Archive for April, 2014

Do Retirement Misconsceptions Hold Back Your Retirement?

Wednesday, April 30th, 2014


Retirement should be a time we look forward too! Isn't retirement the reason we have been working? I know it isn't the only reason we work because we work just to survive but aren't we working so that when the day finally comes that we don't want to work anymore or can't work anymore we are ready to survive and hopefully thrive.

As we strive to make the most of our lives and our retirement there are a few things misconceptions that we really need to be aware of. According to a recently survey done by Charles Schwab & Co there are some misconceptions that many of us don't realize that we are being duped by. In order to help us get the most of our retirement we need to reveal these misconceptions and make sure that we aren't being duped by them. Let's dive into some common retirement misconceptions.

Those who believed they were the most knowledgeable were more likely to agree with misconceptions about important planning decisions. These people were also more often optimist about their financial future.

This misconception is very disturbing and makes me even wonder about my knowledge and if I myself fall victim to misconceptions because I feel more knowledgeable than the regular person about financial planning.  What should be done? I think we need to make sure that our ego and knowledge doesn't get in the way of looking at our own financial situation as careful as possible. It is much better to be safe than sorry. No matter how good you feel like your financial and retirement situation is take a look again. Study your situation and if you tend to hold to the safer side of things hopefully everything should be ok.

You should start taking social security as soon as you're eligible. If you believe this concept you should strongly look at your situation again. I have written about this in previous posts and the simple fact is that if you can hold off in taking social security and also from taking from your IRA or 401k you can really improve your retirement. Holding off a few years can add a significant amount of cash to your yearly withdrawal in turn giving you a better retirement with more to spend or just more for your safety net.

If you need cash while you are still working a 401k plan is a good place to turn for a loan or withdrawal. From the findings nearly one in three believe this. While there may be certain emergency situations that could warrant a loan from a 401k it should almost always be considered the last resort. Taking any money from your retirement savings can really hurt your savings in more than one way. Not only will you have less when finally retiring but loaning from your 401k can have negative tax consequences and hefty fees if you don't pay it back. It is strongly urged to do everything you can to not loan from your retirement accounts.

By the time you are 50 it is too late to make a difference in your financial future. This is by far a bad misconception. While you could have made a huge impact if you would have started early you can still make a difference. Just think, you could have a solid 15 even 20 years more of savings ahead of you. That can really help and make a big difference. There is also the catch-up contribution that is in place to help.

There are plenty of misconceptions that we might not even know is incorrect. The best way to make sure you are on the right track is to continually reevaluate where you are at and where you need to be. Of course there are many things that need to be done in order to get the most out of your retirement but start planning today.

If you are on the right path then looking at different options is a great way to get more out of your retirement. Many think that they are confined to investing in the stock market or bonds with their retirement funds but that is not the case. With a self directed IRA or 401k you can invest in alternative investments like gold or real estate.  Get more out of your retirement and diversify with a self directed IRA


Self-Directed IRA Lending

Monday, April 28th, 2014

Self Directed IRA lending

Investing with a Self Directed IRA can be a great alternative to investing with conventional IRAs. Conventional IRAs are very limited on the types of investments allowed. Typically conventional IRAs are only allowed to invest in stocks and bonds.  The options are much brighter through a self-directed IRA. You can invest in many other things through a self-directed IRA that are non-traditional investments such as real estate, physical gold and silver and private placements.

With so many different investment options available through a self-directed IRA, it can be overwhelming to know how exactly you should invest with your self-directed IRA. While we would love to make it easier for you it is ultimately your decision as to what you will be investing in.

One thing to note is that the two most common types of investments inside a self-directed IRA are real estate and gold or other precious metals. Those are great options but you don’t have to be limited to just real estate or precious metals.

One option that you may or may not know of that can also have great returns for your retirement account is lending out your IRA funds, AKA, self-directed IRA lending.  What is lending out your IRA funds? In essence, you are filling the same role as a bank. You are lending someone money and they pay you back with interest.

If you are interested in learning about some of the benefits to lending through an IRA check out, “Want To Be The Bank? Now You Can Through IRA Lending”.

IRA lending Procedures

  • The IRA is the lender, not you personally.  Therefore, if American Estate & Trust were the custodian holding your IRA the title of the loan needs to read “American Estate & Trust FBO______________clients name”.  FBO stands for For Benefit Of.
  • The loan must be real transactions with a specific interest rate and terms
  • You cannot lend to a related party.  This includes you, your parents, or children.
  • Any expenses related to the loan transaction (i.e. attorney drafting up loan agreement) must be paid with IRA funds.
  • All income generated from the loan must go into the IRA account and not in the clients’ personal bank account

If you have any more questions about self-directed IRA lending, feel free to call or email me.

Author: , Self Directed IRA Professional
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Self Directed IRA Partnering

Friday, April 25th, 2014

Self Directed IRA Partnering

There are so many reasons why investing with a self directed IRA is such a smart option. Most of you probably already know what a self directed IRA is and the tax benefits that come with a self directed IRA.

What many of you probably don't know is that a self directed IRA can also partner with other self directed IRAs to increase your investing power and invest in higher dollar investments. How does self directed IRA partnering work and who can you partner with?

Why Partner With Another Self Directed IRA

It is fairly simple why partnering with another self directed IRA makes sense. The main reason to partner is if the investment that you would like to purchase with your IRA is more expensive than the money that you have in your IRA. Simply put, you don't have enough money to purchase the investment. Another reason you may want to partner is to limit your risk. You may have enough money in your IRA to purchase the investment of your choosing but maybe you don't want to use all of your IRA to purchase the investment. Maybe you still want to stay diversified in other ways. Partnering can make a lot of sense in this case. Here is an example to help illustrate why you may want to partner with another IRA: You want to purchase a rental property that costs $200,000 and you only have $150,000 in your IRA. In order to pay for the property you need to partner with another IRA. When partnering with another IRA you would get another persons IRA to invest the final $50,000.

A few best practices when doing this

  1. It is best doing this through an LLC. The quick explanation of investing with your retirement accounts through an LLC is that the IRA owns the LLC and the LLC owns the investment. Why is this a good way to do it? If you had a rental property the renter pays the LLC in full. Also all expenses are done through the LLC. If it wasn't done through the LLC the renter would have to pay each IRA individually and the expenses would have to be separated for each IRA. It is much cleaner and easier for the investor having the LLC.

  2. Maintain an an even split. In the case of our example, person A who put in $150,000 owns 75% and person B who put in $50,000 owns 25% of the LLC. It is a best practice to always maintain that ratio. If you have expenses person As' IRA should come up with 75% of the money and person Bs' IRA should come up with 25%. If you sell the rental property the profits would also be split in the same 75/25 ratio.

Partner With Family

If you know about self directed IRAs you know that there are prohibited transactions that clearly state that there are certain people who are "disqualified persons" when doing self directed IRA investing. Check out Disqualified Persons if you aren't sure who or what a disqualified person is.

The great thing about partnering with another IRA is that you can partner with anyone you want, even those who are considered disqualified persons. The thing to note is that when partnering with a disqualified person (yourself, family, ect.) it must be the purchase of a new asset.

Partner With Yourself

The same self partnering rule in regards to self dealing also applies to partnering with yourself. One of the trickiest things that you need to avoid is any self dealing issues. Say you had a Traditional IRA that had $20,000 and a Roth IRA that had $40,000 and there was an investment that you wanted to purchase that cost $60,000 you could partner those two IRA's so that you could purchase your investment.

These are just a few reasons why partnering up self directed IRAs makes sense. If you would like any more specific information about partnering up self directed IRAs or even just general information feel free to contact us today.


Position Your Rental In Your Real Estate IRA To Stay Competitive

Wednesday, April 23rd, 2014

For Rent Stay Competitive

Do you have a real estate IRA and are looking to rent it out? Maybe you already have a real estate IRA and are renting it out. Either way some new research done by Zillow can shed some light on the renting market.  

Currently rent has been on the rise at pretty rapid rates and is turning into an expensive proposition. Nationally renters are spending more of their income on rent than they have in the past 30 years. Zillow measured how much of a household's income is spent on rent (not including utilities and other costs).

According to Zillow, renters across the nation are spending almost 19 percent more of their income on rent than during the pre-bubble period between 1985 and 2000.

The current fraction of income spent on rent across the nation is 29.5 percent. Historically renters have spent 24.9 percent of their income on rent.  If you would like to check out which states are spending the biggest percent of their income on rent check out this research done by Zillow.

One thing that I thought was quite interesting by this research is that since 2000 the share of income that households must devote to paying rent has dramatically outpaced the growth in income over the same period. The median household income has increased 25.4 percent since 2000 while rents have increase over 52.8 percent.

How can we apply this knowledge to our real estate IRA? One major thought comes to my mind, stay competitive! If you haven't rented out your real estate IRA rental property yet then take this time to get ahead of the competition. If you have already rented out your rental property this is a great time to do a checkup on how things are going and to make sure you position yourself for great rental income for years to come.

How to Stay Competitive

As renting is getting more and more expensive staying competitive is going to be crucial. The following are a few things to look at to stay competitive:

  1. Rent Price– Is the current price you are asking competitive and if you are looking to put a monthly rent price on your real estate ira make sure you keep it competitive. If you are thinking about making renters pay higher than average your home better be better than average and even then in order to keep renters for the long haul you might wan to think about being around average or lower than average.  Use RentOMeter to help you figure out how much you should rent your place out for. 
  2. Keep It Updated and Fresh– Your rental property doesn't have to be decked out in the latest gadgets but there are a few things you can do to get more out of your rental property. Follow these few tips to maximize your rental property income Get The Most Out Of Your Real Estate IRA Investment.

These are just a few tips to make sure that the property in your real estate IRA is going to bring you steady income for a great retirement.

If you are still considering setting up a real estate IRA in order to take advantage of the tax benefits that come with retirement accounts while also bringing in some great rental money for retirement we can help.


Are You In A Buyers Market Or A Sellers Market?

Tuesday, April 22nd, 2014

Buyer or Seller Market

Are you currently looking to sell your real estate that is in a self directed IRA? Maybe you are looking to buy real estate in your self directed IRA? Either way it is a great idea to know if you are in a buyers market or sellers market? New comprehensive research done by Zillow breaks down the United States and analyzes different metrics to decide which areas are buyers' markets and which are sellers' markets.

It may be a fairly obvious what a buyer's and seller's market is but so everyone is on the same page let's explain it. A buyers market means that those buying a home have a strong bargaining position compared to the seller. In a sellers market it is the exact opposite, the seller has a strong bargaining position compared to the buyer. The best example of these markets is as follows: Typically in a sellers market the homes are selling within days and often receive multiple offers. In a buyers market there are plenty of homes on the market that aren't receiving offers and have been on the market for a bit of time.

Knowing the difference between the two markets let's you know how to procede if you are a buyer or seller.  Let's get back to the research done by Zillow compares the top 35 largest metro areas and breaks down the top 10 sellers' markets and top 10 buyers' markets.

Top 10 Sellers' Markets

  1. San Jose
  2. San Francisco
  3. San Antonio
  4. Los Angeles
  5. Seattle
  6. Riverside
  7. Denver
  8. Washington, D.C.
  9. Sacramento
  10. Dallas, Fort Worth

Top 10 Buyers' Markets

  1. Cleveland
  2. Philadelphia
  3. Tampa
  4. Chicago
  5. Pittsburgh
  6. Cincinnati
  7. New York
  8. Detroit
  9. Baltimore
  10. St. Louis

The findings show that the West is typically a sellers market and the East is typically a buyers market and the West is a sellers market.  

Now that you know if you are in a buyers or sellers market you should have an idea of what you should do with your real estate IRA. Should you sell your real estate IRA property or hold off until it is more of a sellers market? Make the most of your retirement by making sure you make the right moves when purchasing and selling your real estate inside your self directed IRA. If you sell at the right time and buy at the right time your self directed IRA will have a much stronger benefit.

If you need help setting up a self directed IRA also known as a real estate IRA so that you can purchase real estate in your retirement account then we can help. We provide high quality professional account set up along with account maintenance. You can be assured that your self directed IRA is set up correctly and maintained properly so that you can invest in that rental property you always wanted. Get the most of your retirement now!