Self-Directed IRA’s are, unfortunately, a well kept secret… Well, this is one secret I won’t keep!
Do you know what at Self-Directed IRA is? What it can own? How it is different from a Traditional IRA? I share with you some information on the Self-Directed IRA in this short video.
Did you know it’s not preordained that you must lose money in the stock market? If you use the strategies of indexing and resetting you can grow your money without the risk of stock market losses. Enjoy this quick video explaining these two powerful yet little used strategies and let us know if we can help further.
This is a true story from a new client that describes almost everyone reading this today.
“John, I just got back to even this year on my retirement account after being down for about 8 years.”
Does this sound familiar?
I asked this client if he had ever heard about a reset and he said “no”. If he understood a reset he would have never been in the tough situation of waiting for money to rebound to long forgotten high values.
You see, when your money has the power of a “reset” every year it is a game changer for the future value of your money.Ex: You place money in a program that allows you to track an index instead of actually owing the underlying security. Let’s say for the sake of example that the index you follow is at the level of 100 on the day your money starts tracking that index.
Let’s also assume that one year later that index is now 80 instead of 100. This is a 20% loss that because of the way you have your money structured you did not participate in any loss whatsoever. Your cash didn’t lose any market value even though that index you track is down 20%! This is powerful in and of itself but it gets even better.
Now let’s say from the first day of your second year until the last day of that same year the index that went down to 80 rebounds that year to 90. If this was a share of a mutual fund or a stock you would still be underwater 10%. However, since you took advantage of tracking the index your cash went up the second year because your base for determining an index’s gain or loss “reset” back to the 80 level which it was at the end of the first year.
So, in year two, instead of being still underwater on your investment your cash grew by a percentage of the index gain from 80 to 90! Would this have changed my new client’s end results? The results would have been very different over that 8 year period by utilizing the power of indexing with the power of a reset.
Do you have money in the market right now you are hoping will grow over time providing you with a great retirement nest egg? If you knew your money could never go backwards, would grow any year the index was higher than where it started from by using the power of a “reset” why would you still take on all the risk of the market? There is no need to lose large amounts of money needlessly.
You can be in the market with a chance at real growth but never the downside risk. Your money can also be guaranteed to provide you with lifetime income no matter how long you live. Another benefit is you can use your IRA money or new money for this kind of program.
What is “Investment Grade” Life Insurance…
Just a few short years ago, I was staunchly opposed to whole life insurance, because that’s what I was taught by national “gurus” 25 years ago. I wholeheartedly believed (as many people still do) that if you need life insurance, you should buy a term policy, then take the difference in premiums between whole life and term and invest it in mutual funds.
So when a good friend of mine sat me down and tried to show me a whole life insurance plan, I nearly refused to listen. Many of you reading this will feel the same way, and nothing I say will change your minds. That’s fine — you’re entitled to your opinion just as I was entitled to mine.
Thankfully, my friend told me about “Investment Grade” life insurance. I soon realized that the gurus in my early years and the gurus of today were correct — based on the information they’d been given. The problem was their information was incomplete.
Whenever I hear a financial consultant (or anyone, for that matter) talk about less expensive premiums for term, I know they really don’t understand how this animal of properly designed “Investment Grade” whole life insurance really works.
1. Principal protection guarantees of your money. Your cash value isn’t subject to market losses, as it is with mutual funds and other programs. When the stock market tanks again (and it’s never a question of if but when), you won’t lose a dime.
2. Guaranteed growth of your money every year. This will be interest-rate-driven based on the economy, but your account will move forward every year regardless of what the market does. This is compound tax-free growth and not the “average rate of return” you get with mutual funds. To be fair, in our current low-interest-rate environment, the growth rates are only in the 2 percent to 4 percent range but as you study further you start to realize the real wealth is not in the growth rate even when rates go higher.
Many financial advisers will tell you that your money would do better in a good mutual fund. But remember: When someone shows you an “average rate of return,” they can start taking that average from any time that benefits their example. This is not compounded growth but rather a factor of timing as to when you enter and exit the market. The stock market has wild swings; if that is acceptable to you, you should have much of your money in stocks. If not, maybe it’s time to consider a different way to think about investing. (Remember the period from March 2000 to October 2002, when the Nasdaq lost 78 percent of its value? It’s been 16 years since the dot-com bubble started to pop, and the tech-heavy index still hasn’t quite recovered to that level. If you like guarantees and stability then you have no business putting most of your money in the stock market.)
3. Dividends paid to policy owners are not taxable. Dividends aren’t guaranteed, but many reputable life insurance companies have been in business for more than 100 years and they’ve paid out dividends every year. The amount of that dividend will depend on several factors, but it boils down to how much profit the insurance carrier made. When properly paid to the policy owner, those dividends are not taxable.
4. A high starting cash value amount, based on what you contribute to the policy. Whole life policies that aren’t properly designed will have very little cash value in the early years.
But a properly structured life insurance policy will have high cash value percentages, even in its first year, and they increase every year. This becomes an important fact when you realize that access to your cash will help you grow wealth systematically regardless of market conditions
5. Access to your cash value at any age, at any time, for any reason — without taxes or penalty. This is a huge benefit of whole life policies compared to 401(k)s and IRAs, which impose multiple obstacles if you want to access your cash before retirement, and penalize you if the funds you borrow from them are not paid back by a certain time and at a certain interest rate. No such obstacles exist with a whole-life policy. So leave your cash in the policy if you wish, or borrow it back out and use it, the choice is yours.
6. The ability to use your account’s cash value to recapture lost depreciation on major purchases and interest and fees paid to banks. If you treat this pool of money inside the life policy like your own personal bank, you can loan it out to yourself and others to create wealth. (More on this in future articles, but suffice it to say for now that banking has been around in some fashion for thousands of years. Any business model that lasts that long is worth understanding and using to your advantage.)
7. Guaranteed insurance. Once the policy is in place, your insurance is guaranteed for the rest of your life. Many people assume they’ll be able to buy new insurance at any point in their life. But nothing is further from the truth — especially for those who’ve been diagnosed with chronic or terminal diseases. If you become seriously ill, don’t expect to be able to buy a new policy.
With many whole-life policies, you can add an “accelerated death benefit rider” for little to no cost, which will give you access to a large portion of your death benefit during your lifetime if you have a terminal or chronic illness. I just had a colleague with a client who was diagnosed with Lou Gehrig’s disease, or ALS, and was sent a check from his insurer for more than 70 percent of the eventual death benefit. He’ll be able to enjoy his remaining time without worrying how he will pay his bills.
8. The ability to combine your life policy with the worlds of real estate, private lending and auto financing to accelerate your wealth, both inside and outside of the policy. Just remember that any funds inside the policy are tax-free for life.
9. Protection from long term care and chronic care expenses. Well written policies with the proper companies could provide the ability access a portion of your eventual death benefit during your lifetime to help pay for assisted living or long term care expenses. This will insulate and protect your other wealth so you don’t spend a lifetime building wealth only to give it all back before you pass away leaving nothing for your family.
10. Death benefit. In addition to all the benefits you can make use of while you’re still here, at heart, this investment is still a life insurance policy, so when you eventually die, there will be a sum of money left behind to your beneficiaries — tax-free.
There’s a reason family dynasties, banks, and big corporations have been using life insurance for generations to grow and protect their wealth. Even when subject to estate limits, these death payouts go a long way toward promoting the tax-free, inter-generational transfer of wealth.
Of course, insurance company policies and riders will vary by state due to state regulations and depending on the actual insurance carrier. But you won’t find another type of account or investment that has all these benefits in one investment — not 401(k)s, IRAs, mutual funds, stocks, bonds, precious metals, real estate, nor any other account.
To engage with me further on this kind of policy, please email me directly at firstname.lastname@example.org and visit our site at www.wealthwithoutstocks.com for many free videos, articles, archived interviews and more!
Please take a look at our brand new review for Wealth Without Stocks or Mutual Funds that a reader posted on Amazon. If the book impressed a man who was at the top levels of a major Wall Street firm, then don’t you think you should pick up a copy and devour the information?
This is not your standard financial or business book. The reader is shown real ways to grow and protect money by saving, investing (in little known yet powerful vehicles), and using small business strategies to make your business more profitable or launch your dream business and make money right away instead of waiting two years. His endorsement is reprinted word for word below and can also be seen at the order page on Amazon. You will also see an endorsement from Jack Canfield who is a multi millionaire many times over and the author of the Chicken Soup for the Soul® series. This is right at the top of the cover!
Click www.wealthwithoutstocks.com, order your book and receive a special limited time FREE Bonus valued at $995.00 just for investing in my book. Thanks and get started now.
“As a retired senior executive of a global Wall Street firm, I found this work to be an immensely informative sourcebook of alternative methods of wealth-building. It identifies less well-known usages of existing products and services which enable self-directed activities such as self-funded business investments through an IRA and self-funded loans through a negotiated bespoke insurance annuity with its tax advantages. Importantly, Mr Jamieson offers to facilitate contact with experts in various fields if a closer discussion of a method is deemed necessary. The examples put forward are especially interesting for those who would be interested in taking a more active role than simply allowing banks, insurance and investment firms to take over the process of wealth creation for a fee(s). If nothing else, the book will suggest a new perspective of wealth building.” W. Ferrari
Well, if you have not heard yet my new book launches on Monday, Dec. 7th. I am so excited to have this book available to everyone as there is great information inside.
Want to know more about “Wealth Without Stocks or Mutual Funds“? We have some pre-launch videos talking about the book that you can view here. Also, the website is just chocked full of information; each chapter is discussed so you have an idea of what is covered, resources for you to tap into, additional training, and so much more!
And the best thing… there is a special bonus for those who purchase the book (Paperback or Kindle) from Amazon.com during our Launch Promotion. I will share the link to that Special Bonus on Monday.
We look forward to hearing from you! All of us at Perpetual Wealth Systems is ready to provide you will any follow up support needed to actually implement the strategies and information in the book to help you and your family.
PS: Here is the latest video but you can watch all of them here
This article is the last in a series of pieces on how to dramatically reduce your income taxes legally and ethically. If you missed the first two you can review them before moving on to this article; Giving Yourself a Pay Raise – Beating the Biggest Wealth Drain and Give Yourself A Raise. These other two articles discuss the hundreds of deductions you qualify for when you own a business as opposed to being an employee. First we show you how everyone can have a small business even if they’re a current employee working for someone else. Specifically we talked about 4 strategies out of those many hundred of deductions that you can start to use immediately to increase your net take home pay. Now let’s talk about the 5th and a special discussion on a superior business structure for successful businesses to lower their taxes by 50% or more.
TAX DEDUCTION 5 $25,000 Vehicle Deduction
Per Section 179, you may be able to expense some or all of your business use of your vehicle. Basically, if your vehicle weighs more than 6,000 pounds, you can expense up to $25,000 the first year the vehicle is used in your business. You also must use the vehicle at least 50% for business in order to qualify. The $25,000 deduction assumes 100% business use. If you use your vehicle 75% for business, you would get 75% of the $25,000 or $18,750.
Car Used Less Than 50% for Business
If the business use of your car drops to 50% or less, there are certain rules that apply. These include:
- You cannot take a Section 179 deduction for your heavy vehicle.
- You must use the straight-line method of depreciating your vehicle. While the five-year period still applies, this will result in a lower depreciation deduction in the earlier years.These 5 strategies are just the tip of the iceberg that I mention here and in the other two articles.
These 5 strategies are just the tip of the iceberg that I mention here and in the other two articles.
If you are already a successful business owner and feel like you are implementing every legitimate tax deduction, but are still paying $150,000 or more in annual income taxes there is a different specific strategy for you. There is a little known company structure that may help you save 50% or more on your income taxes every year. We call this our income efficiency strategy and work in conjunction with a very high level attorney to structure these programs. It is very unlikely your current tax professional will be aware of this business structure but this attorney has been utilizing them for clients since 1998. However, the attorney who sets these up will be happy to have conference calls with your tax professionals to explain the program in depth. This attorney is not trying to replace your current professional but rather work with them to implement this plan for your business.
You will utilize structures that have been around for decades and most tax professionals mistakenly believe are only good for public corporations. These are structures that Lowes®, Southwest Airlines®, and Home Depot® use just to name a few. Now the successful small business owner can utilize the same structures as the big boys thereby dramatically lowering your tax liability.
I don’t want to bore you with details here but if you are in that small group who are paying those kinds of taxes we have a real solution that has been looked at by the IRS several times since 1998 and every time there were no changes required for the client. In other words this is not some kind of a scam or loophole but rather a very specific company structure that will fit into your existing business model to dramatically reduce your income taxes. Send us an email at email@example.com with the subject line “income efficiency strategy” and we will have one of our professional teammates reach back out to you to see if we can help.
My new article published in the Florida Association of Realtors® state magazine. Got a cover mention and 4 pages in the magazine itself. Great read for investors, entrepreneurs, as well as real estate agents and brokers.
Do you know which kind of IRA you have?
Most investors mistakenly believe they have a “self-directed IRA” when in fact they have one that limits their choices to a few investment types. Within your plan, you can choose stocks, mutual funds or bonds. And while you may have hundreds and even thousands of choices of where to put your money inside that account, chances are you won’t be able to invest in nontraditional retirement assets — especially if your IRA or 401(k) rollover is with a traditional brokerage house.
So just what is a true self-directed IRA? It’s an account allows you to invest in many other options with your IRA, including:
- Rental real estate.
- Fixer uppers to resell at a profit (flip).
- Private loans made at higher interest rates to other investors.
- Discounted private notes.
- Tax liens or tax deeds.
- Privately held companies and startups.
- Precious metals.
- Leases and lease options.
- Straight options (real estate options, not stock options).
Such investments receive the same tax treatment as more traditional IRA assets. Any tax due is deferred until withdrawal, typically at age 70½, when your are required to start drawing down your savings, or possibly sooner.
This is an account for hands-on active investors with unique knowledge of some of the asset classes in the approved list, not for a “set it and forget it” investor.
By using this type of account it is possible to make some sizable returns from a relatively small amount of money. Here’s an example:
You have an opportunity to buy a rundown house from an estate that would like a quick sale. You determine the house is worth $200,000 — after you have spent $40,000 in upgrades. You contract to purchase the property for $120,000. But lacking the $160,000 to proceed with the sale, you enlist a partner who agrees to provide the full amount, provided you handle all the details, including closing, rehabbing and reselling the home.
You further determine that you would like your share of the profits to go inside of your IRA for the obvious tax benefits. You only have $10,000 inside your IRA with which to invest. The proper play given these set of circumstances is to have your partner buy the property in his name or an entity he controls, such as a limited liability company. You enter into an option agreement to purchase half ownership in this property. You pay $100 from your self-directed IRA and fill out option paperwork and give all the papers to your plan administrator.
This deal now moves forward, and the property is rehabbed and ready for sale in 60 days and sells and closes quickly for $200,000. You have $10,000 worth of sales and holding expenses, netting a $30,000 profit on this deal in five months. The actual title owner to the property agrees to pay you $15,000 for you to close out your option. This $15,000 is a return on the $100 option investment and is deposited back inside your IRA tax-deferred or tax-free (for a Roth IRA).
Your investor put up $160,000 and received $15,000 for a five-month investment. This represents more than a 20 percent annualized return on his money, which is pleasing to almost every investor. If he used his IRA money for this investment, then his profit would be tax-deferred as well.
Here’s another example: An investor from New York became aware of the self-directed IRA and used some of his IRA to acquire four rental homes in Metro Detroit. Each home was purchased for around $55,000 and rents for about $900, and the cash flow goes back to the IRA on a tax-deferred basis. If he sells these for big gains years from now, that profit will also be tax-deferred.
Be warned: There are also some prohibited investments with your IRA (see IRS Publication 590):
- No loaning of money to yourself, your spouse or any family member in your direct linear family chain.
- No investing in collectibles.
- Your IRA can’t personally guarantee any loans in which it borrows money. This means that any money borrowed by your IRA must be “non-recourse” funds, which means that only the asset can be put up for collateral and may be foreclosed upon for nonpayment. The creditor may not file suit against the IRA for any shortfall in the loan goes delinquent.