Real Estate Offers Security to Retirement Plans during Stock Market Volatility

Statistics proved residential real estate a recession-proof asset, offering security for retirement plans

The first thing investors learn about portfolios is that they need to be diversified. Often, investors added bonds to their portfolio to offer some cushion when stock markets experience volatility. However, bonds offer little in term of return and as it turns out, bonds are not the only option to offset the stock market risks.

According to data from Robert Shiller, a Yale University  professor and a Nobel prize winner, real estate may offer a safe haven from stock market collapse. While the real estate market experienced a big drop along with the stock market during the 2007-2009 recession, residential real estate market actually remained unharmed. The research studied 15 previous equity bear markets since 1956 to find out that home-price index steadily rose through these periods.

Based on this finding, real estate investment can offer a way for investors to lower their risk during equity bear market. Unlike bonds, real estate investments, such as rental properties, can offer much higher returns.

Sense Financial recommends investors to consider adding real estate assets to their retirement portfolio. Many investors chose to purchase properties for value appreciation. Others count on the steady, predictable monthly rent payments as a passive source of income to finance their retirement.

Traditionally, investors may not have the option of investing in real estate with their 401k or IRA plans. However, with self-directed options such as the Solo 401k plan and Checkbook IRA, it became possible to add real estate to a retirement portfolio. With the Checkbook Control feature of a truly self directed Solo 401k, investors can freely choose the investment classes they are interested in. Transactions can be executed just by writing a check. No approval process needed.

Aside from the flexible investment choices, the Solo 401k plan also allows plan participants to contribute up to $59,000 a year in 2015. This is a significant limit that will help investors build their savings faster. The plan participant is also allowed to use non-recourse financing to leverage their real estate purchase. This makes Solo 401k plan one of the best investment vehicles for real estate investors.

Sense Financial is California's leading provider of retirement accounts with "Checkbook Control": the Solo 401k and the Checkbook IRA. Over the years, they have assisted hundreds of clients to obtain checkbook control over their retirement accounts while providing them with the ability to invest in virtually any investment class, including real estate, private lending, mortgage notes and much more without the need for custodian approval.

To learn more information about Solo 401(k) for self-employed real estate agents, please visit sensefinancial.com.