Archive for November, 2017

How a Self-Directed 401K Works for You

Monday, November 27th, 2017

A self-directed 401k is practically the same thing as a 401k, but the main difference is that you’re able to invest in non-traditional investments. At Accuplan we often refer to a self-directed 401k as a one.k. There are some great benefits to a self-directed 401k, so let’s talk about some of them.

Investment types

Regular 401k plans don’t allow for non-traditional investments. If you want to diversify your 401k portfolio and invest in something other than stocks and bonds than a self-directed 401k is for you. You would now be able to invest in farmland, commercial real estate, small tech start-ups, Bitcoin, and so on. The options you have with an SD 401k is almost endless.

Hands-on control

Because a one.k is a 401k plan set up for your company, it allows you to go beyond the regular 401k capabilities. As the manager of the company, you will have direct, hands-on control of and investment decisions over one.k assets. This includes control of the checkbook. Custodian involvement and hassles are eliminated, regardless of whether the investments are in securities, real estate, or other assets.

Low to no fees

Annual fees are eliminated because you control and handle all one.k transactions and act as the custodian. In a regular self-directed IRA, there are annual fees, transfer fees, asset fees, and more.

Gains

A 401k offers a great deal of deferral of income and gains. As long as the company sponsoring the plan generates income, then you can make contributions of up to $53,000 annually to the 401k plan ($18,000 for employee and $35,000 for the employer).

These are just a few reasons that make a self-directed 401k a great option. If you are looking for fewer fees, more control, and more investment options then a self-directed 401k is for you. We can help you set up your self-directed 401k plan.

Why These Self-Directed IRA Rules Are Important

Monday, November 20th, 2017

You being able to invest in what you want is equally as important as you become familiar with the rules and laws involved. It can definitely be overwhelming, but it’s not at all impossible to go from novice to knowledgeable. The reason we stress this so much is that is due to the off chance that your IRA gets disqualified by the IRS because of a rule violation. The only way to avoid that is to vigilantly abide by the set IRS rules, and get cozy with these self-directed IRA rules.

Self-Directed IRA Rules

Disqualified Transactions

The IRS has outlined two things that are not allowed inside of an IRA and so you will want to stay clear of these types of investments or they will surely disqualify your IRA.  What are the two disqualified transactions?

  1. Insurance Policies- You cannot take out a life insurance policy on yourself inside of an IRA. We will get more into why this is the case under the self-dealings section.
  2.  Collectibles- This includes stamps, coins, artwork, guns, cars, and any other asset that could be deemed a collectible. If it seems like a collectible then the best bet is to stay clear of the investment. Note:  The IRS does allow gold and silver as long as it meets certain criteria.

Disqualified Persons

This is a very big issue when investing with a self-directed IRA. 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. So who is considered a disqualified person? The following image should help show you who is considered disqualified and who may be disqualified.

This is the general rule for disqualified persons. You will want to make sure for your specific situation that you are not doing any dealings with disqualified persons. Contact us today for help in determining if you are dealing with a disqualified person.

Self-Dealing

This is another topic that can be easily broken but easily forgotten. IRA owners cannot make investments that benefit themselves, even indirectly. For example, you cannot use your IRA to buy a house that you will be living in. Nor can you use your IRA to buy a house that any of your family members will be living in or be renting. This is another area that you will want to make sure your specific situation is in line with the self-directed IRA rules. If you need help trying to make sure you are not self-dealing then contact us and we can help.

These are just a few of the biggest rules to investing with your IRA. We want you to be fully aware and educated so that you can have the best experience investing with your IRA. It should also be noted that if you fail to abide by any of these rules you risk significant tax liability to your IRA and in turn, you would be removing all the benefits that come with IRAs.

Private Lending with a Self-Directed IRA

Monday, November 13th, 2017

We’ve all heard of or taken out a loan in our lives, and it’s usually through a bank or another financial institution. What most IRA owners don’t know is that they are allowed to lend out the funds in their IRAs in the same way. The idea is that your funds can be loaned out and used to invest in real estate, small businesses, land, pretty much anything. Your IRA is acting as the financial institution.

Disqualified persons

Now, a regular IRA cannot loan out funds, but a self-directed IRA can. Since you’re loaning out through your self-directed IRA, the IRS rules will still apply when it comes to WHO you can loan the money to. Self-directed IRA funds can be loaned out to anyone who isn’t a disqualified person. That includes you, your spouse, your children, or parents. The same rules still exist for private lending that exists for self-directed IRAs.

Setting the terms

One of the main draws to private lending is that you’re allowed to predetermine the terms of the loan. First, you obviously can set the amount that you’re loaning to the person seeking the loan. You can also set the interest rate, the payment amount, and the length of the loan. You can choose if it’s a secured or non-secured loan. Securing the loan can be done through real estate, cars, pretty much anything that you choose. Note that the value of the item does not have to be equal to the loan amount.

No IRA is too small

Even if you have less than $20,000 in your IRA, or even just $5,000, the beauty of private lending is that you’re still one hundred percent allowed to loan out your funds. If you have a lower amount of money in your IRA, you’re also able to combine funds from your IRA and funds from another IRA to loan out.

What you Didn’t Know was Possible with your IRA

Tuesday, November 7th, 2017

It’s not difficult to imagine that the majority of U.S citizens have heard of an IRA. It’s equally imaginable that most have not heard of a self-directed IRA. A self-directed retirement account gives you the ability to invest in non-traditional investments. In all reality, though a self-directed IRA is the same thing as a regular account. Because they are the same thing and the only real difference is what your custodian allows I wanted to explain a few things that you need to know about an IRA that you may not have known.

You can invest in so much more

Most retirement accounts are invested in stocks and bonds, but they don’t have to be. What most don’t know is that a self-directed IRA is really just a custodian that allows you to take full advantage of your retirement account and invest how you want with you. Most custodians only allow for certain types of investments, like stocks and bonds. Why is that? More than likely it is because they make more money by pushing other investments. Or it could simply be because it is not in their wheelhouse. The truth is though with an IRA you can invest in just about anything. You can invest in real estate, gold or even private placements.

You can pay for college

You can without penalty withdrawal funds from your IRA to cover the cost of tuition. There are a few issues to be aware of when doing this though and that is why it is important to talk to a tax attorney or CPA when dealing with this.

Whether this information is new to you or not you can gain from this knowledge. What you can gain from this is that you can do more with your individual retirement account than you probably are doing. If that means using your funds for things like education or if it means investing in things other than stocks and bonds. You can find a way to maximize your IRA for what works for you.