Retirement Investment Options — A Different Version of Goldilocks and the 3 Bears

Unfortunately, many people are unaware that they can invest their retirement funds in assets other than “traditional” assets such as stocks, bonds and mutual funds. Unfortunately, this prohibits them from investing in “non-traditional” assets (e.g., real estate) when they may want to make these investments.
But, since brokerage firms and banks will only permit you to invest in their financial products, how is one able to invest in other assets and how does this have any correlation to Goldilocks and the Three Bears? You remember the story….”this porridge is too hot, this porridge is too cold, this porridge is just right.” Well , let’s first introduce the stars of our show……

Papa Bear – Papa Bear is your bank or brokerage firm/broker whose plans only allow you to invest in stocks, bonds and mutual funds.

Mama Bear – Mama Bear is the self-directed Custodian or Administrator that will permit you to invest in non-traditional assets such as real estate. While allowing, they don’t give you checkbook control of your own funds and charge you annual fees that end up being costly.

Baby Bear – Baby Bear is a self-directed company that sets up your retirement plan (e.g., IRA, 401K) whereby you serve as your own fiduciary/trustee. Now, you control your retirement checkbook and can invest as you see fit. No more annual fees as you will pay a one-time fee for your plan.

“This Porridge is Too Hot!”

Just like Goldilocks, many of us scrunch our noses at the idea of investing solely in Papa Bear’s world of stocks, bonds and mutual funds. And, we are right in scrunching up our noses as many people have soured on placing total faith in the market as the sole receiver of their retirement funds.  Acknowledge the fact that stocks, bonds and mutual funds fill a diversification hole…but it shouldn’t be the only filler for that hole. But, it won’t surprise anyone that over 80% of all assets in all retirement accounts are in these “traditional” offerings….does this really sound like true diversification to you?

“This Porridge is TOO Cold”

Now, Goldilocks moves to the Mama Bear’s bowl of porridge and while being enticed by the proclamations of investing in all assets (i.e., traditional and non-traditional), she discovers that this bowl is not to her liking and she blurts out, “this is TOO cold.”  You see, while Goldilocks enjoyed all their claims, she wearied quickly when learning that she wouldn’t control her IRA/401K checkbook and paying high, ongoing annual fees. In addition, when she learned that she may have to wait (and wait) for the check and not have protection against possible IRS Prohibited Transactions….well, this bowl got down right freezing.

“This Porridge is JUST Right”

Finally, Goldilocks finds the Baby Bear’s (TRUE self-direction) bowl of porridge and found that it was JUST RIGHT. What made this bowl the most enticing and delectable? Well, Goldilocks found that she could have checkbook control of her funds and pay a one-time fee in establishing her account. No more asking permission, no more waiting. This account gave her true control and true freedom.  While eating from this bowl, Goldilocks also enjoyed the fact that she could purchase both “traditional” and “non-traditional” assets all from one account. No asking permission, no additional fees in being able to do this….she had ultimate control of HER account.

Now, at this point in the story, you remember the Three Bears came home only to find that someone had eaten from their retirement-account bowl.

Papa Bear said, “Who’s been eating from my bowl…..I hope they know they can only purchase stocks, bonds and mutual funds!”

Mama Bear said, “Who’s been eating from my bowl….I hope they know that I am going to control the checkbook, charge annual fees and not necessarily be user-friendly!”

Baby Bear said, “Whoever ate from my bowl will have a self-directed plan that is just right! They will have a one-time fee, they will control their own checkbook and it is user-friendly. They can purchase and invest in both “traditional” and “non-traditional” assets without hassle or extra fees!”
You see, it really is amazing what life lessons we can learn from children’s nursery stories. Your decision….do you want Papa Bear’s bowl, Mama Bear’s bowl or Baby Bear’s bowl? The choice is yours!  Do your homework and do your due diligence. Make a decision that best suits and reflects your investment philosophy…not just following the rules established by Papa or Mama Bear.