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Self-Directed IRA & 401(k) Mid-Year Financial Review

Just like your garden needs water, food, and perhaps a little pruning or weeding to stay healthy and productive, your retirement investing strategy needs tending in order to produce the best results.  Mid-year is a great time to review some of the big-picture aspects of your retirement plan.  This is typically a quiet time for financial and tax matters, without the demands of year-end or tax season. As such, you can sit back with a cool glass of lemonade and think a bit.

Some topics you may wish to consider include:

Are all the ducks in a row?  A periodic check to make sure your financial account records, beneficiary designation and other vendor contacts are in order is a good idea.  Make sure your key vendors like your IRA custodian, insurance agent, etc. have your current contact information.  If you or any of your plan beneficiaries have moved, married or otherwise had a life change, make sure that is reflected on your IRA account or 401k as well as any estate planning documents.

How are your investments performing?  When you invest in traditional financial products, you typically get a statement.  If you are managing your own investment portfolio in a self-directed IRA or Solo 401(k), you are effectively the “fund manager” and would need to produce your own statement if you wanted one.  Creating some kind of financial analysis for your plan is a really good idea.

This is a good time to look at the various investment choices you have made and evaluate whether they are producing the results you desire.  If not, are there things you can do to improve results?  If so, do you forecast that they will continue to do so in the future, or do you possibly need to adjust to hedge against changes in the local economy or real estate market, for example?

If you have excess capital in your plan, how are you managing that?  In most cases you will want to have some semi-liquid reserves to cover contingencies with non-traditional assets such as real estate.  In order to keep your capital productive, you may wish to look at traditional choices such as bank CD’s, stocks, etc.  Many people are not aware that their self-directed IRA LLC or Solo 401(k) may hold a brokerage account in addition to or instead of a bank checking account.

How are your vendors or partners performing?  Depending on the nature of your investments, you may have several vendors or partners providing services to your plan.  If you are investing in rental property, you may have a property manager, insurance agent, landscaper, handyman, etc., that you rely on to keep your property performing well.  If you are lending with your plan, you may have a note broker or note servicer assisting you.  You certainly have a relationship with a bank, credit union or brokerage firm to hold plan funds.  A periodic check to make sure you are getting the best value from these types of providers is wise.

Touch base with your property manager to schedule an inspection of your property, for example.  Have a conversation with your insurance agent to ensure you have the right coverage in place and perhaps compare rates.  If you work with a realtor to source investments, see what they think about the market you are investing in.

Depending on the nature of your investment portfolio, there may be other topics you will want to consider.  The basic principal is that this quiet time of year is a great time to put a little focus into your plan.  Who knows, some of that tending may bear fruit for years to come?

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