Introduction to Self Directed IRAs

CONTROLLING YOUR RETIREMENT WITH A

SELF-DIRECTED IRA

Chad A. DotyCEO, Co-founder 37th Parallel Properties

Tuesday, May 29, 2012

WHAT YOU WILL LEARN• The different kinds of Self-directed IRAs and their respective

benefits

• When to use an IRA vs. Cash

• What to look for in a good SDIRA custodian

• How to structure your commercial real estate investments to provide tax free income and equity growth


WHO IS 37TH PARALLEL?


37TH PARALLEL PROPERTIES• $100 Million in Commercial

Real Estate Under Management

• Over 60 years of real estate and portfolio management experience

• Over 1500 Real Estate Transactions

• Acquire $25 Million in new assets every year

• Hundreds of investor clients in 13 time zones - domestic and international

www.37parallel.com

Ed Barriskill, Chad Doty, Dan Chamberlain


http://www.dealmakersguide.com

http://www.dealmakersguide.com

Brazos Point Apartments Hunter’s Point Apartments EastGate Apartments The Arbors Apartments

University Park Plaza

The Freedom Center Southwest Crossingat Bee Creek

Southwood BusinessProcess

Marriott Courtyard Hotel Hilton Garden Inn

PROVEN BUSINESS

Woodcreek ApartmentsRiverwalk Apartments


SELF-DIRECTED IRA TYPES


• Pre-tax contributions. Taxed on earned income on withdrawals

• Regular/Rollover IRA

• SEP-IRA

• Self-directed 401k (Solo K)

TRADITIONAL


• Tax reduction in the year you contribute

• Tax-deferred equity growth eliminates the tax drag during the investment

• You can shape your taxable gain by shaping your distributions after 591/2.

TRADITIONAL PROS


• Required Minimum Distributions at age 70 1/2

• Assumes your tax rate will be lower in retirement

• Assumes your living expenses will be lower in retirement

• Limited mechanisms to withdraw funds early w/o penalty

TRADITIONAL CONS


• Post-tax contributions. Tax free gains.

• ROTH-IRA

• Self-directed Roth 401k (Solo K)

ROTH STYLE


• Tax-free equity growth eliminates the tax drag during the investment

• Tax-free distributions provide insurance against future tax hikes and freedom from lifestyle constraints due to income shaping

• No Required Minimum Distributions

• Greater early distribution flexibility

ROTH PROS


• After tax contributions. No tax benefit for contribution.

• Many of us started our largest chunks of savings before Roth’s were introduced.

• Conversion can be pricey (take the earned income tax hit all in one year)

ROTH CONS


• A special high-fee self-directed IRA

• Provides checkbook control of your retirement

• Only real estate scenario we’ve seen that looks good is someone that does:

• Private Notes

• Wholesale

• Renovation Flips

CHECKBOOK IRA


FUNDING SOURCES

• Cash

• Roth-IRA

• SEP-IRA (Contribution cap and flexibility)

• Traditional IRA


IRA CUSTODIANS


• Equity Trust

• Pensco

• Provident Trust

• IRA Services

• Entrust MidSouth

• Sterling Trust

SOME TOP NAMES

• Fidelity

• Charles Schwab

• Morgan Stanley

• Merrill Lynch

Fully Self-directed Brokerage Self-directed


• Time in the business (15+ years)

• Assets Under Administration (1 Billion and Up)

• Good service record (ERISA, Social Media)

• Not a marketing company

• Flat “Reasonable” Fee Structure

• Human Contact

WHAT TO LOOK FOR


• Overall - Provident IRA

• www.trustprovident.com

• Sue Archer [email protected]

• Excellent service

• Strong organization and AUA

• Flat fee model

RECOMMENDATION 1


http://www.trustprovident.com

http://www.trustprovident.com

mailto:[email protected]

mailto:[email protected]

• Setup Fee $50

• Flat Annual Fee $395

• Minimum Balance $250 with credit card on file $500 without

• Small transaction fee

PROVIDENT TRUST FEES


• Lower Fees - IRA Services

• www.iraservices.com/

• More of a self service experience

• Prompt and efficient with less personal interaction

• Flat fee model

RECOMMENDATION 2


https://www.iraservices.com/

https://www.iraservices.com/

• Setup Fee $25-50

• Flat Annual Fee $250 - $295

• Small transaction fee

IRA SERVICES FEES


PUTTING IT ALL TOGETHER


STEP 1: COLLET INFORMATIONWhere are all of your retirement funds:

•Old 401k with prior employer

•Your IRA

•Spousal IRA

•Child IRA

•What types of accounts pre-tax saving/post-tax/etc.

•Collect it all documentation


STEP 2: PLANNINGWhat do you want to achieve?

•What’s the total amount of assets by type by person? (In many cases you can merge accounts of the same type)

•You cannot merge people or tax treatment

•Look for larger pools of capital ($50,000 plus)

•Review merging all same type funds into 2 to 3 master accounts (reduce fees and complexity)


STEP 3: SDIRA OPTIONSEvaluate Custodians

•Speak with account coordinator

•Get summary information on the company

•Check BBB, ERISA, Social Media

•Don’t just look at fees. Track record and service model are more important


STEP 4: SELECT CUSTODIANTransfer Funds

•Request and complete SDIRA application

•Submit transfer paperwork from current custodian to new one.

•Verify funds have arrived at new custodian


STEP 5: INVESTING FROM IRAYour IRA invests on your behalf

•To invest you will complete a Direction of Investment letter with your custodian approving the project

•The custodian will then complete the paperwork and fund on your behalf.

•SEC disclosure forms will still be completed by you.


STEP 6: DISTRIBUTIONSAll economic benefit returns to IRA

•The investment distribution (cash flow) checks are sent to the IRA company.

•All equity distributions checks are sent to the IRA company.

•You receive a copy of all checks with a report on performance.

•K-1s (annual tax documents) are sent to you and your custodian.


MAKE YOUR RETIREMENT WORK HARDER FOR YOU


ACHIEVE PERMANENT WEALTH

[email protected]

LEARN MORE


http://www.37parallel.com






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