Broker Check

Monday Money Report

| October 25, 2021

Two weeks ago, we were talking about a market pullback, or a drop of over 5%.  Last week, the market hit yet another all-time high.  The takeaway from those two pieces of information is not to let short-term market volatility scare you.  Pullbacks and corrections are normal, and happen even in otherwise strong bull markets. Earnings season is wrapping up, and companies are continuing to report strong results, indicating the economy is doing well.

Also over the last few weeks, I’ve had the topic of self-directed IRAs come up in discussions. Most people invest their IRAs in typical investments – stocks, bonds, mutual funds, sometimes even cash or CD’s.  You can’t invest your IRA in collectibles.  But you can invest in real estate or privately-held companies.

If you are starting a business, an IRA can be a source of capital, or funding.  You don’t have to cash out the IRA and pay taxes on the money, you just invest the money in the IRA in the company. The advantage can be significant tax savings. The disadvantage is that, if your business fails, you’ve also lost your retirement.

You can also use your IRA to purchase rental property.  Again, this provides tax-advantaged funding for a purchase you might not otherwise be able to make. On the flip side, you can’t use the property for personal use – ever. With a normal rental, you can stay 14 days a year with no tax ramifications.  With a rental owned by an IRA, you can’t use it at all.  You also can’t do any work on it yourself; everything must be done by outside companies. You need to make sure there is enough cash inside the IRA to fund maintenance and repairs, taxes and insurance, and cover the mortgage if there is ever a shortfall in rent.  When it comes time to liquidate the house, you can’t buy it from your IRA.  It has to be sold to a third-party.

A self-directed IRA can make sense and provide funding for unique opportunities.  But you need to think through the downsides and make an educated decision before you put your retirement at risk.

Your action to take this week is to for people 65 and older.  Open enrollment for Medicare started October 15th, so now is the time to evaluate your Medicare supplement and Part D coverage for next year.  Learn more on our website at, and be sure to check out our Facebook page for more information.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. 

The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.