Not If—When: Why Now Is the Time to Reevaluate Your SDIRA Strategy
Economic headlines aren’t always easy to ignore, especially when you’re a self-directed investor who’s thinking beyond traditional stocks and bonds. Interest rates rise, inflation spikes, and recession chatter picks up. You start wondering: Is my retirement strategy still solid?
If you’ve already established a Self-Directed IRA (SDIRA), congratulations. You’re ahead of the curve when it comes to diversification and financial control. However, even the most experienced investors can benefit from stepping back, reassessing, and making adjustments when the economic landscape begins to shift.
Drawing on years of conversations with high-performing business owners and investors like you, here’s how I think about preparing an SDIRA for uncertainty.
Self-Directed IRA: Built for Flexibility in Tough Times
If you’ve chosen to invest through an SDIRA, you likely did it because you wanted more control over your retirement funds. Unlike traditional IRAs that lock you into a small universe of mutual funds or ETFs, an SDIRA gives you the ability to hold alternative assets such as real estate, private businesses, notes, and more.
That control also means flexibility when market conditions change.
When inflation creeps up or the stock market becomes more volatile, most investors scramble to reposition their portfolios. But with an SDIRA, you're often already diversified beyond traditional public markets, so you’re not as exposed to the same volatility that affects index-heavy portfolios.
That said, diversification only works when it's intentional. Do you have all your SDIRA assets in a single property or within a single sector? That’s not really diversification. Now’s a great time to assess what you hold and how it might perform in a more turbulent economy.
Inflation and Retirement: The Silent Erosion You Can’t Ignore
Even when the economy seems stable, inflation chips away at purchasing power and, by extension, at the real value of your retirement savings.
Let’s say you’re holding rental real estate in your SDIRA. Rising inflation might seem like a win. Rents can go up, and asset prices may rise. But inflation can also bring challenges:
Higher maintenance and repair costs
Increased property taxes
Tenants are under more financial pressure, which could mean more turnover or delinquencies
It’s worth asking: Are your real estate holdings located in areas with strong, resilient rental markets? Are your tenants likely to remain stable if inflation persists or the job market weakens?
Or maybe you're holding private equity in your SDIRA. Inflation and shifts in interest rates can significantly impact business margins and growth plans. Do you have updated financials from those businesses? Have they adjusted for rising costs?
This kind of due diligence is not only good practice, but it’s your responsibility as an SDIRA investor. And while you can’t control inflation, you can take steps to protect your purchasing power through diversified, inflation-conscious investing.
Understand Market Conditions for Your Assets
Economic uncertainty doesn't hit every asset class the same way. What’s happening in one region, sector, or property type might be entirely different elsewhere.
If you own rental properties in Phoenix or Nashville, you’ve likely seen significant appreciation over the past few years. But what’s happening now? Have interest rates slowed investor demand? Are there signs of overbuilding? Are local job markets holding up?
Or let’s say your SDIRA holds shares in a private manufacturing business. Are they struggling with supply chain issues? Labor costs? Energy prices?
I’m not suggesting you make knee-jerk decisions. However, being passive in an SDIRA is akin to owning a business and never reviewing the financials. You have to stay informed.
Here’s something I do personally: I review each asset in my SDIRA at least twice a year. I ask:
Is this still aligned with my goals?
How might a downturn affect this asset?
Is this the best use of tax-advantaged space?
Sometimes the answer is, “Yes, let it ride.” Other times, it’s time to reposition.
Economic Uncertainty Can Be a Clue to Diversify
For clients who already hold real estate in their SDIRA, this may be a moment to consider expanding into other alternative assets. That could mean adding exposure to:
Private credit. Lending to businesses or individuals, secured by collateral, with structured returns.
Farmland or timberland. These tangible assets can offer steady, inflation-resistant returns and low correlation with traditional markets.
Private equity or venture capital. If you’re comfortable with longer lock-up periods and higher risk, early-stage investments can offer substantial upside.
Not every “diversified” asset belongs in an SDIRA. Liquidity, paperwork, and IRS rules around prohibited transactions can trip up even experienced investors.
If you’re evaluating a new investment class for your IRA, you’ll want to ask:
Does this investment require active management or frequent involvement?
Will the asset generate UBTI (Unrelated Business Taxable Income)?
Can I maintain proper arm’s-length relationships?
Does this asset require significant cash reserves or follow-on funding?
If you’re not sure how to answer those questions, it’s worth getting a professional opinion. That's where an experienced consultative SDIRA custodian can be invaluable, not only to help you execute but also to guide you through the process before pulling the trigger.
How One Investor Rebalanced for Resilience
One of our clients had accumulated several rental properties in her SDIRA. Over the past few years, the cash flow was strong, but most of the properties were in one metro area, and she was feeling uneasy about rising taxes and vacancy rates.
Together, we walked through a reassessment of her portfolio. She decided to sell one underperforming property and used the proceeds to purchase a private lending note backed by commercial real estate in another region. She also allocated a portion into a precious metals trust, both of which fit well within SDIRA rules.
Was it flashy? No. However, it provided her with a stronger income base, exposure to new markets, and better downside protection. That's the kind of realignment many SDIRA investors could benefit from, especially in uncertain times.
A Word of Encouragement from Chicago Trust Administration
If you’ve taken the initiative to build a Self-Directed IRA, you’re already thinking like an owner, not just a saver. Economic uncertainty is a reality, but it doesn’t have to mean fear or paralysis. It's a cue to assess, adjust, and ensure your SDIRA continues to work for you.
And you don’t have to do it alone. At Chicago Trust Administration Services, we partner with investors who want real conversations, not just custodial checklists. We provide not only administrative expertise but also consultative guidance that helps our clients understand the full scope of their options while avoiding costly missteps.
If you're ready to review your Self-Directed IRA and explore how to adapt it for an uncertain future, we invite you to schedule a complimentary meeting. Call us at 312-869-9394 or email steve@ctasira.com.
Professional guidance makes all the difference. Let's ensure your SDIRA is built to withstand whatever the economy throws our way.
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*The content and opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
**CTAS professionals are not financial advisors and cannot provide advice or recommendations regarding specific investment decisions.