Retirement Vehicles - Live and Invest Overseas...Checkbook IRA Structure There are 2 weaknesses in...

Retirement Vehicles

Taking Control of Your Retirement Plan

This Information Applies to These Plans

IRA 401k 403b

457 TSP SEP

SIMPLE Keogh

– Ben Franklin

“An investment in knowledge always pays the best interest”

“Knowledge is power. Information is liberating. Education is the premise of progress…”

– Kofi Annon

Wall Street Plans vs

Self-Directed Plans

Level 1

Working With Wall Street

Do You Have A Balanced Portfolio?

Stocks Bonds Mutual Funds ETF’s, CD’s Money Market Accts.

Typical Wall St. Plan

It’s all based on the Stock Market and Fiat Money

It’s all paper.

It contains no hard assets.

It has Counterparty Risks

Counterparty Risk

Enron Unicom Tyco Worldcom Bear Sterns

Lehman Bros. GM MF Global Wachovia WaMu

This portfolio depends on inflation for its gains.

What happens when the bubble bursts?

Your Investing Platform

Level 2

Move to a Truly Self-Directed Plan

Truly Self- Directed Plan

Stocks & Bonds Real Estate Precious Metals Private Offerings Private Loans Businesses

Private Mortgages Hard Money Loans Real Estate Options Ag Land, Timber Wind, Solar Natural Gas

Your New Self-Directed Investing Platform.

Real Estate

Stocks Gold

Bonds Lending Self-Directed Notes

Tax Liens Natural Gas Water Rights Commodities Real Estate Options And More …

If you have a plan and can’t invest in all of these things…

…It’s because your Custodian doesn’t allow it,

Not the law.

ERISA says your IRA Plan Trustee

must be a bank or trust company.

About Custodians

Guess who controls the banks?

Wall Street wants to control your assets so that they can be used as Wall Street sees fit.

This is no accident.

100,000,000 qualified plan accounts 11 Trillion dollars in assets 99.9% controlled by Wall Street

through banks and brokerage houses.

High Stakes Game

Like the Fox Guarding the Hens

Or maybe, for you conspiracy

theorists it’s more like …

One Ring To Rule Them All

So, if you had to pick?

Stocks Gold

Bonds Lending

Self-Directed Plan

Wall St. Plan

Real Estate

How NOT to use your self-directed IRA.

“You got to know your limitations”

— Dirty Harry

Avoiding Problems

The IRS can disqualify your plan

entirely if you participate in a prohibited transaction.

You could pay tax on a distribution of the entire balance of your account.

If You Break The Rules

Penalties reach back to the date the

transaction occurred.

You will pay tax at 15% per year plus…

If not corrected within the current tax period you pay a 100% tax on the amount involved.

1. Disallowed Investments 2. Disqualified Persons 3. Prohibited Transactions – 2 Rules

What you can’t do & why.

So to keep your wealth secure from seizure by the IRS

Remember the following…

No disallowed investments.

Art and Collectibles any work of art, any rug or antique, any metal or gem, any stamp or coin, any alcoholic beverage, or you get the idea…

Don’t Invest In

No Self-Dealing

Rule 1 Your plan cannot buy, sell, transfer or exchange assets with you or any disqualified person.

Rule 1

No personal benefit derived from plan investments.

Rule 2 Your plan cannot enter into a transaction which benefits you or any disqualified person.

Rule 2

Don’t put your plan in deals with disqualified persons.

You and your linear ascendants and descendants & their spouses.

1. You and your spouse. 2. Your parents and grandparents. 3. Your sons and daughters and their

spouses. 4. Your grandchildren and their spouses.

Who are disqualified persons?

5. Plan fiduciaries & spouses. 6. Businesses, trusts, or other entities

controlled by you or any disqualified person.

Also Disqualified

1. Your plan can’t buy a vacation home and you

use it personally – Rule 2

2. You can’t sell your home to your plan – Rule 1

3. You can’t do any work on a property owned by your plan – Rule 1

Some Examples

4. You can’t buy a business with your plan and work in it – Rule 1 or Rule 2

5. You can’t partner with your plan – Rule 2

6. Your plan can’t partner with your daughter – Rule 2

But you can partner your plan with your daughter’s plan.

This involves trying to accomplish in 2 or more steps what you could not accomplish in one.

It doesn’t work – The IRS looks through the steps and sees the end result.

Step Transactions

• Don’t buy collectibles.

• Use Rules 1 & 2 as a Litmus Test for all your creative investments.

Taking It To The Next Level

Level 3

Direct Control of Plan Assets

Start At Level 2 Self-Directed IRA

Wall St. IRA SDIRA

Common & Familiar Hands off & Easy

(hidden fees)

Alternative Custodian More Involvement

Fees Exposed – More Choices –

Paperwork Delays

$ Rollover

Level 1 Investor

Level 2 Investor

Custodians: Charge fees Hold all plan assets Sign all the checks

Working With Custodians

Custodians: Slow or kill deals Are good at being bureaucrats

They work for you but you jump through the hoops?

Problems : Custodian Fees Custodian Involvement

Solution: Checkbook IRA

Add Checkbook Control and Move to

Level 3

Gain Personal Control

Wall St. IRA

Level 1 Investor

Level 2 Investor

SDIRA Checkbook IRA

Level 3 Investor

$ $

Checkbook IRA

Wall St. IRA

$ SDIRA

LLC

Investment 1

Investment 2

Investment 3

Investment 4

Investment 5

$ 100% Funded by

IRA

You manage the LLC

As LLC Manager You write the checks on the LLC bank

account.

You hold the assets titled in the name of the LLC

LLC profits flow through to the IRA

How It Works

It’s not only possible but it’s been possible for over 20 years.

• In 1990 – DOL approves (Jason Opinion Ltr.)

• 1996 – IRS is reprimanded in court (Swanson Case)

How’s that possible?

Side-by-Side

Wall St. IRA

Level 1 Investor

Level 2 Investor

SDIRA Checkbook IRA

Level 3 Investor

Hidden Fees Few Choices

Lower Fees More Choices Paperwork Delays

No Custodian Fees Unlimited Choices Direct Ownership Direct Control No Delays

$ $

If you want – Unlimited investment choice Checkbook control Direct control of plan assets

2 Ways to Get Control

1. Checkbook IRA 2. Solo 401k

Level 4

The Elegant Solution A Solo 401k

Solo 401k

Wall St. IRA

$ Solo 401k

Investment 1

Investment 2

Investment 3

Investment 4 Self Trustee (You) Trust Bank Account Trustee Controls Assets No Custodian No Delays No Fees

You must be self-employed.

Any business will do, even part-time.

Have no full-time W-2 employees

To Open A Solo-401k

Anything you do with the intent to

make a profit is a business.

Anything

About the Business

Hobby Business Part Time Consulting Investing Contract Jobs Freelance Writing

Photography Flea Markets Antique Dealer Catering Trainer Seminar Speaker

Anything you do with the intent to make a profit is a business.

Do at least the minimum to make your business a real business:

Make It Real

assumed name (dba) tax number (EIN) business bank account keep separate books

Also, if you want:

business cards, brochures, flyers website – business email get listed in online directories other things normal businesses due

You can have workers who:

have ownership in the business (owner- employee)

work less than 1000 hours per year

are independent contractors • follow IRS guidelines

About Employees

are non-resident aliens with no U.S.

income

are union employees

are under age 21

You Your Spouse Partners may also be included.

Who’s Included?

If your business must have full-time w-2 wage earners

The Solo 401k is not available to you.

You have 3 options:

1. Open a Checkbook IRA

2. Reorganize your employee relations

3. Adopt a 401k plan that covers you and all your eligible workers

(but still has all the choices you want)

A Self-Directed Smackdown

1st – How are they alike?

Both are based in ERISA but governed by different parts of ERISA, both allow:

“alternative” investments

rollover’s from other plans

checkbook control

ROTH component

How are they alike?

How do they differ?

About Rollovers

IRA Simple IRA

SEP IRA Roth IRA

401(k) 403(b) Keogh

TSP 457

2006 Pension Protection Act (PPA)

Established Plan portability

Funds in any of these plans can be moved to any other of these plans

(with rare exception).

403b TSP Roth

IRA IRA SEP

Simple 401k 457

IRA LLC Solo 401k

If you have a ROTH IRA

You will have to use a self-directed IRA.

About Custodians

• Plans are Trusts • A trust has a Trustee and Beneficiary • Custodians are Trustees, you are the Beneficiary

IRA Trust Trustee is a bank or trust company.

401k Trust Anyone can be Trustee

No Custodian means No Fees with a Solo 401k

You can use debt financing to buy real

estate but your plan might have to pay UDFI tax.

UDFI = Unrelated Debt-Financed Income

About Debt Financing

Tax rates vary between 15% and 39.6%

Tax is levied on income and profits based on the percentage of financing used.

If 80% financing is used –

80% of the profits will be taxed.

IRA’s pay UDFI tax — 401k’s do not

Solo-401k Loans allowed Borrow up to $50k or 50% For any purpose

About Participant Loans

Reasonable Interest – Paid back within 5yr.

IRA, No loans – 401k, Up to $50

Solo-401k Employee = $17,500 (plus $5,500 over 50 yr.) =

$22,000 Employer = 25% of w-2 income – max $50k

combined

About Contributions

IRA, Minimal – 401k, Huge

IRA Max (over 50) =

$6000

401k Max (over 50) =

$50k

The Solo-401k is simpler

About Simplifying

Checkbook IRA Structure

There are 2 weaknesses in this system.

1. Custodian Intervention

2. Government regulation of the LLC

Wall St. IRA SDIRA

LLC Investments

1

2

Gov’t Mandates Rule Changes Forced Distribution

Regulatory Changes Increased Taxes Increased Filings Fines

Solo 401k Structure

Wall St. IRA Solo 401k Investments

Simpler is better

No moving parts 1. No Custodian 2. No LLC

Plan Trust is formed by a private document.

No gov’t. entity needed.

IRA LLC Solo 401k

Comparison

or

Investment Choice Portability

Checkbook Control Debt Financing Tax Free Loan

Large Contributions

Legal Structure

Trustee

Custodian Required

LLC Needed

Trust

Bank

Yes

Yes

Trust

Anyone

No

No

No full time employees = Solo 401k

Otherwise = Checkbook IRA

IRA LLC Solo 401k

Comparison

or

With freedom comes responsibility.

In the end – you open an Self-Directed account

You decide how to invest it initially (hold cash if you wish – or gold)

You learn more –

You adjust your investments accordingly

But It’s Not Difficult

Inflation Financial Instability

Nationalization

Inflation

Awakening Monster

Monetary Inflation

2008

QE Infinity and Beyond!

Hyper-inflation on the Horizon

In an inflationary economy:

Savings are destroyed

You are forced to speculate to try to preserve your wealth

Stock market gains are just chasing inflation – and losing

Inflation Forces Speculation

Store your wealth in “real” assets – real estate, precious metals, productive farm land.

Keep at least some of this offshore.

Financial Instability

Inflation Brings Instability

445 U.S. Bank Failures – since 2007

Instability in Europe (Greece, Ireland, etc. – PIIGS)

Government budget deficits = half the budget!

Looming bankruptcy crisis for cities and states

Consider These Events

Boomers entering retirement

Social Security and Medicare insolvency

Capital flight – nowhere to go

Runaway spending on foreign wars

Add you own…

China as a World Financial Power Hint, this is big!

Who do you think’s in charge here?

WTF?

Capital Controls

Increased Litigation Risks

Coming Tax Law Changes (maybe retroactive)

Add To That

Increased IRS Audits

Possible Civil Unrest

Peak oil, peak food, peak water?

Nationalization of IRA/401k Plans

Can the government really take my IRA?

Unprecedented Times Call for Unprecedented Measures!

Unprecedented Times Call for Unprecedented Measures!

Watch for: “Guaranteed Retirement Account” (GRA)

• A “Lifetime Annuity” scheme that amounts to a 2nd tier Social Security plan.

• Lose the balance when you die.

Should you be worried?

Persistent activity on the legislative front indicates that you should.

Watch for: “Treasury Retirement Bonds” (U.S. Debt = IOU)

• Replace some or all of the assets in your plan with U.S Debt = IOU from Uncle Sam

• Any takers? It’s backed by the full faith and credit of the United States of Government.

Watch for “Protect the Little Guy” jargon.

Prof. Teresa Ghilarducci’s fights an unending battle for social justice.

The Good Professor G

Called the most dangerous woman in America by some.

Big promoter of 401k “reform”

Here’s Some of what’s been happening.

Oct. 2008 – House Committee held hearings – Treasury Retirement Bonds to replace IRA’s, 401k’s

Feb. 2010 – proposed issuance of rules regarding “annuitization” of 401(k) plans

Feb 2012 – Calif. SB1234 introduced, it’s known as: "Golden State Retirement Trust". This Bill is based on GRA’s

May 2012 – Connecticut HB5337 (SCEPA) based on GRA’s.

I assure you.

We haven’t seen the end of this issue yet.

A plan for saving your retirement.

It’s not an act of Congress.

It’s an action.

An action you take to reclaim your retirement savings, secure them.

It’s probably not what you thought.

Open a Self-Directed Plan Now!

IRA or Solo 401k

Inflation Financial Instability Nationalization

3 Reasons – You should consider getting your savings under your personal control sooner rather than later.

4th Reason – There is no benefit in leaving your savings under the control of a Custodian at some bank.

You are the only one responsible for your future.

No one else cares as much as you do.

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Full Freedom of Choice

Complete Asset Control

Minimum of Restrictions

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IRS accepted Prototype Plan

Comes with IRS Approval Letter

All the personal help you need

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Plan Documents…………………………….. $1550 Annual Registration …………………… $200 Total …….. $1750

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$1750 Total Probably less than you pay each year in custodian fees.

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Next year and thereafter just $200 per year

Liberty 401k By Guardian Capkey Co.

Special Panama Offer

Start your Liberty 401k before Dec. 1, 2012 and you’ll get a

$300 discount.

Liberty 401k By Guardian Capkey Co.

Special Panama Offer

Total Price Until Dec. 1, 2012 $1450

I Urge You

To take the steps necessary to regain control of your retirement savings.

If you need to, educate yourself or seek trusted advisors.

Do it soon.

You’ll sleep better once you do.

The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.

~Marcel Proust