Author Box
Articles Categories
All Categories
Articles Resources

What Happened to My IRA?

January 31, 2012 | Comments: 0 | Views: 160

If you're like me, you check your IRA statement periodically and wonder, "What happened to my IRA?"

Even with the stock market getting healthier, my IRA is still at less than half of what it was before the bottom fell out.

I mean, there's been some ground regained, but it's pretty dismal and there's a long way to go to get back to where it once was.

I also know, that despite what the politicians and some media would like us to think, economic growth isn't going gang busters.

We all know how to manipulate the numbers to get them to say what we want. But the reality of the situation is any growth is much slower than they would like us to believe and very tenuous, at that.

Between roller coaster oil prices, the continued turbulence in the middle east, crazy weather - there's just a multitude of reasons why businesses aren't investing heavily in growth and they are holding the reins pretty tightly.

So, what's all that mean for your retirement funds? Well, it means that what growth there is, is slow and may not last.

In the meantime, real estate is in shambles, too. But for an investor, that's a good thing! A weak real estate market is the type of market you want to expand into. The old adage - buy low, sell high comes into play, which is obvious.

But what is less obvious to the rookie is, the rental market is strong in most areas of the country, so buy low and hold, is also very inviting.

What's this got to do with your IRA/401K accounts? This is where a self-directed Roth IRA comes into play.

Self-Directed IRA's are quite a sweet deal, and very simple to get into. You simply convert your existing retirement account into a self-directed IRA account, and the tell it what to invest in.

Of course, all transactions must be at an arms-length - meaning no self-dealing, and there are strict rules to follow, but all this is made very easy by choosing a Trustee, or management company that is experienced with self-directed retirement accounts.

When choosing a company, stick to one that's been doing this type of investing for 10 or more years. There have been a lot of companies who have jumped into the business within the last couple of years, who really do not have the experience.

Obviously, doing a bit of research here, is important but you'll be able to narrow it down pretty quickly when you ask how long they've been doing self-directed IRA's. If it's 10-15 years or more, you should be good. Most of the seasoned companies have on-line tutorials that will provided you more information than you will want to know.

Converting your IRA is a matter of filling out some paperwork to facilitate the transfer. There are some fees, which are a drag but they're not bad and usually based on the amount of the transfer.

Once you convert, you can have your IRA invest in a plethora of investments. So, whatever your knowledge base is or whatever you're comfortable with you can pursue - coins, gold etc. They'll tell you exactly what you can and can't do.

Getting back to real estate - which is what I chose, given my background... I contacted my company of choice and told them I'd like my IRA to purchase a rental property. They sent me an e-mail with the appropriate paperwork, which I completed.

I had to identify the property, indicate how it was being purchased - a mortgage can be used, partnerships can be used etc - mine was a cash deal, so very straight forward. They wanted to know who will handle the closing and other pertinent information. I chose a local title company, who was somewhat familiar with self-directed IRA's.

Because my purchase was all cash, they asked how it was to be funded and where the funds were to be sent. I completed the paperwork, and sent it off.

My company can close in about 3 days once they receive the paperwork from the title company. They offer expedited service for a fee. But I chose normal processing, which takes about 3 days - which is pretty darned quick, if you ask me.

The problems you'll run into aren't with the self-directed IRA Trustee, but with title companies and insurance companies that are unfamiliar with dealing with such a transaction. Oh, and the city, of course. I took possession in the name of my IRA, and the city where the property is located advised me that couldn't be done - which was wrong, of course. But I did have to educate them, as well.

My title company was leery at first, because the property must be titled in the name of the Trustee/ custodian FBO my account number, IRA. Pretty funky, but very cool when it comes to asset protection.

Tracking down an insurance company that was willing to write coverage in the name of a "company," was a bit of an issue too, but I was able to finally find a company that understood the transaction.

I also hired a management company to run the property. I did this for two reasons. One very self-serving, in that I just don't want to be bothered with calls to come fix the toilet or collecting rent. Two, because it gives me proof of the transaction being at arm's length.

I did have to educate the management company, as well. Some had policies that prevented them from working seamlessly with the Trustee, so I eliminated them straight away. Other's were simply dazed and confused by the idea. I found a few professional organizations that were experienced with such transactions, and based on their costs and services made my choice.

You can plan on paying 1/2 - 1 month rent immediately and then 8-10% per month for the term of the contract. Most have additional fees if they have to do maintenance work or go to court. But, most cover normal day-to-day activities, tenant screening, rent collection etc. All fees are paid from the IRA.

Here's how my deal worked out - and this is very nice: I purchased a completely rehabbed home, whose sale price had been reduced by half due to the market collapse

Because I was able to pay cash and close quickly, I offered half of what they were asking, and they accepted!

I could have turned around and had my IRA sell it, for a quick profit. But decided to hold onto it, because with all costs figured in - closing costs, taxes, insurance, management fees etc, the original investment will be paid off in about 21 months. Worst case scenario, 25 months.

By then the property should have appreciated some, and my profit margin will increase tremendously, since the property will be paid off. I'll have nearly 80% positive cash flow from the house - tax free, of course.

What made this possible? The low real estate market, and the cash in my IRA!

If your not happy with the growth of your IRA or 401K, you owe it to yourself to seriously take a look at self-directed IRA's. You can't escaped risk when investing, as that's the name of the game, but you can take control of how those funds are being invested and direct those investments into something that you're knowledgeable of.

And don't forget, since these investments are within your IRA, the profit is tax free!

If you don't include self directed IRA's as part of your portfolio, you're missing out on a huge opportunity to grow your investment, even in a down economy.

Are you earning 8-12% annually? If not, do yourself a favor and check out: Aligning yourself with an investment oriented brokerage, with national connections is a great first step.

Paul Clinton: Having been involved with real estate investing for about 10 years now, Paul was amazed to learn the income potential of self directed IRA's. You can forget the paltry 2-3% earnings, if any and begin enjoying growth again!

Source: EzineArticles
Was this Helpful ?

Rate this Article

Article Tags:

Self Directed Ira


Real Estate Investment


Self Directed Iras


Grow Your Ira


Tax Free Profits



Forex dealing is dealing in currency trading and basically includes dealing in foreign exchange while the stock market dealing is the dealing of stock in a standard market market. The two types of

By: Anil Mali l Investing > Stocks l October 25, 2012 lViews: 243

Investments in silver metal can be done by several ways. The article talks about the best ways of silver investments. Silver, the precious metal has always attracted investors for several reasons.

By: Kyles Humphrey l Investing > Gold Silver l August 17, 2012 lViews: 305

The article offers reasonable reasons for high oil prices. Crude is indispensable and it is a great source of energy. The prices on oil keep on altering, sometimes it is too high and sometimes it

By: Kyles Humphrey l Investing > Stocks l August 17, 2012 lViews: 286

Many investors are unaware of new tax that will be levied as part of the Supreme Court’s decision to uphold President Obama’s health care reform. The investment tax, as it is being referenced,

By: Ben Esget l Investing > Retirement Planning l July 17, 2012 lViews: 405

A few months ago, I was at Starbucks talking to someone about stocks and bonds, he and his wife had worked hard and were worried about the stock market. They wanted something much less risky. He

By: Lance Winslow l Investing > Stocks l July 11, 2012 lViews: 433

The first step in the risk management process is to acknowledge the reality of risk. Denial is a common tactic that substitutes deliberate ignorance for thoughtful planning.

By: Lawrence Tepper l Investing > Retirement Planning l July 10, 2012 lViews: 240

There cannot actually be a winner when you compare 401k versus Roth IRA, as they both have their set of advantages and drawbacks. Even when you consider the unique feature of self-directed 401k plan,

By: Mark G Millerl Investing > IRA 401kl May 16, 2012 lViews: 203

Most adults have completed a beneficiary designation at some point. We complete the forms when we are hired or become eligible for the company 401(k) Plan and then we forget about them. But your

By: Stacey L Spencerl Investing > IRA 401kl May 04, 2012 lViews: 173

Many employers offer some kind of retirement plan that allows the employees to save for retirement on a regular basis out of their paycheck, most of the times on pre-tax basis allowing employees to

By: Dan Georgel Investing > IRA 401kl May 01, 2012 lViews: 168

If you have money locked up in a 401k account you may be able to use it to help buy a house. A 401k loan offers a way to use the money in your 401k without triggering taxes and penalties.

By: Brian E Nelsonl Investing > IRA 401kl April 29, 2012 lViews: 179

Many companies offer to match an employee's contribution into their 401(k) plan. If this is available to you, you must take advantage of it as it is "free" money. Don't delay, start today!

By: Chris Borgl Investing > IRA 401kl April 17, 2012 lViews: 178

A 401k is an excellent retirement plan and most people are taking it up with several financial providers that cater to this plan. Investing for retirement is a crucial step especially in the present

By: Jeremy Wongl Investing > IRA 401kl April 10, 2012 lViews: 154