump, now is a great time to consider doing so!

That's because when you do the conversion, you will be forced to pay taxes on pre-tax contributions and earnings made in the account.

So if the account's value is down substantially on paper, you will pay taxes on a much smaller chunk of change ... and from then on, the money will be able to grow tax-free for you and your heirs.

Before you rush out and convert your regular IRAs, there are a few things you need to know.

First, you currently must fall within a certain income threshold to convert a traditional IRA to a Roth ($100,000 in modified adjusted gross income for both single and joint filers). As of right now, that limitation is set to expire in 2010. Conversions that occur in 2010 will be allowed to have half of the taxable converted amount taxed in 2011 and the other half taxed in 2012.

Second, you will need to have enough money set aside to pay for the taxes on the conversion. Unless you're 59 1/2 or older, the money will have to come from a source outside the account or you'll pay the 10% early withdrawal penalty, too. And even if you're of retirement age, I wouldn't want to see you diminish the value of your account's future earnings power by using funds from within the account.

Third, the conversion could move you into a higher tax bracket and prevent you from getting other tax benefits like dependent child and college tuition credits.

Still, for many investors - especially younger folks and those looking to leave their accounts to heirs - now is a very good time to consider a Roth IRA conversion.

As always, you should do your homework before making your final decision, and a quick chat with a financial planner or accountant might be worth your while.

But the bottom line is that even though the daily market action is beyond our control, there are always smart proactive decisions that we can make to keep our financial lives as efficient and profitable as possible."

So, schedule the appropriate meetings with "Your Team" of professionals to consider and move appropriately with your Self-Directed Retirement Account. There is still time to make 2007 roll-overs and deposits.

Have a safe and happy holiday season. While we need to have a secure financial plan and provide for ourselves, the most important thing in the world is people. Enjoy these times with your family and friends.

To learn more about Self-Directed Retirement Accounts, visit www.propertyvestors.com, email invest@propertyvestors.com or call PropertyVestors directly at 804-874-0141.