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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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$1750 Total Probably less than you pay each year in custodian fees.
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Next year and thereafter just $200 per year
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Special Panama Offer
Start your Liberty 401k before Dec. 1, 2012 and you’ll get a
$300 discount.
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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