Learn how to transform old employer 401k into a Self Directed IRA or 401K, navigate health and education savings, and choose between Roth and Traditional IRAs. Discover the advantages of Directed IRA's low flat annual fee, setting up trust and business checking accounts, using non-recourse loans for real estate investment, and upcoming features like a crypto IRA.
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Quick takeaways
Investing in Bitcoin and other cryptocurrencies with a self-directed IRA is possible through Directed IRA's Crypto IRA product.
Clients can purchase rental properties using their self-directed IRA, generating rental income and potentially benefiting from property appreciation.
Investing in private funds, such as private equity funds or real estate funds, can provide diversification and potential returns for self-directed IRAs with proper research and evaluation.
Self-directed IRAs allow investments in assets like real estate, cryptocurrencies, private funds, and LLCs, but limitations may arise from the provider of the IRA account.
Working for a company owned by your IRA depends on factors like ownership percentage, with potential restrictions and complexities that can be clarified by seeking advice from tax lawyers.
Deep dives
Investment Options: Bitcoin and Cryptocurrency
One of the investment options discussed in the podcast is buying Bitcoin and other cryptocurrencies with your retirement account. Directed IRA offers a specific Crypto IRA product that allows investors to trade or buy and hold cryptocurrencies within their IRA.
Investment Options: Rental Real Estate
Rental real estate is another popular investment option discussed in the podcast. Clients can purchase rental properties using their self-directed IRA, either by using available funds or by using a non-recourse loan. This allows investors to generate rental income and potentially benefit from property appreciation.
Investment Options: Private Funds
Private funds, such as private equity funds, debt funds, or real estate funds, are also mentioned as viable investment options for self-directed IRAs. Clients can invest in these funds to diversify their retirement portfolio and potentially earn returns through the performance of the fund. However, investors are encouraged to thoroughly research and evaluate each private fund before making any investment decisions.
Investment Restrictions in Self-Directed IRAs
There are only a few restrictions on what your IRA can invest in. Prohibited investments typically include collectibles and life insurance. However, you can invest in assets such as real estate, crypto, private funds, and LLCs. The main limitation comes from the provider of your IRA account, as some brokers or companies may not allow certain investments. The key is to choose a self-directed IRA company, like Directed IRA, that allows you to invest in alternative assets.
Working in a Company Owned by Your IRA
Working in a company owned by your IRA can be possible, but it depends on various factors. If your IRA owns 50% or more of the company, you cannot work for it and receive a salary. If your IRA owns 10% or less, it's generally acceptable for you to work in the company. However, if your ownership falls between 10% and 50%, the situation becomes more complex and depends on factors such as reasonable compensation and how other investors are compensated. Seeking advice from a tax lawyer, like KKOS Lawyers, can provide further guidance in navigating the rules.
Contributions and Contribution Limits
When it comes to contributions, it's important to take advantage of the available options. For IRAs, you can contribute up to $7,000 for 2023 and 2024 ($6,500 for traditional and Roth IRAs). If you have a solo 401(k), the contribution limits for 2023 are $66,000 for employee and employer contributions, and $69,000 for 2024. Health Savings Accounts also have contribution deadlines, allowing you to make contributions until April 15th. It's crucial to maximize contributions to benefit from tax advantages and secure your long-term wealth growth.
Understanding the Five-Year Rule for Roth IRAs
Roth IRAs have two important five-year rules. The first rule states that you must have a Roth IRA for at least five years before you can withdraw earnings tax-free. The second rule applies to conversions, stating that each conversion has its own five-year window before the converted funds can be withdrawn tax-free. It's essential to understand the five-year rules when planning your withdrawals from Roth IRAs.
Engaging with Your Retirement Account
Many individuals neglect their retirement accounts, missing out on opportunities to grow wealth. Engaging with your retirement account is vital for better returns and long-term financial success. By being more active and exploring alternative investments, such as real estate, small businesses, and private funds, you can enhance your retirement portfolio. Take the time to understand the options available to you and consider attending educational events like the Alternative Asset Summit to expand your knowledge.
A Reminder of Investment Restrictions
When investing in real estate with your self-directed IRA, you can involve family members such as siblings or siblings' spouses. However, there may be restrictions when working for a company owned by your IRA, depending on factors like ownership percentage. Virtual help from professionals at KKOS Lawyers can clarify specific situations and guide you through potential obstacles. Additionally, maximize contribution opportunities for various retirement accounts and prioritize engagement with your financial future.
Our COO Aaron Halderman and I discuss transforming old employer 401k into a Self Directed IRA or 401K, navigating the intricacies of health and education savings, and choosing the right path between Roth and Traditional IRAs. Whether you're looking to use existing retirement account money or start fresh with new contributions, we've got you covered. Join us as we break down the rules, discuss pain points, and provide practical steps to empower you to take control of your retirement. At Directed IRA, we assist clients in setting up 30-40 new accounts daily, and our goal is to make you experts in managing your financial future. Subscribe now for expert insights and success stories!
