Longboat Retirement Solutions LLC

Diversified Portfolio February 28, 2017

Over and over I hear the mantra “Diversified Portfolio” – but what does that mean?

Diversification means different things to different people.

Most however, think that it means they own stocks in several industries that counteract each other. In other words, they own two stocks – if one goes down, the other goes up. No two stocks are going to perfectly counteract the other, but a person can come close with lots of research.

Other people (including myself) contend that investment diversification must also include investment class diversification and international diversification. In other words, you should own things other than stocks, things like metals, currencies, bonds, real estate, and even international investments.

The argument could be made that a world wide downturn would hurt all of these things. Well….sure, maybe, but maybe not. Generally “safe harbor” investments and “contrarian” investments like gold, and certain currencies (Norway, Switzerland) tend to go up during world wide downturns.

Now, being a guy that does not give investment advice, I’m not going to advocate any particular investment, or even investment class, or even investment style….but do your research, and diversify…..and I mean really diversify, not just own a bunch of U.S. stocks.

 

What Does a Trump Presidency Mean to Your Retirement Savings? February 22, 2017

How will the Donald Trump Presidency affect your retirement?

If you believe the big media outlets, he is going to steal your wallet and your retirement account.

I doubt that this is the case. But, how would I know?

While we are certainly overdue for a market correction in the U.S., the timing of a correction is of course the million dollar question.

I’ve said this before, but I’ll say it again; I am not in the business of predicting the stock market. I am in the business of helping people diversify their retirement savings through the set up of self directed retirement accounts.

In other words, it should not matter what the U.S. stock market does. My clients have the flexibility to move in and out of the market when ever they choose. Or, if they choose to have zero dollars in the stock market, they can do that too. If they choose to pull out of the market and hold cash, they can. If they choose to hold metals, or real estate, they can.

The point I am trying to make is that true diversification requires more than owning several stocks from different industries in the U.S. stock market. True diversification necessitates ownership of a variety of investment classes, as well as investment location diversification. When you have your retirement savings invested in stocks, bonds, real estate, foreign markets, and metals, you can call yourself diversified.

The best way to diversify your retirement savings is through a Solo 401k – accept no substitute.

Give Longboat a call or send us an email. We are not slick salesman; we are real people.

406-551-4775

 

A Self Directed IRA or Solo 401k Can Hold Real Estate as an Investment. April 29, 2016

A Self Directed IRA or Solo 401k can hold real estate as an investment.

Why does this make sense, or what would be the benefit?

In short, your retirement account balance can grow as it collects rent, and if the property appreciates in value, you could sell it down the road for a gain.

There are restrictions and regulations that you need to follow.

Number one: You cannot live in the property.

Number two: You cannot repair the property; you must contract out the work.

Basically, be sure that you, personally, are not receiving benefits or doing work for the property.

Naturally you will want to remember the rules of Prohibited Transactions – don’t break them.

You will want to think about the ramifications of Unrelated Business Income Tax (UBIT) if you use a Self Directed IRA. UDFI, Unrelated Debt Financed Income, is a component of UBIT, and applies to IRA income generated by financial assets.

A Solo 401k has the added benefit of not being subject to UDFI or UBIT.

Describing UDFI will be a subject of an entire blog; for now, just remember that it exists, and inquire with your accountant if you are on the verge of purchasing property within you IRA.

 

Your 401k Stinks April 5, 2016

 

Part Three: Self Directed Retirement Questions May 19, 2015

This is the third installment in the Self Directed Retirement Questions, Answered.

These are questions I’ve been asked, my answers to those questions, and some commentary.

Question:  What is the difference between a Self Directed IRA and a Solo 401k?

Answer:  A Self Directed IRA requires a Custodian.  Custodians are generally banks and investment houses.  These Custodians charge fees to baby sit your money and tell you where you can and cannot invest your savings.  An SDIRA is far better than a standard IRA, but it can still have high management fees, hoops to jump through, and limitations in what you can invest in.

A Solo 401k, which is designed for the self employed, enables you to invest in anything that the IRS allows.  You become the Custodian; therefore you don’t have any filters on your investments (within the framework of the IRS’s allowed investments).  You basically don’t have to ask permission to use your own savings as you see fit.  Since it is a 401k, you can also borrow up to 50% of the value, up to $50,000.  And again, you don’t have to ask permission or fill out piles of paperwork to take out a loan.  You draw up the terms, put the terms in your safe, write a check from your 401k to you, and then just make the monthly payments to your 401k.  Because you are making payments to your 401k, the interest is essentially free – you are paying yourself!  A Solo 401k also enables you to contribute as the employee and the employer; in other words you can contribute over $50,000 a year to your retirement account – or over $100,000 if your spouse is a partner in the business.  This is a BIG deal.

My thoughts on the two different approaches boils down to this:

If you can, go with the Solo 401k.

 

More Solo 401k Questions May 17, 2015

Part two of the series where I answer questions that people have asked me about Self Directed Retirement Accounts.

Question:  “Can I buy a vacation house in another country with my self directed IRA or Solo 401k?”

Answer:  “Yes, you can, but legally, you cannot use the house for your own benefit.  In other words, the whole point of investment inside of a retirement account is for the benefit of the retirement account….therefore, you could not take a vacation at this house.  Of course the point of your retirement account is for the benefit of you – when you retire.  So, until you retire, you cannot use the vacation house.  I don’t know how anyone would know that you used the house, but regardless, it would not be legal, as far as the IRS is concerned.  I suppose if you went through a nasty divorce and your spouse wanted to stick it to you, they could tell the IRS that you took vacations in the house, and the IRS could look into it.  Another thing to consider is that you cannot do any handyman work on a house that is owned by your retirement account; you need to farm that work out to a contractor.  Again, I don’t know how anyone would know that you fixed a leaking toilet, or patched the roof on your beach house in Nicaragua, but technically, it is not allowed.”

Remember that when I say illegal, it is not a jail time thing, but you could lose more than the value of your account; that’s nothing to sneeze at.

You could buy a condo in Mexico, and rent it through a rental program with a management company, and the money would go into your Solo 401k – tax free.  This money would grow, tax free until you start taking distributions, then the distributions would be taxed at whatever income tax rate you are in at the time.

Alternatively, you could set aside a portion of your account as a Roth, and use those funds to make payments on your condo.  When you retire, you take the condo as a distribution, and since you already paid taxes, you pay none.

I think making an investment in foreign real estate is a great choice for inside a self directed account, but you need to stay within the guidelines.  Investing in emerging markets is exciting, fun, and creates true diversification.  Hell, you might even make some money!

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