Real Estate

How to hedge against inflation with an IRA

Inflation is a scary word for those saving for retirement. If inflation changes too fast, you’ll see your retirement funds shrink before your eyes. Inflation has risen steadily year over year in the recent past, however this does not mean that you should stop saving for retirement. There are ways to combat inflation by creating a very special type of IRA called a self-directed IRA.

Most people think of stocks, bonds, and mutual funds when they think of IRAs, because they are traditional investments. Those same people don’t realize that they could also be investing in gold, silver, rental properties, and just about anything else. By entering a self-directed IRA, you can take some of your retirement savings and start investing in ways that protect you from inflation.

Real estate is a great way to protect your money from inflation because houses retain their value even if the currency itself does not. People need a place to live and will always be willing to pay a premium for them. By using a custodian that will allow you to invest in real estate, you can start building your retirement by renting a home or business each month.

If you invest in real estate, you must be very careful not to rent to immediate family members, not to use the house yourself, and to have all of the rent returned to your IRA each month. Making any of these mistakes will lead to penalties from the IRS, which will definitely hurt your retirement savings.

If real estate isn’t your thing, you can invest in precious metals. Gold has been one of the surest ways to hedge against inflation for as long as people have used it and there are many custodians who have no problem with you making this type of investment. You will have to stay away from collectible coins made of precious metals. Also, all the metal you buy will have to be in the custody of your custodian, because you cannot handle the assets yourself.

The great thing about precious metals is that they retain their value even when entire economies collapse. Even if the United States government collapsed next year, you could take all your precious metals and get your money back in another country without a problem.

Inflation is scary, but you can protect yourself from it with a little careful investment planning. Investing in hard assets will help you protect your earnings and is also a great way to diversify your income.

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