Due Diligence in your Self Directed Retirement Plan

Recently I have had a number of calls from clients and readers who have lost money in alternative investments they selected for their own self directed plan. My first question when I get a call  like this is, "what Due Diligence did you do to determine if the investment sponsor was legitimate and what calculations did you base your decision on?"  In almost every case, the decision to buy was made in the heat of a selling event and almost no Due Diligence was conducted prior to the purchase. The purchase of local hard assets, like real estate you can physically see, touch and inspect is one way to avoid an investment fiasco.

We are in tough times and tough times often bring out the best in human nature, but also nuture the worst. People under financial pressure will do and ...<< MORE >>

Or, if I only knew then what I know now...

Recently while surfing the net I came across a well written blog by a "thirtysomething" on "Financial Commandments for Your Thirties" that brings home to me the slow spread of a new paradigm among younger generations about money. Namely that there are good reasons to carefully manage it and to save it for the future and specifically that "Debt is not Wealth".

As a Baby Boomer I was very happy to see this viewpoint expressed and I realize that younger generations may have a better grasp of financial reality than mine at that age. This realization was reinforced when I recently held an open house (one of my hats is as a Realtor in CA for a Broker specializing in Bank owned (REO) properties). A group of young people came in to see an REO property in a popular ...<< MORE >>

Dealing with New Realities in Middle Class America

In a recent entry on one of my other blogs at http://unsustainabubble.com in an entry called "Going Down with the Joneses", I wrote about the paradigm shift that is taking place in the American Middle Class. Specifically the difficult, disruptive and very painful adjustments that are being made in saving, spending and consumption and over all life styles, accelerated by the current economic crisis and rapidly expanding unemployment. In a future article I want to discuss the key factors in our financial history that have brought us to this point and the strategies we can use going forward to best create sustained abundance, regardless of the external environment.

One of the ways people will begin to rebuild wealth once they have dealt with their debt and created an emergency fund, will be to increase the amount of contributions they make to ...<< MORE >>

Why Self Direction of Pension Funds Should Replace the Broken Promises of Corporate Plans

It's not bad enough that the value of shares in many Corporate 401k plans have been slammed by the sell off of securities in 2008, but there is another unintended consequence of the sell off in securities that will likely impact earnings on shares of companies with an active Defined Benefit Plan for many years to come.  The best short discussion I have seen on these issues is about a likely $409 Billion hole in Pensions that is likely to reduce U.S. corporate earnings for a long time.  

"Defined Benefit " (DB plans have largely been replaced at many corporations with "Defined Contribution" ( DC, or 401k ) plans. This process is part of a massive transfer of the financial responsibility for pension benefits to workers from corporations. This transfer has taken place because of the long term liability created ...<< MORE >>

Get Ready, Because History Will Repeat Itself

Back in 1870 the U.S. resembled the China of today in many ways. Most of our citizens were still in the country, living near or working on family farms (this is the case in China today). Poor, disabled or ill and elderly people were taken care of by family or friends or through local religious groups in the local community. There was no health or disability insurance and no company pension to count on, only the hard assets that were saved or purchased or inherited. Today we are closer than ever to being back in the same situation we were in back in 1870.

From 1870 on as we became an Industrialized nation, people left the farms for the cities and gave up the social network that protected them for the lure of higher pay in the cities. The burden of caring for people in need ...<< MORE >>

63% of Americans Have Stopped Making Pension Contributions!

Given the difficult financial times so many are facing, I was not surprised to see some shocking statistics like the one above in an article titled "Four Ways to Protect Your Retirement From the Ongoing Financial Crisis at:
http://www.moneymorning.com/2008/10/29/retirement-assets/ .  But it really got me thinking about what so many of us have not done about planning for the future.

There is really no reason to be surprised by this statistic, considering that most Americans have lived well beyond their means for years (peaking at 113% of income in 2005) and most stopped saving for the future in 1985.  For more than 23 years we have lived primarily for the moment, expecting that the future would take care of itself.  Why not when our political leaders and consumer companies keep telling us that it is OK to spend?

Almost all of ...<< MORE >>

Why Tempt Fate?
As a businessman and investor I can relate to clients, prospects and students who contact me with personal financial problems that they hope to solve using IRA money, without taking a taxable distribution.  Many times, they are looking for solutions to current problems in their personal or family finances, using assets currently in a Self Directed IRA account. Frequently the solutions they seek to implement are based on "self dealing" with "disqualified" parties and so constitute "prohibited transactions" (sometimes called PT's) in an IRA.  In a recent response to a client concerning some potential investments, I made the following comments, which I have paraphrased here for the benefit of others:
From our perspective as people working self directed retirement plans(who do not provide legal, accounting or investment advice), the loan you propose to make to a spouse or lineal family member and the investment in a siblings existing business venture are transactions that would ...<< MORE >>

From "Hard Money" to "Private Money" Lending, Using Pension Assets

What follows is a discussion explaining why I think “Private Money Lending” will become "The New Sub-Prime" resource for lending on many Single Family Residential (1-4 Unit SFR) loans in America and many other types of properties as well. The opportunity for you is to use money from Self Directed Retirement Plans, secured by real estate and other types of collateral. The returns from these “Private Money” loans will help you reach or exceed your retirement plan goals much faster, with control and real security.
 
Historically Private Money Lending (PML) was called "Hard Money" or sometimes "Equity Lending" or "Asset Based Lending" (ABL). Each loan was made based on a much lower "Loan to Value" (LTV) than "Conventional" loans from a Bank or Savings and Loan. Hard Money Loans have had a maximum LTV between ...<< MORE >>

Advantages Self Directed 401(k) plans for Sole Proprietors can have over Self Directed IRA LLC’s*

Please note that 401(k) plans designed for Sole Proprietors or Self Employed Couples are called by various names like Individual (k) or Solo (k).  Different plan sponsors may have different names for similar 401(k) plans designed for the same market. Please note that these plans are designed for Sole Proprietors that have no employees working more than 500 hours per year. Employers with employees working at least 1000 hours per year (or 500 hours if they leave service and are subsequently rehired) must include all eligible employees in any qualified plan, including those that offer self direction by plan participants.

1. Tax Deferred or Tax Free Growth based on your allocation of contributions into the Tax Deferred or Tax Free components in a 401(k) (Solo(k) includes a Roth tax free component).  An IRA LLC Does ...<< MORE >>

Job Changes and Pension Rollover Options

At the time of a job change, thinking about your pension options may not be your highest priority, but the decisions you make (or do not make) can have repercussions throughout your working career and into your retirement.

A common way people handle pension assets in a 401(k) during a job transition is to leave the money in their old employers plan.  Typically an ex-employer will allow this if the amount in the plan is more than $5,000.00.  If the amount is $5,000.00 or less, normally an employer will distribute the money in the form of a check to the ex-employee that will become a taxable distribution to the recipient if it is not placed (as an indirect rollover) with another retirement plan custodian in 60 days or less.

There may be advantages to leaving funds in your old plan ...<< MORE >>