Real Estate

Three ways to increase your IRA

I like solutions that give me maximum choice and control. I service my own motorcycles and guitars. I do my own basic electrical and plumbing repairs. I file my own taxes … unless they get really complicated, in which case I know where to draw the line and bring in an expert.

Along the way, I have learned to avoid large, remote institutions, as they don’t give me many options. Planning for retirement is a good example. For a few years I had a 403 (b) plan from a previous employer. Once I took the fees and costs into account, it became clear that it would be better to pay taxes on the salary that would have gone into contributions and invest it myself.

Many people are realizing the fact that individual retirement accounts (IRAs) suffer from the same problem … but it’s one that you can solve by moving away from IRAs offered by large institutions and moving to a self-directed IRA.

The IRA Released

Most retirement investment products are not designed with you in mind. Instead, they are designed to direct your retirement savings into the US equity markets A whole “food chain” has grown up around America’s retirement system, pumping money from Main Street to Wall Street … Like I need more

The problem is the lack of investment options. Most institutional IRAs offer only a limited range of US stocks and bonds.

The truth is, your IRA can legally pursue just about any investment option imaginable – real estate, business start-ups, intellectual property, precious metals, you name it. A “self-directed” IRA is perfectly legal and can be as simple or as complex as you are comfortable with.

Is that how it works. By law, all IRAs must have a US-based “custodian” who is responsible for custody of your IRA, record keeping, transaction processing, filing IRS forms, and other administrative tasks. . Most large custodians make things simple for themselves by offering a standard menu of US stocks and bonds. But there is nothing to stop an IRA custodian from offering foreign investments, real estate, private mortgages, precious metals … and much more. In essence, some custodians allow you to manage your own IRA.

A self-directed IRA is like a conventional IRA: tax deductible contributions; no income tax; distributions are taxed as ordinary income. The difference is that a specialized IRA investment custodian allows you to actively choose your investment.

For example, your self-directed IRA could buy a home that you plan to use in retirement, but rent in the meantime. Tax-deferred rental income is used to maintain the property and to finance other investments. You can select the property and negotiate the terms of the deal yourself. (However, the custodian must be the legal owner, so all documents are in your name, although you are referred to as the owner of the IRA, as “Custodian of company XXX for the benefit of (Your name) GO TO”.

When you title the home when you retire, you’ll pay regular income tax on the appreciation of the home’s value since the IRA bought it. For example, let’s say your self-directed IRA buys a home for $ 100,000. He rents it out and it appreciates at an average annual rate of 8%. After 20 years, your $ 100,000 investment would be worth $ 215,890, and when you move, you will pay income taxes on the $ 115,890.

The gold option

Thanks to the Taxpayer Relief Act of 1997, a self-directed IRA can contain gold, silver, platinum, platinum, and palladium, either as bullion or coins. In both cases, the metal or coin must be of a specific quality to qualify for an IRA. For example, an IRA may own American Gold Eagle coins, Canadian Gold Maple Leaf coins, American Silver Eagle coins, American Platinum Eagle coins, and gold and silver bars with a purity of 99.9% or higher. (Some known gold coins, including the South African Krugerrand, are banned, as are bullion bars that are not pure enough.)

To meet IRS requirements, the custodian must keep the precious metals in an IRA … sorry, you can’t keep it yourself. IRS Publication 590 specifies that “The trustee or custodian must be a bank, federally insured credit union, savings and loan association, or entity approved by the IRS to act as trustee or custodian.” Many trustees / custodians use private warehouses to store IRA metals. Alternatively, your IRA can invest in COMEX metal futures or exchange-traded funds (ETFs).

The last option on the high seas

There is another IRA “trick” that can really open up the world of investing for retirement. That’s so your IRA custodian creates and owns a limited liability company (LLC), either in the US or abroad, which in turn can make the necessary investments, including gold and other metals. In this case, you can basically manage the LLC yourself, bypassing the custodian for most matters.

However, the key to all of this is getting good advice from an experienced and knowledgeable tax attorney. IRS rules for IRAs are pretty strict and mistakes can lead to “early distributions” … with the tax implications that come with it.

So go ahead, supercharge your IRA … but get help. DIY doesn’t mean going it alone, after all.

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