All Forum Posts by: Loren Whitney

To chime in on what Jaime was saying, be sure to ask the FOREX platform about personal gaurantees ahead of time. If they require you to provide any personal information or require personal signatures when using an SDIRA, that is the first red flag. All forms of leverae must be non-recourse.

Another consideration that you should look into is UBIT. UDFI (debt financed income) will ultimately be subject to UBIT when making leveraged IRA investments.

Good luck

Good information @Walt Payne 

The $17,500 maximum is a hard and fast rule for employee deferrals as you've cited in IRS text.

Employer contributions can technically exceed $52,000 but this scenario is extremely rare. The employer contributions must come from separate legal entities and tax IDs AND cannot be owned by the same individual. For example, if you are self-employed and have multiple businesses, you are still considered a single employer. The example cited by Walt from IRS.gov highlights that there are two separate employers. In that same example, the first employer could have also made employer deferrals of its own.

That is how making it to $104K is possible. 

@Jennifer Allen 

I can't offer any financial advice but have you considered purchasing the condo with the retirement funds 'inside' an IRA? That way you don't have to withdraw the money from your retirement plan and pay taxes.

There are plenty of rules when doing this but it's covered in depth here on BP and there are many experienced investors that can offer advice. I have a blog here on BiggerPockets that discusses the basics as well.

Good Luck!

I'll be happy to talk with you tomorrow.

Nicely worded @Phil G. 

The question you should ask yourself is, do I need to the immediate control?

Don, this is a common question but is requires a bit of time to explain. I'd suggest searching the forum for more details. I'll give you a short run down below with simple pros/cons. I'm happy to answer additional questions or share a conversation to visit this in more detail.

Checkbook IRA Pros:

• Convenience - Ability to direct investments in real time.
• Ability to avoid administration fees over time if you make regular investments
• The IRS has agreed that the investment structure is legal

Checkbook IRA Cons:

• You have to do all the work and manage the books.
• You are responsible for understanding but more importantly following the IRS rules.
• Risk Tolerance - No case law has been set to determine if the ongoing management of the LLC is prohibited. Many believe that ongoing management is considered 'goods and services'.
• No subsequent fundings. Others will argue that this is okay but again, both sides have arguments.

Custodial Model Pros:

• Depending on who you use, you may receive a full service experience from start to finish.
• Technology and online accounting to support your investments and recordkeeping.
• Custodian compliance reviews your investment for accurate titling before processing.
• Some custodians can process specific investments in 24 hours or less.
• Knowledgebase is valuable - Ongoing education and hand holding.

Custodial Model Cons:

• Must handle all cash flow and funding of investments on your behalf.
• Fees apply for services and some providers are more expensive than others.
• Customer service isn't always what you expect.
• Providers may restrict certain types of investments.
• Processes may not always make sense - causing client frustration.

If you begin leaning towards the idea of withdrawing funds; consider a Roth conversion before you make any final decisions. You'll pay the taxes now on whatever amount you convert but you'll avoid the early withdrawal penalty, and receive tax free withdrawals later in life. You can even pay your tax from the IRA balance. That being said, that's just one idea. Speak with a CPA or CFP that can actually help you determine what's really best for YOU. Good luck!

Phil sent me a message a few moments and brought up something about FDIC insurance that I thought I would share with everyone for clarification purposes. Most IRA providers are considered non-depository banks, meaning they don't hold cash. Instead, they need to partner with another financial institute that can provide safe cash positions for clients. This is why you won't necessarily find their names listed on the FDIC website. IRA providers should be happy to share information on who they bank with for cash management. I hope this helps some of you.

@Phil Berens 

SIPC is commonly associated to the banking and brokerage industry; specifically where securities are sold. Most SDIRA providers don't sell securities and many aren't broker-dealers either. Infact, you should NEVER receive a sales pitch for an investment from an SDIRA provider that administrates alternative assets. We offer FDIC insurance on all uninvested cash and it's not uncommon for others to offer it as well. What you have to realize is that most SDIRA providers are not banks themselves.

You won't be able to take a distribution from your Vanguard IRA and put it directly into a real estate deal. Doing so would actually be a taxable event (distribution). Keep the funds invested in the name of your IRA to maintain the tax advantages. The SDIRA industry is improving dramatically as systems are upgraded and technology improves.

Keep doing your research and good luck!

Doreen and Matt are correct. Keep in mind that the funds can easily be distributed after they've been returned to the IRA initially. It's a matter of logistics to keep your paper trail accurate.