Archive for January, 2014

What You Need to Know about Self Directed IRAs

Thursday, January 23rd, 2014

What You Need To Know about SDIRA

Most people who have a retirement account or are looking to set up a retirement account have not heard of a self directed IRA. A self directed IRA is the same thing as any other IRA except that you can invest in non-traditional investments that most IRAs do not allow. That is why it is called a self directed IRA because you can "self direct" your investments. You can choose what you invest in. Most IRA custodians limit you and don't allow certain types of investments, but when you go with a self directed IRA you have more control over these investments. Self directed IRA custodians allow most types of investments and a few of the most popular investments in self directed accounts are gold, silver and other precious metals, real estate and even businesses.

To make a self directed account less daunting here are a few general rules you should know about self directed IRAs.

  • All types of retirement plans can be self directed. Those include: Traditional, Roth, SEP, SIMPLE, and even 401ks.
  • As noted before your investments inside a self directed account can be real estate, gold, private placements and more. Most custodians if they allow self directed accounts will allow you to invest in just about whatever you want as long as it is within IRS regulations.
  • There are two main investments that the IRS does not allow, life insurance and collectibles (art, jewelry, collectable coins, etc.) Learn More: Disqualified Transactions
  • Transactions to avoid inside of an IRA: No personal benefit from IRA owned asset. For example, you cannot live in a home that you purchase with your IRA. It cannot be lived in by any disqualified parties which brings us to our next transaction to avoid. No self dealing among disqualified parties. You cannot do business with linear descendents or your spouse. Learn More: Disqualified Persons
  • All income from the IRA investment goes back to the IRA tax-deferred. Any money made from rent, interest or sale of metals, ect. goes back to the IRA. Also, if you have any expenses on the asset (repairs to property) they need to be paid by the IRA.  
  • The IRA can be a part owner of a specific investment. For example: John Anderson's IRA may own 50% of a rental property while Lance Johnson's IRA owns the other 50%. In that case they split 50/50 all of the income and expenses.
  • An IRA can borrow money but only if the situation is right.  Loans in this type of scenario have to be non-recourse and typically you will have a higher interest rate and be required to put more down.

One thing that you need to remember is that one of the greatest benefits of a self directed IRA is that it allows you to invest in opportunities that are typically not available through most IRA custodians. Some of these investments include real estate, mortgage notes, gold, private placements, private stock, mineral rights and lease options are just a few of the investments that are possible through a self directed IRA.

Hopefully this has helped shed some positive light on what a self directed IRA is and help you learn what it can do for you and how to best use one. Each situation is different and could cause a different outcome as to what is possible for you to do inside an IRA. Always consult a professional before doing anything that could potentially cancel your IRA. If you find yourself still confused or want additional information feel free to contact us or leave a comment below. If you are looking for a quality custodian with low costs and great customer service set up an account at: Account Setup


Tips to Help You Retire Early

Tuesday, January 21st, 2014


Do you find yourself working late or even on weekends? Maybe your work is holding you back from taking that vacation you have always wanted. If that is the case for you then I bet the thought of retirement sounds really good. Being able to wake up and do as you wish; maybe a round of golf, some time at the gym, taking the family on a road trip or beach vacation.  Doesn't it sound attractive to retire early?

Most likely you aren't able to retire yet because you aren't ready financially. The earlier you start the journey of saving for retirement the more likely you will be able to retire early. Here are a few tips to help you retire early:

Save Early

This is a no brainer but time and time again people hold off. The longer your hold off saving the more you will need to save to make up the difference. It really does pay to start early.

Get the Advice of a Professional

Meeting with a financial advisor can really help the starting process. It is important to start early but also start correctly. Your financial advisor should be able to help you set up a financial savings plan for a targeted retirement date. They should also be able to help you set up your retirement account making sure to help get you the best account for your situation and wants. The two main accounts you need to know for retirement are IRA and 401k. There are also different types of IRA's and 401ks. For example, SEP IRA, Roth IRA and Traditional IRA. You will also want to be aware of self directed IRAs and 401ks as they allow you to invest in non-traditional investments.

Opt in to Workplace Retirement Benefits

Many businesses offer retirement accounts as part of their benefits packages. Often employers will even match a certain percentage of funds contributed to those accounts by the employee. What it means for you, FREE MONEY. It should be a huge no brainer that this is one of the best things you can do for your retirement.

Cut Spending

Do you really need a new home, luxury car or boat? If they are things that truly you need or can stomach buying maybe try to cut back a bit by not getting the most expensive home, choose a car that isn't too expensive but covers your needs. Simple strategies that can help you save more for retirement.

Take Advantages of Tax Benefits

There are plenty of tax benefits out there you just have to know where they are. Your financial advisor should be able to help you stay on track with getting the most out of tax benefits.

These are just a few tips that can help you get on track to save more money for your retirement in order to retire early. If you are looking for more retirement help talk to your tax accountant or read more: Now is a Good Time to Check Your Retirement, Is Your Retirement Plan Ready?


Small Business Retirement Plans

Monday, January 20th, 2014

Small Business Retirement Plans

There are millions of Americans that own their own business but do not know their options concerning retirement plans for their business.  There are a number of different options to consider when trying to decide what option is the best to them.  In todays article we are going to discuss the various options available.

Keep in mind the rules can be slightly different depending if you are self employed, have an LLC, S or C Corp.  I would consult with your tax accountant on the best structure based on your entity structure and financial situation of the company.


An IRA for business owners and their employees.  It is similar to a profit sharing 401k but has some advantages over a 401k:

  1. The cost to maintain a SEP IRA are very low
  2. The IRA custodian you are working with reports everything to the IRA via a 5498 form.  You do not need to file a SEP tax return at the end of the year
  3. Unlike a 401k you do not need to hire a TPA (Third Party Administer) to run, maintain, report, and run testing each year on the plan

If you have employees through your business then all employees must receive the same benefit as any other employee.  The following are the rules regarding what employees are eligible for the SEP IRA.

  1. Must be 21 years old
  2. Must have worked for the company at least 3 of the previous 5 years
  3. Must receive at least 500 in compensation

SEP IRA contributions are treated as profit sharing, similar to a 401k.  The employer may contribute up to 25% of the employees wage (i.e. employee earns 50k, the SEP IRA can contribute up to 12,500 in profit sharing).  The total contributions cannot exceed the maximum total contributions for the year (51k in 2013 and 52k for 2014).  As stated before, check with your tax accountant based on the entity structure you have as the numbers above can change slightly.


An IRA that is similar to a SEP IRA with one difference.  A SIMPLE IRA allows employees to contribute part of their salary to the SIMPLE plan wheras the SEP is only a company profit sharing plan.  The company also has the ability to match profit sharing funds.  A SIMPLE IRA is also very similar to a 401k but allows the same benefits as the SEP IRA above. (low cost and less reporting)

The employee contributions are limited to 12,000 for 2013 and the company matching is much less that the matching done by a SEP.  For more information about company matching rules you can reference the following IRS link

Self Directed 401k (solo 401k plan) 

Most people are most familiar with 401k plans because most large businesses choose to sponsor 401k rather than SEPs or SIMPLE IRAs.  A Self Directed 401k has similarities with a SIMPLE IRA.  The employee is able to contribute up to 17,500 from his salary and the company can match up to 25% of his salary.  The maximum combined contributions between employee and employer is 51,000 for 2013.

With a Self Directed 401k with employees, the employer  must comply with IRA regulations on reporting.  It is recommended that you hire a TPA (Third Party Administrator) to handle reporting requirement to the IRA and testing requirements to ensure all employees are allowed participation in the plan.

For more information about Solo 401k plans you can reference the following IRS link

There are many different options for retirement plans inside of a business and all options have their benefits and disadvantages.  The information above is for educational purposes only and amounts can change with each year or each entity.  If you have any more questions about Self Directed Small Business Retirement Plans feel free to contact us so we can review your specific situation.

Author: , Self Directed IRA Professional
[email protected]

Disqualified Persons in Regards to Self Directed IRAs and 401ks

Thursday, January 16th, 2014

You will want to set up a self directed IRA account if you plan to invest in gold, real estate or other businesses with an IRA. Setting up an account is fast and easy, but when it comes to investing with your self directed IRA or 401k it can be a bit trickier. You have to make sure you are doing everything correctly to avoid any disqualification of your IRA or 401k.

One basic rule to self directed IRA investing that you need to be aware of pertains to disqualified persons. In regards to disqualified persons you cannot lend money to them through your IRA, invest in their businesses through your IRA or let them live in a real estate property that you purchased through your IRA. The following is directly from the IRS website and explains what constitutes someone as a disqualified person.

A disqualified person is any of the following:

(1)  a fiduciary of the plan;

(2)  a person providing services to the plan;

(3)  an employer, any of whose employees are covered by the plan;

(4)  an employee organization, any of whose members are covered by
       the plan;

(5)  any direct or indirect owner of 50% or more of any of the following:

  • the combined voting power of all classes of stock entitled to vote, or the total value of shares of all classes of stock of a corporation that is an employer or employee organization described in (3) or (4);
  • the capital interest or profits interest of a partnership that is an employer or employee organization described in (3) or (4); or
  • the beneficial interest of a trust or unincorporated enterprise that is an employer or an employee organization described in (3) or (4);

(6)  a member of the family of any individual described in (1), (2), (3), or
      (4) (i.e., the individual’s spouse, ancestor, lineal descendant, or any
      spouse of a lineal descendant);

(7)  a corporation, partnership, trust, or estate of which (or in which) any
       direct or indirect owner described in (1) through (5) holds 50% or
       more of any of the following:

  • the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of a corporation;
  • the capital interest or profits interest of a partnership; or
  • the beneficial interest of a trust or estate;

(8)  an officer, director (or an individual having powers or responsibilities
      similar to those of officers or directors), a 10% or more shareholder,
      or highly compensated employee (earning 10% or more of the yearly
      wages of an employer) of a person described in (3), (4), (5), or (7);

(9)  a 10% or more (in capital or profits) partner or joint venture of a
       person described in (3), (4), (5), or (7); or

(10)  any disqualified person, as described in (1) through (9) above, who
         is a disqualified person with respect to any plan to which a
         multiemployer plan trust is permitted to make payments under
         section 4223 of ERISA.

For additional information, see Publication 560 on the IRS website.

The below infographic shows disqualified persons. The infographic is a general rule and different situations could deem others as disqualified persons or not a disqualified person. Talk to a professional to know if your specific situation involves anyone that would be considered a disqualified person.

Click on the image for a bigger view.
Disqualified Persons

Contact us or comment below with any questions or to learn more about self directed IRAs.


Private Placements Investing inside of an IRA

Wednesday, January 15th, 2014

Invest in a business

Investing through a Self-Directed IRA is a great alternative strategy to diversifying your investment portfolio.  Through a self-directed IRA, you can invest in multiple investments, including real estate, physical gold and silver, private placements, loans, and other non-traditional investment vehicles.

One investment vehicle that could have a big pay out is private placements. In short, a private placement is an ownership in a privately held business that is not traded on the stock exchange. Private placements can be LLC or corporations.
With a private placement, they do not have the normal disclosure laws that a publically traded company is required to report.  There are benefits and disadvantages to this.  The disadvantage is that you need to do your own homework on the company, as to ensure that the company is legit and that investing in the company will be a good move.  The advantage is that by doing your own homework and getting into an investment early, you can hit the jackpot on a good investment that can pay out in large dividends.

If you are interested in investing in a private placement you need to align yourself with an IRA custodian that will allow you to do this type of transaction. Most IRA custodians only allow you to invest in a publically traded stock. Our company allows you to take your IRA and put it in private placements investing.

Below are some other benefits of investing in a private placement:

  • Allows for greater balance in your portfolio because of diversification in your IRA
  • Control over the investment options, because you’re not bound by a custodian that only allows for stock and bonds
  • If you have knowledge of a new startup company, you can get in early enough to make large profits
  • Any growth or dividends grow tax deferred or tax-free if you have a Roth IRA
  • Your IRA is also able to diversify into Limited Liability Companies, Limited Liability Partnership, C-Corporations, and other non-traditional start-up companies

Below are some general rules to follow when investing in a startup company:

  • Due to the tax nature of S Corps, your IRA cannot have any ownership in an S Corp. That’s because S Corps can only be owned by a natural person
  • Your earnings could be subject to UBIT Tax (Unrelated Business Income Tax). For more information read What are UBIT and UDFI Taxes Associated with Self-Directed IRAs.
  • You cannot invest in a private placement that you already own
  • Ownership in the private placements needs to read as the following: NAME OF CUSTODIAN FBO___________clients name.  You cannot have the ownership read your name individually
  • There can also be restrictions if you are employed by the company or are a manager for the company
  • And lastly, all income or dividend payments must go back to the IRA, not to you personally

If you would like more information on private placements investing inside of an IRA, feel free to contact me or comment below.

Author: , Self-Directed IRA Professional
[email protected]