Recent statics show that up 10,0000 Baby Boomers per day will turn 65 for the next 19 years in which up to 80% the that population either lack a retirement account and/or underfunded retirement accounts to sustain them in their retirement years. Part of this problem is attributed to the economic downturn that occurred in 2008 which is still haunting many of us in the present.

Over the past 50 years the population has been advised to fund an IRA or 401K along with other miscellaneous retirement related accounts and all would be fine at the age of retirement. Another segment of the population had depended on the equity in their real estate to serve as their primary, additional and/or supplemental retirement savings vehicle to serve as their income source in retirement.

Unfortunately for many, that plan is no longer a viable plan based on past retirement planning practices with declining returns in the stock market and declining real estate values resulting in negative equity for a vast majority of the population whom purchased properties prior to the 2008 economic meltdown. This can all be reversed by incorporating the use of a self directed IRA into your retirement planning strategy by allowing you to take control of your retirement funds, choosing a wider array of alternative investment options outside of the stock market and having the ability to TRULY diversify your investment portfolio.

Take the Shackles Off Your IRA

The ability to TRULY diversify your retirement portfolio is key to growing and securing your retirement nest egg. The historic rule for a sound investment strategy has always been “diversify”. Unfortunately, many of us were not diverse enough in 2008 when the stock market crashed.

The reason being is that ALL of your funds were invested in a single investment engine, the stock market. Imagine if you had the opportunity to invest in other asset classes outside the stock market that weren’t affected by the crash, it could have resulted in losses not as great as those realized in having all their money in the stock market. While I believe stocks, bonds, mutual funds, money market accounts should be a part of your retirement portfolio, others alternative asset classes should also be included such as:

Real Estate

Secured Private Notes

Private Placements/Private Shares

Precious Metals

Business Investments

Secured Business Loans

Accounts Receivable Factoring

Seed Capital For Starting Your Own Business

The above listed investment options are just some of many options available to you using a self directed IRA. The list also reflects the type of investments that are in demand for capital that could grow your retirement accounts faster and more securely than some of the traditional investments you have invested in the past. With a self-directed IRA, your only two investment restrictions as it relates to asset classes are life insurance and collectibles. Outside those two investment class restrictions, you have almost unlimited investment options available to you using a self-directed IRA.

It’s almost a certainty taxes will increase in 2013 based on the current economic affairs of our country. Therefore, anticipate higher income taxes and capital gains taxes on investment in 2013. In order to reduce and/or avoid taxation in these two areas would be to consider establish a self-directed IRA, in particular a self-directed ROTH IRA in 2012.

Making your investments with a self-directed IRA funds versus private capital allows you the ability to defer taxes on your gains or not pay taxes at all on the gains with a self-directed ROTH IRA. The rules are as follows for avoiding taxation on growth within a self-directed ROTH IRA:

1. The ROTH account must have been established and funded with for at least (5) years

2. The accountholder must be 59 ½ or older to withdraw gains without penalty nor taxes

Many may not feel it’s worth establishing a ROTH because of the low contribution limits of $5k/$6K and/or may not meet the requirements to contribute based on too much income. Keep in mind, you are able to convert from your tax deferred IRA, 401K or retirement plans to a ROTH. There are no income restrictions on a conversion, full or partial and you are the amount you are allowed to convert has no limits. So take advantage of these tax advantages before they become subject to change in the future.

The objective of using a self-directed IRA is to take more control over your investment choices and invest in what you know and understand. The use of this investment tool requires the necessary due diligence to be performed on any investment you choose. If you lack the ability to perform the necessary due diligence on an investment, consider hiring a professional to assist you. Arm yourselves with the required information and education for the investment choices you choose to prevent the potential for losses. Remember, this is your retirement account we’re talking about here, so become diligent and proactive to protect it.

Lamarr Baxter

Director Of Business Development

Accuplan Benefit Services

lamarrbaxter@accuplan.net

(916) 708-0235

THIS IS YOUR OPPORTUNITY! A CALL TO ACTION IS UPON US TO SAVE THIS INDUSTRY!

Submit a public comment opposing the new rule. THIS ONLY TAKES A FEW MINUTES!

• Seller “financing” provides housing for millions who otherwise could not qualify for conventional loans.
• Homeowners are not bank officers or mortgage lenders. By requiring them (many if not most of whom who take back a mortgage are elderly) to qualify buyers using bank standards means they will simply refuse to sell with owner financing. Thus millions of people will be deprived of home ownership.
• Why should the buyer be required to divulge their income and assets to the very person with whom they are negotiating the terms of a sale? This is not required when there is a 3rd party lender.
• Requiring the buyer to turn over all their financial information to a stranger opens the door for identification theft and fraud.
•  This also creates the opportunity for predatory borrowing. This is where an unscrupulous buyer knowledgeable about the Dodd-Frank Act leads an uninformed seller (and this will be the majority of sellers) into negotiations not in compliance with the ability-to-repay requirements. (An example of that could be a balloon, an interest rate greater than 1.49% above a standard mortgage, or the seller did not know how to calculate the income-to-debt ratio correctly, or know what residual income means). That buyer lives in the property trying to resell it for a profit and if they are not successful within three years they rescind the sale and get all their money back.
• By not allowing them to negotiate a balloon payment, there is a good chance that a seller 55 years or older will die before receiving all their equity. A lot of seniors have invested in real property with the intent of selling it using seller financing (an installment sale) in order to supplement their income in retirement, but also with the hope that they would not be stuck with a 30 year investment. The Dodd-Frank Act does the same thing insurance companies do who sell 30 year annuities to seniors. Our government has criticized this deplorable practice because seniors will die before they receive all their investment.
• The restriction of no balloon doesn’t affect just seniors, it has financial consequences for anyone using seller financing. Under the Dodd-Frank Act community banks are allowed to originate fully amortizing loans with a five year balloon. The rationale is that they hold these loans in their own portfolios and the government recognizes their need to hedge  against inflation and rising interest rates. Yet, the Act does not recognize that private property owners who have 100% skin in the game need the same protection. A five year balloon is predatory lending. If there has to be a restriction it should at the very least be the same allowance given to community banks of a balloon in 5 years.
• There are a lot of small builders that have a spec house or two that they can’t sell unless they offer great terms using seller financing. Otherwise they have to let these properties go back to the bank, which doesnot help housing or the economy.
• It has been said that a seller financing the sale of his or her own property would completely avoid the issue of licensing by retaining the services of a licensed loan originator. If a mortgage loan originator (MLO) fails to properly follow the ability-to-repay guidelines the buyer still has three years in which to rescind the sale which leaves the seller at risk and will most likely bankrupt them.

A sample letter you can use that was developed by National REIA is available online.

I suggest you submit this to your Representative and/or Senator in Congress  as well as submit as part of the proposed rule
comments.

Take Care,
Lori Greymont