Getting Around Prohibited Transactions August 31, 2009
Posted by Jeff Nabers in real estate, Self Directed IRA/401k.Tags: 4975, house, individual 401k, internal revenue code, ira, ira llc, irc 4975, law, laws, llc, loan, prohibited transaction, real estate, retirement, retirement account, retirement plan, self directed, solo, Solo 401k, solo k, strawperson, uni k
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Prohibited transactions is a chief topic when exploring self-directed IRA & Solo 401(k) investing. When a person first discovers that his retirement accounts have been chained to Wall Street brokerages without necessity, his mind starts to imagine the possibilities.
Real Estate? Yes.
Private Businesses? Sure.
Precious Metals? Absolutely.
Getting my hands on my retirement money now? Slow down there.
There are two types of limitations on the average retirement account. One is an unnecessary restriction of investment options to securities products. That can be eliminated through restructuring your accounts and funds. The second limitation is legal and cannot be removed.
Setting up a self-directed IRA or 401(k) is about removing limitations. Once you have it setup outside the nearly monopolistic network of securities dealers, you can invest in almost anything… but you must fully understand the legal limitations.
The general premise behind prohibited transaction rules is that the government wants you to grow your retirement account as big as possible because they plan to tax it later on when you distribute the funds to yourself for spending. Without prohibited transactions rules, anyone in their right mind would (more…)
Book Announcement: UNLIMITED INVESTING March 31, 2009
Posted by Jeff Nabers in Money, Precious Metals, real estate, Self Directed IRA/401k, Uncategorized.Tags: alternative, alternative assets, alternative investments, book, chongchua, depression, economy, gold, ira, ira llc, jeff, llc, nabers, phoebe, proof, real estate, recession, self directed, self employed, solo, Solo 401k, solo k, unlimited investing, wall street
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In case you haven’t heard through the grapevine, my new book, UNLIMITED INVESTING With a Self-Directed IRA LLC or Solo 401(k): Break Free From Wall Street To Build Real Wealth With Alternative Investments, will be available soon.
I’ve joined (more…)
Is my home an investment? March 18, 2009
Posted by Jeff Nabers in real estate, Self Directed IRA/401k.Tags: 401k, bernanke, builder, buyer, clinton, consumer, fannie mae, fed, finances, financial, FNMA, greenspan, home, house, income, invest, investing, investment, ira, ira llc, llc, planner, primary, property, real estate, realtor, recession, residence, self directed, seller, solo, Solo 401k, spending
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Recently I received a question from somebody looking into self-directed IRA/401(k) investment for themselves. They said, “I ran this by my financial planner in New York who said to roll over my IRA to put some of its money into my home is illegal.” This statement is technically correct. Putting IRA money into his primary residence would be a prohibited transaction. The disturbing thing about the situation is that these three people (a person, their realtor, and their financial planner) could all be on the same page about something so fundamentally ridiculous.
The misconception
In the past 10 years, many people think “real estate investing” equals “putting money into my home”. Their home can’t be an investment in the first place because they are paying for it rather than having it paid for by a renter.
When somebody wants to help people rationalize buying the stuff they sell, they often call it an “investment”. Bill Clinton started changing the way people thought about government spending (when he was increasing it) by calling it an investment.
An investment or a consumer product?
Selling a primary residence to a home buyer is selling a consumer product. It’s for their use. They can buy what they really need. Or they could get extravagant and buy the Lexus/Mercedes version of a home and spend more. Either way, it’s a consumer product if they are paying for it and using it themselves.
But realtors followed Clinton’s spin move and started calling home buying an investment. This really caught on once Fannie Mae, Freddie Mac, and the Fed all took actions to artificially inflate home prices in order to defer the recession of 2002. Once you could buy this consumer product (the home) and then have it rapidly increase in value (supposedly) and realize this value by selling it or doing a refinance cash out, then the talk about the home being an investment seemed to make sense.
Today, the bubble is over, and the illusion that your home is an investment should be easy to correct. If it was an investment, then somebody else would be paying the mortgage. If somebody else was paying the mortgage, they’d probably live in it instead of you.
It’s not to say that buying a home is a stupid thing to do. That can only be decided on a case-by-case scenario that depends on the buyer and the home in question. Buying a home can be a financially beneficial thing to do in some cases, but it hardly could be truthfully classified as “real estate investing”.
Back to basics: real estate investing means buying properties that produce income. And, yes, real estate investing can be done inside an IRA or 401(k). :-D
Tool for Battling Coming Inflation February 19, 2009
Posted by Jeff Nabers in Money, Personal Enjoyment, Personal Productivity, real estate, Self Directed IRA/401k.Tags: alternative asset, alternative investment, bail, bailout, bernanke, building, congress, currency, debasement, economy, fed, federal reserve, fiat, fiscal, government, inflaiton, ira, ira llc, monetary, obama, out, paulson, policy, responsibility, rubino, schiff, self directed, solo, Solo 401k, stimulus, strategies, strategy, tax, tool, treasury, wealth
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If you’ve been following my blog, you know that I take great interest in understanding money. Why every single human who uses money on a regular basis doesn’t also share this interest is beyond me.
With trillions of dollars created by actions of Congress, the Federal Reserve, and the Treasury Department, the concern for coming inflation can only spread. This video explains why tax deferred investment vehicles are the best tool for battling inflation and can possibly even (more…)
The Top 5 Investing Myths of 2008 January 5, 2009
Posted by Jeff Nabers in Money, Personal Enjoyment, Personal Productivity, real estate, Self Directed IRA/401k.Tags: 2008, 2009, 401k, adviser, advisor, bailout, financial planner, government, invest, investing, invstment, ira, ira llc, losses, madoff, meltdown, Money, plan, recover, regain, scam, SEC, self directed, solo, Solo 401k, stock market, strategy, wall street
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2008 was a very interesting year to say the least. Possibly the most productive outcome of the year was the restless message of “rethink things” coming from the little voice beckoning each of us in our minds.
Myth #1… The SEC keeps investment information honest and accurate
The Securities and Exchange Commission (abbr “SEC”) should be done away with. The Madoff debacle along with the dozens of other securities frauds that draw less (or no) attention every single year should be evidence that the SEC is failing. It is tasked with making investments safe and transparent and is having the opposite effect. When an investor or fund manager is considering a particular investment, they believe that the investment is truthful, transparent, and honest because the SEC is supposed to regulate it into such a position. The result can be decreased due diligence because of reliance on the SEC. This leads to disaster when the SEC ends up not doing its job very well. If we didn’t expect the SEC to be “keeping investing safe and honest” then investors and asset managers would take a closer look at investment opportunities which would result in better thought out decisions. I’m not saying the SEC should be doing a better job – I’m saying we shouldn’t expect regulation to create investment safety in the first place.
I believe the SEC does more harm than good by offering a false sense of security.
Myth #2… Financial planners give good investment advice
Something very interesting happened in the last 15 or so years: Stock brokerages spent millions of dollars convincing the American public that securities salesman had become “financial planners”. That move alone shifted the perception of almost every American and the magnitude of Wall Street’s success (theirs, not yours). A “stock broker” is to securities as a car salesman is to cars… but a financial planner sounds a lot like somebody whose job it is to plan your finances. What actually changed to make stock brokers become financial planners? (more…)
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