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s a real estate professional, you play a crucial role in helping clients navigate one of the most significant transactions of their lives—the purchase or sale of a property. However, what about your own financial future? As an independent contractor, you're responsible for your long-term financial well-being, which can be challenging without access to employer-sponsored retirement plans like a 401(k) or pension plan.

    Fortunately, being a small business owner provides you with access to certain financial mechanisms that allow you to save more money and grow your nest egg. One such solution is a self-directed IRA (SDIRA), which Jason Cochran, an agent with Desert Sotheby’s International Realty in Palm Springs, California, discovered.

    Cochran transitioned from a salaried position to a commission-based income, which was concerning. He had to devise creative strategies for additional income while also planning and investing for his eventual retirement. He found a solution in IRAR Trust Company, an NAR REALTOR Benefits® partner and provider of self-directed retirement plans.

    Cochran initially had reservations about transferring his existing 401(k) from a previous job to a self-directed IRA, but he found the process surprisingly smooth and tax-free. In 2017, he transferred a small portion of his 401(k) to his SDIRA and used it to fund a flip project. The SDIRA contributed 25%, while he put in the remaining 75% of his personal funds. Seeing how profitable it was, he eventually transferred the remainder of his traditional 401(k) into his SDIRA.

    Since then, Cochran has used his SDIRA to invest in other real estate projects and expand his property portfolio. His retirement portfolio has grown exponentially from flip profits, rental income, and equity.

    The number of real estate professionals opening self-directed retirement accounts at IRAR has increased an average of 22% year over year since 2021, according to IRAR President Jason Craig.

    A self-directed IRA is a retirement account that gives you complete control over your investments, allowing you to move beyond traditional 401(k)s' preselected investment options. You can invest in alternative assets like real estate, which you specialize in.

    SDIRAs offer real estate agents greater flexibility and control over their financial future. Here are some of the main benefits:

    1. Higher Contributions: Being a small business owner allows you to access a variety of retirement plans tailored for self-employed individuals, enabling you to make higher contributions to reduce your taxes.

    2. Higher Average ROI: Self-directed retirement accounts invested in real estate tend to have higher balances than stock market accounts at big banks. The average ROI for self-directed retirement accounts from real estate is also higher.

    3. Guaranteed Income Stream: SDIRAs offer predictable, tax-free rental income from real estate investments that act as a steady stream of income.

    4. Access to New Capital: Different strategies can be leveraged depending on the size of your retirement account and goals. You can use your IRA's cash to directly purchase real estate investments or create an LLC owned by your IRA for greater control over the property.

    Remember to stay informed about IRS regulations and prohibited transactions to ensure your SDIRA remains compliant.

    Don't forget to consult with a financial advisor to ensure your chosen strategy aligns with your retirement goals and complies with IRS regulations.

    NAR REALTOR Benefits® offers an exclusive discounted flat annual fee for self-directed retirement accounts with IRAR Trust Company. Find out how to open an account today.