Filed under: Self-Directed IRAs
Now is the Time to Invest in Real Estate with your Self-Directed IRA
Are you “in the know” about this extremely valuable investment tool – the self-directed IRA? Statistics show that there are approximately $4.2 trillion dollars in IRA’s in this country and fewer than 4% are self-directed IRA’s. Many people are simply not aware that a self-directed IRA can enable them to tap into an amazing potential for growing wealth for their retirement portfolio and future.
Chances are — if you are like most people, your retirement money is locked into traditional and often unproductive investments, such as stocks, bonds and mutual funds. You might agree that the volatility of the stock market and resulting losses in the last several years is enough reason to take a look at other alternatives.
Up until now, you may not have realized that you can legally invest your IRA in “alternative” investments such as real estate (domestic and foreign), private placements, tax liens, precious metals and limited partnerships, to mention a few, increasing those retirement dollars exponentially.
Individual retirement accounts were introduced in 1974 with the enactment of the Employee Retirement Income Security Act (ERISA). The rules governing what an IRA can invest in have been in effect and not changed since IRAs were created. The rules only specify where someone cannot invest and there is an unlimited array of investments that fall well within the permissible boundaries. There are only three investments that are specifically not allowed within IRAs: collectibles, life insurance, and capital stock in an S corporation.
So, you may ask, what exactly is a “self-directed” IRA and how do I open one?
A Self-Directed IRA and Diversification
A self-directed IRA puts you, the investor, in the driver’s seat, allowing you to freely choose investments from a myriad of asset classes. This is in strong contrast to having a financial institution (bank, brokerage firm) making the decision for you and your future, as they likely have a biased interest in profiting from the limited investments (traditional stocks, bonds and mutual funds) that they offer to you.
A “truly” self-directed IRA is when YOU (with the advice of your chosen professionals) choose your IRA’s assets, allowing you to invest in both “traditional” investments such as stocks, bonds and mutual funds, as well as the aforementioned non-traditional investments. Therefore, it need not be an “either or” proposition.
The fact is, if you so choose, you can still hold positions in the stock market with a self-directed IRA, yet branch out to include these non-traditional or alternative investments, diversifying your investment portfolio. It is common knowledge that “diversification” is paramount to any investment strategy!
It is actually quite easy to open a self-directed IRA, as it’s a simple matter of deciding on a reputable custodian such as Pensco Trust Company or Equity Trust Company, and filling out an online application. The fees are nominal and clearly disclosed on company websites. These custodians also offer excellent free educational tools and webinars to further enlighten you and get you started on the road to self-directed IRA investing.
After some thoughtful research on the various types of investments that you can now take advantage of, the next and most exciting step is to make your decision on how to proceed with expanding your retirement account! However, we do recommend that you discuss your investment approach with your chosen professionals (CPA, CFP, PA) for guidance as you would with any type of investing.
Real Estate Investing with a Self-Directed IRA
Since our forefathers, real estate investing has been the primary investing methodology that people have employed to successfully amass wealth. Long before the extreme example of the U.S. real estate “bubble” of the last few years, “tangible” real estate investments have brought financial security and wealth to investors for centuries. Yes, real estate investments are indeed tangible, where an investor can actually have a direct effect on appreciative value — unlike stocks and bonds.
According to the National Association of Realtors (NAR), recent statistics show that the housing market has actually rebounded in the last three months. The report says that existing-home sales rose for the third consecutive month with inventory easing and home prices declining less sharply in June 2009.
NAR chief economist, Lawrence Yun, is hopeful about the gain. He said that “the increase in existing-home sales occurred in all major regions of the country. We expect a gradual uptrend in sales to continue due to tax credit incentives and historically high affordability conditions.”
Real estate investments in a self-directed IRA are both tax-deferred and tax free, depending on the specific investment vehicle. It is truly amazing that more people do not take advantage of these tax breaks, as statistics show that currently less than 2% of retirement accounts hold real estate as an investment.
It is important to know that you can purchase real estate in your IRA as long as it does not result in “self dealing,” which means that you cannot purchase property that you will reside in or do business in. There are also specific IRS prohibitions on purchasing or selling property in your IRA where certain family members may have a percentage of ownership. In learning more about observing IRS regulations, we again suggest guidance from chosen professionals, CPA or ERISA versed attorney to assist you in becoming a successful self-directed IRA investor.
The Benefits of Real Estate Investing in the State of Louisiana
Louisiana and its beautiful, historic city of New Orleans are also actively engaged in the process of rebounding and rebuilding after the catastrophic devastation of Hurricane Katrina in 2005. The real estate market in Louisiana is largely driven by the need to literally rebuild its cities (parishes) and because of an increased housing demand due to the influx of workers, workforce housing is a burgeoning necessity and building projects are rapidly proliferating.
Timing is “optimal” for real estate investors to get in on the unusually lucrative post-Katrina economic environment in the state of Louisiana. As spicy as New Orleans jambalaya, real estate investing is “kicked up” a couple notches in The Big Easy.
The good news for investors in Louisiana and New Orleans is not only due to the extreme market demand, there is the additional perk that investments are enhanced by federal tax credits enacted by what is known as the Gulf Zone Act of 2005, which gives investors hefty tax breaks. Larry Haines, CEO of Road Home Builders and Sunconomy Homes said “residential housing in Louisiana is strong, especially in areas supporting oil field services and offshore drilling. These investment properties are yielding state and federal solar tax credits, depreciation, and positive cash flow that investors aren’t getting in most of the U.S. right now.”
Road Home Builders, a “green” contracting firm, headquartered in New Orleans, is currently involved in the development of several projects, building affordable, energy-efficient solar homes. These projects target first time home buyers and the need for workforce housing along the Louisiana Gulf Coast, offering significant investment opportunities for self-directed IRA and discretionary income investors.
Here are the six easy steps to start investing with a Self-Directed IRA:
1) Select a reputable custodian/administrator of self-directed IRA’s
2) Choose a plan type: traditional, ROTH, SEP, SOLO K and open your account online, by filling out application (print, sign and mail)
3) Research investment asset classes and decide upon investment(s)for diversification
4) Discuss investment strategies and review IRS regulations and tax laws with chosen professionals
5) Submit specific investments to custodian for approval (they make sure that the investment is sound and legal, however, they do NOT make the decision whether it is a good or bad investment, that is up to you)
6) Enjoy watching your retirement account grow, having peace of mind knowing that you are now responsible for the investment decisions about YOUR retirement money and YOUR future
The Golden Opportunity
Real estate investing using a self-directed IRA is a prime investment vehicle right now for both long term and short term investing. With real estate prices and interest rates at an all time low, it is time to “make hay while the sun shines.”
As investors, we may never see another golden investment opportunity like this in our lifetimes. NOW is the time to start investing in real estate, using the ultimate tool for your retirement portfolio, the self-directed IRA. Discover the freedom of taking control of your financial future!
Patricia Reynard Hightower is a Managing Partner of Road Home Investments LLC (www.roadhomeinvestments.com) and CEO of Bayou Equity, a conventional mortgage lender in New Orleans, Louisiana. She is a keynote speaker and educator on Self-Directed IRAs. Contact: 504-586-3655 or email patricia@roadhomeinvestments.com
Filed under: Uncategorized
Build your financial future by maximizing your retirement assets
By Patricia Hightower, Road Home Investments LLC
Are you one of a multitude of investors who has recently experienced significant losses in your retirement account as a result of stock market decline?
In 2008 Americans were faced with the unthinkable collapse of large investment banks and corporations, combined with diabolical scandals targeting investors. The climate of fear created by scandals like the recent global Ponzi scheme masterminded by rogue Bernie Madoff, has some investors running for the proverbial hills with their nest eggs.
The Recovery Plan
Investors fed up with the shrinking of their retirement accounts and the shortcomings of financial entities entrusted with their livelihood, may want to consider taking control of their financial destiny and start building wealth with a self-directed IRA. The key advantage of the truly self-directed IRA is that the account owner is directly involved in the choosing of IRA assets. A self-directed IRA allows asset classes in both “traditional” investments such as stock, bonds and mutual funds and “non-traditional” investments like real estate (foreign and domestic), mortgages, notes, tax liens, LLCs, private placements and much more.
An increasing number of individuals are discovering the self-directed IRA, an investment vehicle that features the freedom to choose from this array of investment alternatives without being “pigeonholed” with the limitations of traditional stock market investments that brokers and bankers offer for your IRA.
The motive for Wall Street to monopolize your retirement portfolio is based on the steep “commissions” they make selling you their limited menu of financial products. Conversely, a custodian and administrator in charge of a self-directed IRA account will not (or cannot by law) sell you investment advice, financial products or charge commissions – they simply charge an annual fee of anywhere from $100 to $2000 dollars depending on the investment portfolio.
The Power of Diversification
Consider this. Most of us are familiar with the term “diversification” in regards to investing, are we not? Diversification is a concept often explained with the age old saying – “don’t put all your eggs on one basket.” Harry Markowitz, thought leader and developer of the Modern Portfolio Theory stated that diversification is the “free lunch of finance.”
Yes, it is deemed mission critical to maintain a diversified “mix” of investments in an investment portfolio. And the rather shocking fact is – the retirement portfolios of 96% of American investors currently held in inflexible traditional IRA accounts in banks and brokerage firms simply do not adhere to this traditional wisdom. (Buyer beware: the “self-directed IRA” offered by many banking institutions and brokerages is a “misnomer” – it is a term that implies that the account holder can only “choose” from the “menu” of stocks, bonds and mutual funds offered by the firm or institution.)
So why be limited only to stocks, bonds and mutual funds as an investment strategy to grow your assets? Should you settle for a 2 or 3% rate of return when you can reach for 20 or 30%, depending on your risk tolerance? A self-directed IRA allows for an endless variety of asset classes, with the IRS disallowing only 3 types of investments: Life Insurance, Collectibles and S Corporations. (reference: IRS Publication 590)
With optimum diversification and the reallocation of assets in a self-directed IRA, meeting your retirement goals can truly become a reality.
Get Advice
“Those that won’t be counseled can’t be helped.” – Benjamin Franklin. It is imperative that after opening a self-directed IRA account you consult with experts to avoid breaking any laws or prohibited transactions pertaining to use of IRA funds. You would not want to be subject to stiff IRS penalties and losses due to lack of education and expert counsel.
In every investment portfolio, there needs to be a good mix of opportunity and risk. If you want to make money, you cannot cut out all risk, however the goal is to find an appropriate balance and every investor must decide what his or her risk tolerance is with the assistance of a trusted financial professional.
Real estate investing, for example, a historically safe and tangible investment, has created significant wealth for investors who understand the risk-return trade-off of this asset class. With real estate, a self-directed IRA investor has the security of a tangible asset, whereas the investment in a mutual fund you may not know “where” your money is actually invested. With your self-directed IRA, you can take control, choosing from a myriad of investments to round out and elevate your retirement portfolio.
The Approach
Six Steps to a building your financial future:
1) Choose a top-tier custodian and open a self-directed IRA account
2) Do your homework – continue to educate yourself on self-directed IRA investing
3) Get advice on potential investments from your informed (specifically on self-directed IRA guidelines and investing) and trusted professionals (CPA, attorney, advisor)
4) Seize higher yield investment opportunities employing investment growth strategies
5) Capitalize on the incredible tax advantages – one key objective of a self-directed IRA is to provide a vehicle for a taxpayer to grow their wealth without being subject to income taxes on the gains
6) Be accountable, taking a proactive approach towards improving investment returns, taking advantage of a greater breadth of investment options.
Take Responsibility for your Financial Future
It’s up to you.
Fewer than 4% of investors self direct their investments, are you ready to take an active role?
Taking personal responsibility in planning your financial future is more important than ever. Think about it. The amount of retirement savings you accumulate will have a direct and dramatic impact on whether you will be able to maintain your standard of living when you retire.
To maintain their standard of living, most people will need more than social security and their company retirement plan. With a self-directed IRA you have both the privilege and responsibility to make sound financial decisions for your IRA money. However, you must be prepared to educate yourself, enlisting the assistance of qualified informed professionals to achieve greater diversification and investment potential.
A self-directed IRA is an extremely valuable tool to create wealth when guidelines are followed and used efficiently with the proper allocation of assets.
If we remain proactive in educating ourselves about the various options and flexibility we have to grow our retirement dollars, we will indeed reap the benefits and prosper.
Why not take control of your financial destiny?
Invest in a brighter tomorrow with a self-directed IRA.
Patricia Reynard Hightower is a Managing Partner of Road Home Investments (www.roadhomeinvestments.com) in New Orleans, Louisiana, and a speaker and educator on Self-Directed IRAs. Contact: 504-586-3655 or patricia@roadhomeinvestments.com
Filed under: Uncategorized | Tags: building wealth, creating wealth, IRAs, Maximizing Retirement, retirement investing, retirement planning, ROTH IRA, Self-Directed IRAs
You can no longer follow the age-old traditional advice of putting all your assets into bonds, CDs and cash, which are more conservative. You have to keep investing actively and you have to diversify, or you’ll be forced to work beyond retirement. You must take retirement planning seriously and build some wealth while you are still young.
If you start early and are consistent about contributing, you can develop a tremendous amount of wealth. Young people in particular have the opportunity to invest in things that simply didn’t exist years ago. If someone in their twenties puts just $5000 per year into an IRA for seven consecutive years, and achieves an 8% growth until they retire at age 65, they will have over $1.2 million dollars.
Of course, larger contributions, continuing contributions, or a higher rate of return would yield even more money. Getting started early optimizes the full benefit of tax deferred compound growth.
Don’t limit yourself to 401Ks and other instruments that give you limited investment choices. Consider moving into more self-directed investments. Self-directed investing allows for opportunities like private equity, real estate, foreign investments, foreign stock, and a variety of other investments. Of course, self-directed IRA accounts are an excellent way to do that.
If you are young and make less than $100,000 per year, get started with a Roth Ira. Effective January 1, 2010 there is an opportunity to convert a traditional IRA to a ROTH IRA with tax free growth for life, regardless of income. You can even split up the tax impact over a two year period. You can make non-deductible contributions in the next 2 years into IRAS, and then convert to a ROTH, and you won’t be paying tax on the non-deductible contribution amounts. You’ll only have to pay tax on the growth of those amounts over the first two years. Additionally, the first $10-12,000 will go into your ROTH tax-free. Assuming 3 % earnings, overtime a ROTH IRA will pay off during your lifetime and will have additional benefits to your beneficiaries. You’ll never pay tax on those earnings.
Filed under: Uncategorized | Tags: building wealth, Maximizing Retirement, retirement investing, retirement planning, tax-deferred saving
No matter what your age, you should always make your annual contribution to your IRA by the deadline of April 15th of the following year. If you have available funds, you should also make your current yearly contribution early to get maximum growth before the end of the year.
If you haven’t already, you should also consider converting to a Roth IRA to get started on tax-free growth. Unlike a regular IRA, with a ROTH you don’t have to take the money out when you reach 70 ½, there’s no required minimum distribution, and your money will continue to grow tax-free. In addition, if you continue to have earnings after retirement, you can continue to put more money into the Roth that will also grow tax-free. When you pass away and leave it to your children, it will continue to grow tax-free. It’s a great vehicle.
There’s some risk involved because you’re paying the tax upfront, but the upside is that you will never pay taxes on any return on investment inside of a ROTH.
If you are 70 and have traditional IRAs, it’s time to take your mandatory distribution. You have until April 1st of the year following the year you turn 70 ½. If you fail to do this, you will pay a penalty of 50% of the amount you should have taken. The mandatory distribution applies to all IRAs and must take into account the ending market value of all assets before calculation takes place.
You can also put up to $2,000 per child per year into an educational savings account. The child does not have to be related to you, and it has no effect on the child’s earned income.
Now is a good time to consolidate retirement accounts into one and get the economy of fees and have the opportunity to be more proactive.
If you made too much of a contribution last year for any reason, you can undo it by April 15th without penalty.
Make all your contributions to the maximum, particularly those that are eligible for a tax deduction. Check your limits, speak too your financial planner or CPA and review your income levels to determine what deductions and contributions your eligible for, and max them out.
Filed under: Uncategorized | Tags: creating wealth, investing, IRAs, Maximizing Retirement, retirement investing, retirement planning, Self-Directed IRAs
The good news is: we are all going to live a long life. The bad news is: we are going to live too long. How will you have enough money saved to afford to live? Current life expectancy is 86, and continues to climb. The reality is if you retire at age 65, how can you be sure you’ll have enough to continue your lifestyle for the rest of your life?
The fact is, in 20 years, your dollar will be worth 45 cents. In January of this year inflation was 1%. If that continues, it will destroy a lot of people’s savings over the years. You can no longer follow the age-old traditional advice of putting all your assets into bonds, CD’s and cash, which are more conservative. You have to keep investing actively and you have to diversify, or you’ll be forced to work beyond retirement.
The boomers that are now retiring are moving away from 401Ks and other instruments that give them limited choice investment, and are moving into more self-directed investments. Self-directed investing allows for opportunities like private equity, real estate, foreign investments, foreign stock, and a variety of other investments.
The new concept of “life planning” is beginning to look at retirement as just another life stage, which may involve work, travel, research, whatever you choose to do when you are not dependent on your current occupation. It requires active planning and management by professionals. It’s only been in the last 10 years that the common perception is that we are going to live longer, and can start planning later in life.
In the past, retirement investing has been limited to stocks, mutual funds, CD, bonds, etc. Yet, a recent study of high net worth clients found that 55% of the highest performing, largest balance portfolios are heavily invested in alternative assets (about 80% of the portfolio). Alternative can be a good thing, a way to balance out and diversify your holdings.
Many financial planners suggest that you shouldn’t get a high yield in your IRA account, because if you do you’re going to have to pay more tax. Anybody that advises people not to grow their IRA may as well suggest not having an IRA. What’s the point of putting money in unless you will get a return? You’re not intending to try to lose money by having an IRA; you’re trying to maximize the yield on all your assets through diversification and careful selection. You certainly don’t want to slow or limit your growth by picking investments that are not going to grow. That doesn’t make any sense. Sure, you’re going to have to pay ordinary income taxes, but isn’t it better to pay tax on something, than no tax on nothing? These common misconceptions occur because there is such a lack of knowledge on self-directed IRAs, because the topic is so new to many people and not yet in the mainstream (self-directed IRAs currently represent only 3% of total IRA assets).
The bottom-line is not what the tax impact is on investment, but whether that tax impact still results in a higher yield on the investment. Overall net after tax income is more important.
Filed under: Uncategorized | Tags: Self-Directed IRAs, Solo-K, 401K, SEP IRA, self-employment, entrepreneurs, sole proprietors
How do you triple your retirement contributions? If you are self-employed, you can open a Solo K and contribute three times more per year than you can in an IRA. A Solo K also has no income cap.
Anyone who is self-employed or a sole proprietor is eligible for a Solo-K. It’s much better than a SEP IRA in that it allows you to put up to $15,500 away ($20,500 if you’re over 50) each year that will grow tax free for life. It’s an incredible opportunity that only became available in January 2006. If you are self-employed and have a SEP IRA, you should consider rolling into a SOLO-K to take advantage of the after tax contribution limits.
If you are self-employed and have an IRA, but not a pension plan, open one and get started. With a pension plan, you actually get a larger deduction than you would if you were working for a company and contributing to their 401K.
If you are self-employed and maximize your retirement contributions using all the plans that are available to you, you can actually deduct up to $51,000 per year on your tax return. So you get immediate deduction on your taxes for contributions to your Solo K. You’ll also get a deduction for a SEP IRA. Those are significant deductions that will not only save you money on taxes now, but will allow you to start growing those savings on a tax-deferred basis
Filed under: Self-Directed IRAs | Tags: building wealth, creating wealth, investing, IRAs, retirement investing, Self-Directed IRAs
A self-directed IRA is no different than any other IRA, except that you as the owner direct the custodian to make the investments on your behalf. You select the investment. You can work with advisors, planners, anybody you choose to make the selection, but YOU must decide what to invest in.
You can move your retirement plan from any IRA, Roth IRA, SEP IRA or Educational Savings Account into a self-directed IRA. Those accounts are all eligible to move to a custodian that will allow you to self-direct. When you do move to a custodian, it does not mean that you have to liquidate all of your assets or take all of the money out of your existing IRA, you can leave some behind. You can liquidate to the extent that you want to. You don’t have to move all of it.
There are only two assets that you can’t invest in through a self-directed IRA: collectibles and life insurance. The other main aspect of self-directing is that you have to be making the purchase for investment purposes. You can’t, for example, invest in a house that your child will live in, as that would directly benefit him/her. You and your family members are disqualified persons whom you cannot buy investments from or on behalf of.
Don’t keep all your assets in one “basket”. It’s very important to diversify. The stock market is not presently doing well, but real estate is “on sale” and it’s a good time to buy. Real estate should be included in almost every retirement account to diversify and minimize risk. You need to diversify your retirement account as much as you diversify other portfolios.
Filed under: Self-Directed IRAs, Uncategorized | Tags: IRAs, real estate investing, retirement investing, road home investments, self-directed IRA, Solo-K
Simply put: a Self-Directed IRA puts the “I” back in IRA. That means YOU decide in what, when and where you want to invest your retirement money. The Self-Directed IRA is not limited just to the “traditional” investments of stocks, bonds and mutual funds. A Self-Directed IRA allows for investment by an IRA in ALL asset classes, including direct ownership of real estate assets. According to IRS Publication 590 guidelines, there are only three exceptions to this rule: Life Insurance, S Corporations and Collectibles (unless you have a Solo K IRA).
Investing in real estate for your retirement may serve as a means to diversify, allowing you to hedge against cyclical changes in the stock market. The market is always changing – your Self –Directed IRA will give you more latitude to diversify your holdings. Don’t let Wall Street monopolize your retirement account!
“Sixty-six percent of wealth creation in the U.S. has been through real estate and private equity, so why wouldn’t you invest your IRA in what you know?” says Tom Anderson, CEO and founder of Pensco Trust Company, one of the only U.S. firms dedicated to the administration and custody of Self-Directed IRA’s.
Are you currently looking for “alternative solutions” to diversify and build your portfolio? Road Home Investments, in partnership with Road Home Builders, facilitates real estate investing in the “new and improved” version of the city of New Orleans on the investment horizon. Real estate investments hold the potential to protect against the loss of principle while generating better than market rate returns through income production and capital gains. For “qualified” investors (accredited), we can clearly demonstrate the potential for return on investment so that will get you the “benefits” you deserve. Please request an investor form and we will email it to you. Liberate your retirement portfolio and DIVERSIFY.
In the last seven years the Self-Directed IRA industry has exploded – join those in the know and MAXIMIZE your retirement plan. Statistics show that only 2% of IRA investors have tapped into this emerging market, which leaves a huge opportunity for greater growth of wealth by diversifying into other IRA investment options. Come and expand your knowledge — learn more about using a Self-Directed IRA to invest in a brighter tomorrow!
Filed under: Self-Directed IRAs, Uncategorized | Tags: finance, IRAs, money, new orleans real estate investing, real estate investing, retirement, road home investments, Self-Directed IRAs
Are you ON TRACK to meet your future retirement needs?
Today only four in every 100 working Americans will be able to retire comfortably and do the things they have always dreamed of — that means over 150 million Americans will never feel the benefits of their lifelong work…
Discover the POWER of a Self-Directed IRA and learn more about the wealth building strategies you can employ for YOUR future!
Road Home Investments was founded after the devastation of Hurricane Katrina to help rebuild the splendid, historic city of New Orleans. Our mission is two-fold in that we are both educators and hard money lenders providing short-term financing for investors in New Orleans. As educators we endeavor to share our knowledge, providing FREE seminars on alternative investing so that you, too, can take advantage of the tremendous growth potential that using a Self-Directed IRA can provide for your retirement portfolio. This emerging $4.2 trillion dollar market is growing at $200 billion per year, mostly from pension plan rollovers and (401K)s into IRAs as “baby boomers” retire.
