Seven Ideas for Maximizing Retirement Savings, Part 2

Here's our next tip from a Kiplinger's article giving seven ideas for maximizing retirement savings:

Tip #2: Invest creatively

Erratic stock-market returns and persistently low interest rates have left a lot of investors worried about the performance of their retirement portfolios. A small but growing number are turning to self-directed IRAs -- accounts with third-party custodians that allow them to diversify their retirement savings beyond the typical mutual fund menu into investments such as real estate and community bank stocks.

We're not suggesting that you bet your retirement...on a single investment. But there is room in retirement savings for investing in a good idea outside the usual realm of mutual funds.

That good idea may be the stock of a community bank or a new young company whose product you use and like -- for example, Google when it went public in 2004 (its stock has more than tripled in value since the IPO). Whatever it is, investigate the company thoroughly. Read everything about it you can get your hands on. Find out about its leaders, its customers, its competitors and its balance sheet. Imagine what could go wrong. If you still see a winner, consider investing a portion of your retirement nest egg. If the stock prospers, so will your savings.

I don't know about this one -- I think they are grasping at straws here. Sounds like to me that the risks associated with this idea far outweigh the potential benefits. I prefer a less risky, but still aggressive, stock diversification plan.

Click here to read part 3 of this series.

Comments

[Khyron]

You're crazy! Self-directed IRAs are great. If all you want to invest in is standard securities (stocks, bonds, mutual funds), you can. But you have soooo much more flexibility as well. The company I am in the process of setting up my self-directed IRA with allows real estate investments of many flavors, commodities, and investments in private businesses, among others. Great diversification. Yeah, the fees can be a bit steep but the options are amazing. And lets face it, providing options are are what money is all about. The risk is not inherent or a given; you choose, just as you would with any other investment program. But why bother opening a self-directed if you are going to invest in prosaic vehicles?

[FMF]

I'm crazy? Oh yeah, well...what was that? Who's watching me? I think someone's following me. ;-)

If you click through to the article, the example they use is someone who takes all her money and puts it in ONE investment and it does well. That part is crazy, I think you'll agree.

As far as IRAs go, I simply invest in stocks and bonds. (I'm part of an LLC that invest in real estate.) The one thing I would caution you about is the following:

"the fees can be a bit steep"

Remember that anything with steep fees needs to earn back those fees just to get to even with other options. This can be a tough hurdle for most investments.

That said, I'd be interested in you telling us how your self-directed IRA goes once it's set up. Email me if you like and we can set up having you post about it -- what's good, what's bad, etc.