An investment in knowledge always pays the best interest. Ben Franklin

Transcription

1 An investment in knowledge always pays the best interest Ben Franklin

2 More Choices More Control Better Returns Greater Safety

3 Take Stock Take Control Take Action

4 The Broad View & The Personal View (your plan IRA, 401k)

5 The Broader View Financial trends World trends Political environment

6 Debt The Big Kahuna Living on Borrowed Money Time

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8 Independence Civil War WWI WWII 2006

9 Fiscal Cliff Wile Style Heck, if it works for him

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12 financial crises are things that happen to other people in other countries at other times; crises do not happen to us, here and now.

13 Inflation An Economy Hooked on Speed

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17 S&P 500 Inflation Inflation Adjusted Adjusted S&P S&P SGS Adjusted S&P 500

18 Monthly SS Inflation Adjusted SS SGS Adjusted SS

19 CPI Adjusted SGS Adjusted

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24 S&P 500 Index in Gold Grams

25 Dollar denominated investments are in trouble long term

26 Inflation Brings Instability U.S. Bank Failures Eurozone Instability Budget Deficits Bankruptcy Crisis

27 Age of Aquarius? Information Age Technology Whatever

28 acres and a mule 1900 A house in the suburbs and a job in town. Oh! And a nice car. 2000?? De-centralization? Information Technology Travel Medicine

29 Financial Empire Growing Chinese financial muscle The U.S. dollar on the ropes Direct trade agreements without U.S dollars

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31 Who do you think s in charge here?

32 Will the Government Nationalize My IRA? Only If You Let Them

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34 $19.4 Trillion

35 The governments of Hungary Poland Bulgaria Belgium Ireland France Bolivia Argentina have already seized private retirement accounts.

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37 Here Are Some Highlights Oct House Committee held hearings Treasury Retirement Bonds to replace IRA s, 401k s Feb proposed issuance of rules regarding annuitization of 401(k) plans Feb 2012 Calif. SB1234 introduced, it s known as: "Golden State Retirement Trust". This Bill is based on GRA s May 2012 Connecticut HB5337 (SCEPA) based on GRA s.

38 2013 The Latest Obama Budget Proposal for Fiscal Year 2013, endorsed Automatic IRAs

39 1. Universal IRAs 2. Automatic IRAs Watch For 3. Guaranteed Retirement Accounts 4. help the little guy jargon

40 Desperate Times Call for Desperate Measures!

41 Desperate Times Call for Desperate Measures!

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43 Personal View Your Plan IRA, 401k, 403b Retirement Investments

44 Typical Wall St. Plan Stocks Bonds Mutual Funds ETF s, CD s Money Market Accts.

45 About Custodians ERISA says your IRA Plan Trustee must be a bank or trust company. Guess who controls the banks?

46 Niel Kashkari $700 Billion Man Like the Fox Guarding the Hens

47 Level 1 Investing Wall Street Special

48 Your Investing Platform Inflation

49 Counterparty Risk Enron Unicom Tyco Worldcom Bear Sterns Lehman Bros. GM MF Global Wachovia WaMu

50 It s All About Balance

51 Investing Platform Strategy Plan Assets

52 Level 2 Investing Move to a Truly Self-Directed Plan - Alternative Custodian -

53 Level 1 Investor Wall St. IRA $ Rollover Level 2 Investor SDIRA

54 Truly Self-Directed Plan Stocks & Bonds Real Estate Precious Metals Private Offerings Private Loans Businesses Private Mortgages Hard Money Loans Real Estate Options Ag Land, Timber Wind, Solar Natural Gas

55 Your New Self-Directed Investing Platform. Bonds Stocks Self-Directed Real Estate Lending Gold Notes Tax Liens Natural Gas Water Rights Commodities Real Estate Options And More

56 Which is Better? Wall St. Plan Self-Directed Plan Bonds Lending Stocks Real Estate Gold

57 Level 3 Investing Direct Control of Your Plan Assets

58 Level 1 Investor Wall St. IRA $ Rollover Level 2 Investor SDIRA Common & Familiar Hands off & Easy (hidden fees) Few Choices Alternative Custodian More Involvement Fees Exposed More Choices Paperwork Delays

59 Custodians: Charge fees Slow or kill deals Are good at being bureaucrats They work for you but you jump through the hoops?

60 Problems : Custodian charge fees Custodians are inefficient Solution: Checkbook IRA

61 Gain Personal Control Level 1 Investor Wall St. IRA Level 2 Investor $ SDIRA $ Level 3 Investor Checkbook IRA

62 Checkbook IRA Wall St. IRA $ SDIRA 100% Funded by IRA $ LLC You manage the LLC Investment 1 Investment 2 Investment 3 Investment 4 Investment 5

63 How It Works As LLC Manager You write the checks on the LLC bank account. You hold the assets titled in the name of the LLC LLC profits flow through to the IRA

64 Level 1 Investor Wall St. IRA Side-by-Side Level 2 Investor $ $ SDIRA Level 3 Investor Checkbook IRA Hidden Fees Few Choices Lower Fees More Choices Paperwork Delays No Custodian Fees Unlimited Choices Direct Ownership Direct Control No Delays

65 2 Ways to Get Control If you want Unlimited investment choice Checkbook control Direct posession of plan assets 1. Checkbook IRA 2. Solo 401k

66 Level 4 The Elegant Solution A Solo 401k

67 Wall St. IRA $ Solo 401k Solo 401k Self Trustee (You) Trust Bank Account Trustee Controls Assets No Custodian No Delays No Fees Investment 1 Investment 2 Investment 3 Investment 4

68 To Open A Solo-401k You must be self-employed. Any business will do, even part-time. Have no full-time W-2 employees

69 About the Business Anything you do with the intent to make a profit is a business. Anything

70 Anything you do with the intent to make a profit is a business. Hobby Business Part Time Consulting Investing Contract Jobs Freelance Writing Photography Flea Markets Antique Dealer Catering Trainer Seminar Speaker

71 Make It Real Do at least the minimum to make your business a real business: assumed name (dba) tax number (EIN) business bank account keep separate books

72 About Employees You can have workers who: have ownership in the business (owneremployee) work less than 1000 hours per year are independent contractors follow IRS guidelines

73 are non-resident aliens with no U.S. income are union employees are under age 21

74 Who s Included? You Your Spouse Partners may also be included.

75 If your business must have full-time w-2 wage earners The Solo 401k is not available to you. You have 3 options:

76 1. Open a Checkbook IRA 2. Reorganize your employee relations 3. Adopt a 401k plan that covers you and all your eligible workers (but still has all the choices you want)

77 A Self-Directed Smackdown

78 How are they alike? Both are based in ERISA but governed by different parts of ERISA, both allow: alternative investments rollover s from other plans checkbook control ROTH component

79 How do they differ?

80 IRA SEP 403b TSP Roth Simple 401k 457 IRA IRA LLC Solo 401k

81 If you have only a ROTH IRA You will have to use a self-directed IRA.

82 Plans are Trusts About Custodians The Plan s Trustee is the Custodian You are the Plan s Beneficiary IRA Trustee A Bank 401k Trustee Anyone No Custodian means No Fees with a Solo 401k

83 About Debt Financing You can use debt financing to buy real estate but your plan might have to pay UDFI tax. UDFI = Unrelated Debt-Financed Income

84 Tax rates vary between 15% and 39.6% Tax is levied on income and profits based on the percentage of financing used. If 80% financing is used 80% of the profits will be taxed. IRA s pay UDFI tax 401k s do not

85 About Participant Loans Solo-401k Loans allowed Borrow up to $50k or 50% For any purpose Reasonable Interest Paid back within 5yr. IRA, No loans 401k, Up to $50

86 Solo-401k About Contributions Employee = $17,500 (plus $5,500 over 50 yr.) = $22,000 Employer = 25% of w-2 income max $50k combined IRA Max (over 50) = $ k Max (over 50) = $50k IRA, Minimal 401k, Huge

87 About Simplifying The Solo-401k is simpler

88 Checkbook IRA Structure Wall St. IRA SDIRA 1 Gov t Mandates Rule Changes Forced Distribution Regulatory Changes Increased Taxes Increased Filings Fines 2 LLC Investments There are 2 weaknesses in this system. 1. Custodian Intervention 2. Government regulation of the LLC

89 Solo 401k Structure Wall St. IRA Solo 401k Investments Plan Trust is formed by a private document. No gov t. entity needed. No moving parts 1. No Custodian 2. No LLC Simpler is better

90 IRA IRS Filing Requirements Custodian does filing Solo-401k Under $250,000 no filing Over $250k Form 5500ez (2 page form) None or Minimal

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92 Comparison IRA LLC or Solo 401k Investment Choice Portability Checkbook Control Debt Financing Tax Free Loans Large Contributions

93 Comparison IRA LLC or Solo 401k Legal Structure Trustee Custodian Required LLC Needed IRS Filing Trust Bank Yes Yes No Trust Anyone No No No/Minimal

94 Remove the Dead Wood Look for Fertile Soil Plant New Seed

95 Prohibited Transactions How NOT to use your self-directed IRA. You got to know your limitations Dirty Harry

96 Avoiding Problems

97 If You Break The Rules The IRS can disqualify your plan entirely if you participate in a prohibited transaction. You could pay tax on a distribution of the entire balance of your account.

98 Penalties reach back to the date the transaction occurred. You will pay tax at 15% per year plus If not corrected within the current tax period you pay a 100% tax on the amount involved.

99 What you can t do. 1. Disallowed Investments 2. Prohibited Transactions 2 Rules 3. Disqualified Persons

100 Art and Collectibles any work of art, any rug or antique, any metal or gem, any stamp or coin, any alcoholic beverage, or you get the idea Don t Invest In

101 2 Rules Rule 1 No Self-Dealing Rule 2 No Personal Benefit

102 Rule 1 Easy Rule 1 Your plan cannot buy, sell, transfer or exchange assets with you or any disqualified person.

103 Rule 2 Easy Rule 2 Your plan cannot enter into a transaction which benefits you or any disqualified person.

104 Remember Don t put your plan into deals with disqualified persons.

105 Who are disqualified persons? You and your linear ascendants and descendants & their spouses. 1. You and your spouse. 2. Your parents and grandparents. 3. Your sons and daughters and their spouses. 4. Your grandchildren and their spouses.

106 Also Disqualified 5. Plan fiduciaries & spouses. 6. Businesses, trusts, or other entities controlled by you or any disqualified person.

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108 Your plan can partner with your daughter s plan your wife s plan anyone s plan Or with anyone who is not a disqualified person.

109 Bottom Line Don t buy collectibles. Use Rules 1 & 2 as a Litmus Test for all your creative investments.

110 Traditional Assets Plus Alternate Assets

111 Offshore Real Estate Some Advantages Diversify Geographically & Politically Invest in Growing Economies Low Entry Prices (better than U.S) Cannot Be Forcibly Repatriated Future Retirement Home Retirement Income

112 Real Estate Tax Deals The Government is Your Friend Tax Lien Certificates Tax Deeds 25% in 6mo.) Tax Lending with 1 st lien position

113 Real Estate Notes Buy Discounted Cash Flows Earn 18% Buying Discounted Notes Earn 35% Buying Partials Hope for a Default Private Mortgages Owner Financing

114 Secured and Unsecured Notes Hard Money Lending to Investors 14-18% secured by real estate 8-10% to professional hard money lenders Private Bank Private Lending Earn 8-12% funding real estate deals

115 Buy Gold & Silver Bullion Store it offshore in a private vault Buy mining stocks Buy Metals ETF s Precious Metals Invest in black gold

116 Lifestyle Investing Renewable Energy Security

117 Lifestyle Investing Offshore Income Real Estate Sustainable Living

118 Businesses Equipment Leasing Self Storage

119 Productive Farm Land Food demand on the rise and people always need to eat. Aggregate income 10% Income from production Asset appreciation Offshore farmland Low entry price

120 It s not really thinking outside the box. The box is just bigger than you think.

121 The real voyage of discovery consists not in seeking new landscapes, but in having new eyes. ~Marcel Proust