Guest Post: Self-Directing Your Retirement ~ Sheltering the Fruits of Your Labor, by Will Lehr

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As we prepare our lives for the unknown, the various categories needing attention are overwhelming.  Many start with the obvious: water, food, security, defense, and self-reliance.  Once we secure our basic survival needs we almost all come to the same next dilemma: money.  How do we shelter the fruits of our labor from the coming storm?  

Retirement accounts are among the largest asset for the average American.  Many people have five and six figure sums of money in these accounts.  Whether you’re concerned about a currency collapse, government theft, or complete societal breakdown, finding a good home for these assets could be life changing on the other side.  

For the self-reliant individual, a self-directed IRA is the perfect fit.  This strategy allows the individual to take control of the account investments, stretching far beyond the typical basket of mutual funds.  Self-directed accounts are designed for investing in precious metals, real estate, and much more.  With one unique type of account, an LLC IRA, you can take home delivery of gold, silver, or platinum eagle coins purchased entirely by your IRA. The below guide can help you determine your options.

Step 1: Consider you goals and eligibility.  What account type do you have to rollover and/or are you able to start?  

Retirement Account Types:

  • An individual IRA (aka traditional IRA) is a tax-deferred savings account.  This account is funded each year with pre-tax dollars, meaning the contribution is typically deducted from the individual’s taxable income for that year.  The account grows (ideally) with taxes 100% deferred.  Once the individual starts taking optional distributions at age 59.5, or forced at age 70.5, he or she claims the distribution as taxable income for that year.
  • An employer- or organizational-sponsored plan has many names, including 401k, 403b, 457, governmental, thrift savings plan (TSP), defined benefit plan, and more.  These plans essentially function like a traditional IRA from a tax perspective.  The individual pays in pretax dollars, often matched by an employer, and is subject to the same back-end distribution regulations. 
  • A ROTH IRA is setup and funded by an individual; however, some employer/group plans can have ROTH accounts.  A ROTH is unique in that it is funded with after-tax dollars, meaning the individual does not deduct the contribution from that year’s income taxes.  He or she pays income taxes on the dollars earned and then contributes to the ROTH.  The benefit of this account type is that the distributions at retirement age are 100% tax-free. No income tax is claimed from the distribution.
  • A SEP IRA and a Simple IRA are accounts used by the self-employed.  These allow for substantial contributions, up to 18.6% of profit in some cases, giving higher income business owners the ability to reduce their present tax burden.

All of the above mentioned accounts, except 401k type plans, are eligible to be setup or rolled over to a self-directed plan, like the LLC IRA.  Only about 16% of employer-sponsored plans (401ks) allow for in-service withdrawals, whereby you rollover your balance while still employed.  A simple question to your administrator or HR person will clarify your eligibility.

Step 2: What are your desired investments?

Traditional retirement account investment options are limited.  These limits are placed by the administrator that holds the account.  Options typically include a myriad of mutual funds, individual stocks, and bonds.  Granted, you can get a wide range of asset class exposure from currencies to commodities but all within the stock, bond, and futures markets.  What if you want to own tangible, physical assets with your retirement account?

Non-traditional administrators allow for alternative investments inside of retirement accounts.  In fact, they are built for them.  There is an entire industry that brings these investments to market.  Some investment options include real estate, physical precious metals, private equity, energy leases, and loans.

Step 3:  Pick your platform and move your account to an administrator that allows alternative investments.

  • Real estate. If an investment into property is suitable for your goals, the options are numerous:  bug out property, farmland, income-producing property, dwellings, land, you name it.  The caveat here is that neither you nor any other prohibited parties can use, benefit from, or add value to the property. In other words, you cannot stay at the property or else it would be a taxable distribution.  You should also not provide sweat equity.  You can hire someone to paint the house, but you cannot do it yourself.  The purpose here is to own the asset with tax-deferred retirement dollars, and then you can use the property later in life.

    There are a few ways to purchase property with an IRA. An account designed for real estate investment can be setup directly through any number of self-directed administrators and is fairly inexpensive, typically $200 to setup and $150 per year. However, these accounts have their limitations in that each transaction must be approved. An LLC IRA is a preferred method used to purchase real estate, as it offers more freedom and flexibility for the individual.

  • Precious metals. A traditional gold or silver IRA (PM IRA) is one way for an individual to invest in physical precious metals with a retirement account.  These are cost-effective platforms and a good option for those that don’t want to bother with storing the metals themselves.

    You can setup a traditional PM IRA with a company, like Goldstar Trust or Equity Institutional.  Such an account will cost about $225-600+ to establish, and $175-500+ annually to maintain, including bullion storage.  The cost range is based on account size.  Although somewhat cost effective, many see a risk in having a third party hold their precious metals.  

    The solution to this third party storage risk is setting up an LLC IRA to invest in precious metals.  With an approved LLC IRA formation, you can take home delivery of gold, silver, or platinum eagle coins, purchased entirely by your IRA.  This is not a taxable distribution; you are legally storing the exempt bullion coins on behalf of an LLC, which is owned by your IRA or like account.

  • LLC IRA. You can establish an LLC IRA with the proper attorney or company, like Perpetual Assets.  The setup cost, regardless of account size, is usually about $2,000 and $150-300 to maintain annually, depending on the state of LLC filing.  All of said expenses are allowable to be paid with retirement rollover funds.

    The complete creation and funding of the LLC IRA takes about two to four weeks.  The process can be cumbersome, as there are numerous legal drafted documents needed.  A good facilitator will do everything for you, keeping it simple.  You should only have to sign a few rounds of documents and open a bank account for your LLC IRA.

    Your retirement account is transferred from your current administrator to a self-directed IRA administrator.  Once the LLC is created and the administrator approves the investment, your funds are sent to your newly-created LLC bank account. From here you have complete checkbook control of your retirement account.  

    As the manager of your LLC IRA, you can write checks, purchase and sell assets, and store specified bullion at home.  The range of available investments is almost unlimited, except for collectibles and life insurance contracts.  Once established, the IRA account administrator acts as a silent custodian.  They do not police your investments or activities.  Thus, it is important to follow IRS-prohibited parties rules.  For example, you could provide seed money, in exchange for equity, for your neighbor’s new start-up company but not that of your child, spouse, or parent.

Whatever your choice for sheltering the fruits of your labor, be prudent. In these questionable times, responsibility falls upon the individual. Money is the stored capital of our past efforts. Protecting it helps ensure our future survival.

We celebrate these opportunities with passion. Please don’t hesitate to reach out if we can help in any way. – Will Lehr www.perpetualassets.com

Disclaimer:  This article is meant to serve as an informational guide.  I am not a CPA nor professional accountant nor attorney.  Nothing authored shall be interpreted as accounting, investment, nor legal advice from Perpetual Assets nor any of its officers, affiliates, media partners, nor employees.

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