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Most employers today offer a 401(k) plan. But employees often complain that their investment choices are limited to only a few mutual funds and perhaps a low-paying fixed account.
IRAs offered by bank and brokerage firms may offer a few more choices, but seldom offer more categories of investment. You are stuck with the choices they sell - usually stocks, bonds, and mutual funds. This is why you need to consider a Self directed 401k.
It is not the IRS, but the custodian that limits your investment choices. The following are just some of the investment categories allowed under the IRS rules:
| Real Estate |
Buisiness |
Financial instruments |
| Residential |
Professional Businesses |
Stocks |
| Commercial |
Business Start-ups |
Bonds |
| Lease Options |
Business Franchises |
Mutual Funds |
| Renovations |
Retail Business |
Options |
| Rentals |
Public Business |
Limited Partnerships |
| New Construction |
|
REITS |
| Foreclosures |
|
Annuities |
| Raw Land |
|
Covered Calls |
| Development |
|
Futures |
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Commodities |
The Family IRA
The Family IRA can be used when the desired investment is too large for your IRA to purchase alone. In the below illustration, Bill and Sue use their IRAs to buy a prorated interest in a third LLC. Then that third LLC purchases the property. In this strategy as in all investment strategies, structure and adherence to the IRS rules is of the utmost importance.
Control Of Your Retirement Funds
You have heard it said that "time is money". Never has that been more true than with investing. When a good real estate deal comes along, you can not afford to take weeks to act. With a typical bank or brokerage IRA it can take from a few days to a few weeks to receive a check from your IRA. Why? After all, it is your money that you are requesting. At Waterford Financial
Group, we will help you with the simple yet effective steps of establishing Checkbook Control over your retirement funds. Once completed, you can simply write a check when you have the opportunity to grab a great investment. What could be simpler than that?
Minimal Reporting
There are minimal reporting requirements when you establish an LLC inside of your IRA, since the LLC is by definition a "pass-through entity". This means that all of the LLC's gains and losses pass-through to its owner; in this case, the tax-deferred entity of the IRA. The tax-deferred structure of the IRA usually prevents current taxation.
Financing Real Estate Purchases In Your IRA
Don't ask your banker or broker if you can borrow money in your IRA - the answer will be a resounding NO! But what they are really saying is no, they will not LOAN money in your IRA. But at Waterford Financial Group, we can show you a strategy to borrow up to an 80% loan-to-value on the real estate purchased in your IRA using a NON-RECOURSE LOAN. This non-recourse loan allows your IRA to borrow the funds without tying up your borrowing power.Terms subject to change, each transaction subject to lender approval
Is your retirement going the wrong way?
- Tired of scandals, losses, high paid CEOs & 2% returns?
- Tired of broker's getting paid even when you lose funds?
- You can be more involved than merely opening your statement at month's end. Take CHARGE of your IRA.
- What if you had bought real estate or invested in a start up company what would your nest egg be today?
Many custodial companies are using the term "Self-Directed" to describe the IRA and 401(k) products that they market. Unfortunately, what these companies aren't telling you is that, when used to describe retirement plans, the term "Self-Directed" can actually have either of the following meanings:
1.) Traditional IRA's- typically offer only limited investment options for plan owners (stocks, bonds, and mutual funds). You "Self-Direct" your account only in the sense that you choose your investments from a very limited list of stocks and mutual funds offered through your account custodian.
If you have an Ameritrade account (or similar), you have this kind of "Self-Directed" account.
2) Traditional "Self-Directed" IRAs - expand the investment options
from stock and mutual funds to also include real estate, tax liens and
a host of other potentially higher-yielding investments. Although this
is a step in the right direction, owners of these Traditional
"Self-Directed" IRAs soon learn that there are some significant
drawbacks to this type of "Self-Directed" plan:
- Who’s
The Boss? - Custodial "Approval" is required before you are allowed to
make an investment. (Why should you need to get someone else’s approval
to invest YOUR funds?)
- Delays - Ready to invest? GREAT! Now fill out the paperwork and WAIT up
to a week or longer! (Say goodbye to time-sensitive investment
opportunities!)
- Interest on Uninvested Funds - Uninvested funds are held in an account
at the custodian that pays you little or no interest. (Shouldn’t you be
the one making the interest on YOUR uninvested money?)
- Fees
- Typical fees include a yearly "Maintenance" fee (usually based on a
percentage of the market value of the assets in the plan), fees for
buying AND selling assests, and fees for every little service from
document safe-keeping to cashier's checks and faxes.
If you have an account with Entrust or Pensco (or similar), you have this type of "Self-Directed" retirement account.
The IRA LLC Doctor TRUE IRA and TRUE 401k are the next level in Self-Directed Retirement plans.
Review our LLC plans in the main page or click on the image below to get started on your own IRA LLC CheckUp.
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