All Forum Posts by: Bill Humphrey

Lots of topics here, but to address the one about having a retirement plan at all. Our clients tend to have money in their plan because their employer has set it up for them. Those same people and many others just don't have money in their own pocket to invest, probably because it is too easy to access. Having a plan enforces discipline for savings and prevents you from spending with out tax consequence.

Secondly, moving money around in the plan without tax consequences is easier in a plan. For example some of our clients as they get older and particularly in this market, don't want to tie up their funds in real estate long term, but elect to be lenders. So they have their Self-Directed IRA sell the RE and they then make loans back to the buyer via seller financing. They also provide loans to others secured by Real Estate.

Depends on your own personal goals and situation, but I think most people benefit from having a tax sheltered plan.

Our clients at NewDirectionIRA take advantage of all the options for investing. Recently more of them have been having their IRA obtain bank financing for property.

One more thing, note that the contribution amounts you refer to above require that the company providing the plan have significant income. The deferral requires at least that much income, but the company contribution is based on 25% of the compensation paid out to the participant. To get to the maximum you would need income of around $200K.

Hi Bryan,

The rules about business activity within a plan, regardless of if it is an IRA, 401k or any other plan such as an HSA are the same. UBIT will apply if you are running a business in the plan. Note that fixing and flipping can easily be deemed a business. We have had clients audited and the result was that the plan owed income taxes. Not the worst thing, but certainly something you would like to know in advance.

For the most part, Debt-financed real property income within a 401k is exempt from tax UBIT where it would be taxed in an IRA.