Posts Tagged ‘self directed ira’

What’s Prohibited Within your Self-Directed IRA?

Thursday, October 8th, 2015

prohibit ira

Before opening a self-directed IRA, it’s important to know the rules that are in place. Failure to understand, to partake in prohibited transactions, or deal with disqualified persons can have serious implications like the disqualification of your self-directed IRA, which may lead to penalties and taxes.
The good news is that it’s pretty easy to avoid prohibited transactions and investments by familiarizing yourself with the self-directed IRA rules and regulations that the IRS has put into place.

Disqualified persons

The people that are disqualified from conducting activity, or directly benefiting through your self-directed IRA investments include:

  • The IRA holder (you cannot directly benefit from your IRA, the money that’s earned must go back into your SDIRA)
  • The IRA holder’s spouse
  • The IRA holder’s ancestors and lineal descendants (children, grandchildren)
  • Spouses of the IRA holder’s lineal descendants
  • Investment managers and advisors
  • Anyone providing services to the IRA, such as the IRA trustee or custodian
  • Any corporation, partnership, trust, or estate in which the IRA holder has a 50% or greater interest

Click on the image to enlarge

Disqualified persons

However, it is acceptable to conduct activity within your self-directed IRA with aunts, uncles, siblings, cousins, and friends. For more information on disqualified persons, go to

Prohibited transactions

  • Borrowing money from a self-directed IRA (known as self-dealing, which means loaning yourself money from your IRA)
  • Using the self-directed IRA as security for a loan
  • Selling personal assets to the self-directed IRA
  • Buying property in the self-directed IRA for personal use
  • Purchasing property from a disqualified person (see above)
  • Issuing a mortgage on a disqualified person’s residence

People who own real estate often make the most common prohibited transactions, like paying for expenses out of their own pocket instead of from funds in their IRA. Anything associated with the IRA-owned property (taxes, bills, and HOA fees, so on) should be paid out of the IRA directly.

Types of investments

Self-directed IRAs are known as such an attractive option because of the wide-range of investments that someone can make. One thing that everyone should be aware of though, is that there are types of investments that are not allowed within your self-directed IRA.
The prohibited investments include life insurance, because life insurance is meant to benefit your heirs, who are disqualified persons, and collectibles, and they are not allowed as it is difficult to determine a true value. Examples of collectibles:

  • Coins
  • Gems
  • Antiques
  • Stamps
  • Metals other than gold, palladium and silver
  • Rugs
  • Works of art
  • And alcoholic beverages (although, note that investing in a winery or brewery IS allowed, just not the direct ownership of alcoholic beverages, such as a wine collection)

Remember, your IRA is meant to benefit you once you choose to retire, so vigilant and responsible dealings and investments are what you want to help your IRA grow and prosper. So if you’re considering making alternative investments in your self-directed IRA, do so with a full-range knowledge of the ins and outs of all the self-directed IRA rules.

Biggest Retirement Mistakes That Can be Easily Avoided

Thursday, October 1st, 2015

Retirement mistakes 2

You’ve probably heard it all over the news lately, that people nowadays, of all ages, are simply not saving enough — if any — for retirement. Earlier this week, we talked about President Obama’s retirement plan called “myRA” and with tools such as a myRA, there’s hardly a reason not to get your head on straight and getting to planning.
What we’re going over today corresponds with last week’s blog, and we’re going to talk about today is retirement mistakes that are easily avoided.

Passing up money on the table

If you’re lucky enough to work for a company that offers a 401k program with a matching contribution, we cannot say this with enough enthusiasm, take FULL advantage. The main reason most people don’t take full advantage of a match is they either don’t know how it works, or don’t know how much they can get out of it. The problem is that every company does it differently, some match dollar for dollar up to a certain limit, and others match up to 50% of contributions.
Missing out on those dollars really adds up fast. It can be up to $1000 that you’re missing out on yearly (again, depending on what your employer offers), and that in turn can boost your nest egg by tens of thousands over several decades of saving, plus compounding interest.
The solution is that you need to talk to your human resources department. Write them out a detailed email, have all your questions up front, get all your bases covered, and then sign up, and start saving.

Not fully participating in your planning

The biggest issue with this is that you don’t know where your money is going, or how it’s doing. Don’t give someone else the reigns to your financial future. You may right now have an advisor, and that’s wonderful, but think about how much better two heads are over just one. If you’re watching out for yourself, and your financial advisor is as well, then I’d say that you’re in for a pretty stellar retirement.
Though, getting yourself to that point is where some hard work comes in. You have to choose yourself, pay yourself, and be kind to yourself. It’s all about self-education and responsibility.

Ignoring the obvious

As the song by Dusty Springfield goes, you’re wishin’ and hopin’ and thinkin’ and prayin’. And as we all know, that is no way to get anything done. Ignoring the fact that you will have to retire, or even putting off retirement planning is a surefire way to get you into some deep water. We at Accuplan challenge everyone to either schedule a meeting with a financial advisor, or just a serious sit down by yourself, and really start planning today, because wishful thinking can be dangerous.

Author: Tanya

New to Self-Directed IRAs? Here’s a Breakdown {infographic}

Thursday, September 17th, 2015

sdira breakdown

Self-directed IRAs are what we do best at Accuplan. They’re perfect for the investor that wants absolute control of their retirement funds, and know exactly what they want, and how they envision their future. But if you’re just starting out, say you’ve been funding your retirement accounts for the last 20 years or so, and you’ve grown a healthy amount, and now you’re ready to invest. There’s a lot of information about IRA LLCs, or self-directed IRAs, or investing in gold, so where do you start? It’s best to start with HOW things work

Click the infographic to enlarge.

Self-Diected IRA Infographic

Author: Tanya

Flipping Houses Using Your Self-Directed IRA

Monday, September 14th, 2015

flipping iraFlipping property is an increasingly appealing option, not only for investors but for everyday people. With the economic recovery and accompanying rebound in home prices, as well as the slowdown in new-home construction, flipping is a prime investment opportunity in many markets across the board. There is good money to be made in the business of acquiring homes that are distressed (usually in physical condition or even financial distress), rehabilitating those homes, and then, in turn, reselling the property to a buyer, or even to another investor looking for a cash-flow rental property.

Familiarize Yourself with Self-Directed IRA Rules

  • Now, if you do elect to use a retirement account to hold real estate – whether you are flipping it or not – you need to keep some strict rules in mind:
  • You cannot stay overnight in the property – even for one night.
  • You cannot let your spouse, your children or parents, or any in-laws stay in the house.
  • You cannot use the house to benefit any advisor who works with you on your IRA.
  • You cannot rent the house to yourself, nor to any disqualified persons, even at market rates.
  • You cannot buy the property from or sell the property to your own IRA, nor may any disqualified persons mentioned above.
  • You cannot intermingle IRA and non-IRA funds.
  • You cannot take money out of the IRA unless you take it in the form of a distribution, which may be taxable. There may also be penalties involved for early withdrawals.
  • You cannot lend money to your self-directed retirement account, nor borrow from it.
  • Neither can any disqualified person mentioned above.
  • Your IRA cannot contract for goods and services with you, nor with any entity that you or any of the above-disqualified persons control. That means you cannot buy a property in an IRA and then hire yourself or your son-in-law to provide the landscaping or property management services.

Get Used to the Hands-off Approach

All the investments you make with you self-directed IRA must be done fully at arm’s length. What we mean by that is when it comes to flipping property, you will have to be comfortable with handling your investment at a distance. Your role will be to operate basically as a fund manager; making decisions, negotiating and executing contracts, selecting vendors, and conducting the financial transactions associated with your IRA through checkbook control, or through your IRA’s custodian. It’s also good to note that you cannot be directly involved in a hands-on sense, such as serving as contractor yourself. Hands off.

Learning About Leverage

Depending on the balance in your self-directed IRA, you may be able to flip real estate as an investment strategy by using cash for all of your purchase transactions, which is ideal. Doing so would certainly make the process go more quickly, and could potentially allow you to engage in more transactions and boost your returns.
But, if you choose to use leverage by borrowing money to purchase real estate for flipping, it’s important to understand that you may be incurring a current year tax liability because of that borrowing. Using leverage to make investments within an IRA can generate what’s known as “unrelated business taxable income.” And unlike other types of income, you generate with your IRA, unrelated business taxable income is not tax exempt.

Finally, if you’re considering flipping houses with your self-directed IRA, make sure to go into each transaction well educated and well prepared. Real estate investing (and flipping in particular) might be fun and exciting, but it’s still investing. So if you’re not already experienced with this type of investment, start with smaller transactions and proceed cautiously until you learn more, and grow as an experienced investor.

Financial Mistakes Retirees can Still Make in Their Golden Years

Thursday, September 10th, 2015

golden years 2

Unbeknownst to a lot of people, some, well into their golden years, still have some financial issues when it comes to their retirement. There are still mistakes to be made, there are still some downfalls and hard times, and there are ways to navigate around those issues unscathed.
We’re here today to talk about some of the issues retirees may encounter, and how to solve them with the know-how and tools you already have in your belt.

Keeping old debt

This seems like an obvious point to make, but it’s one that not many retirees take to heart. Not getting yourself out of debt before retirement is one of the biggest mistakes one can make, your retirement funds should never go towards your credit card debt, or car payments, those will burn through your retirement funds faster than you think.
Paying off your mortgage before retirement should be a huge priority, as it is for most people, but it cannot be emphasized enough since a mortgage is most likely to be the biggest purchase you’ll make in your life. Focus on paying down as much as possible before retirement, or even downsizing to a smaller home where the mortgage is manageable, the utilities won’t be outrageous, and the money you save goes right into your pocket.

Stopping investments

Keeping up with your investments and wherever else your money is going is an extremely important factor when it comes to financial-wellness, especially at retirement. Some retirees look at investing as a hobby, others as a necessity.
Whether you invest through more traditional routes like the stock market, or invest in real estate with your self-directed IRA, or even invest in a chicken farm, just keep your money moving, and working for you.

Relying on a single source of income

Don’t depend on a single source of income for anything, including your own retirement income. Social Security will not pay enough by itself, stocks hold the possibility of crashing, and do on occasion, bonds currently don’t keep up with inflation, and loans have to be paid back. This is where diversification comes into play, and why it’s crucial.

Living outside of your means

Most retirees don’t monitor and control their spending by having even a simple budget. For any situation, that’s a recipe for disaster. To just spend and spend, and then have an unexpected expense pop up, like a medical bill, or car repair, can cause serious financial damage. Keeping yourself realistically reeled in is imperative if your goal is to keep yourself afloat for 20+ years after retirement.

In reality, there will always be obstacles to hertel no matter what, whether they’re financial or not is up to you, and the decisions that you make today. A self-directed IRA gives the IRA holder the power to invest in what best suits them. Opening a self-directed IRA can be beneficial to almost all retirement strategies, so get in touch with Accuplan today to find out if a self-directed IRA is what’s missing from your retirement portfolio.

Author: Tanya