By Todd Jackson, New Day IRA

New day Ira logoA self-directed IRA is an investment in your future. You maintain the ability to make decisions over how quickly you grow your finances, and potentially, how early you’re able to retire. Your investment options aren’t just limited to the stock market or CDs, allowing you the ability to diversify your portfolio as much as you choose. The ability to grow your retirement fund stays within your control, and you have the option to pick from real estate, precious metals, or small businesses.

You Can Build Your Own Wealth

For many traditional IRAs held by a major bank, the only options for investment are mutual funds, stocks, bonds, and CDS. However, your options are far less limited with a self-directed IRA. This means you can invest in areas your confident will build wealth far quicker than if you’d stuck to a low-risk mutual fund or other option.   Your options are no longer limited to a narrow range of stocks, bonds, and funds with a self-directed IRA plan. As long as your investment falls within the range of permitted options, you can grow your retirement fund as quickly as you choose.

The purpose of 401(k) business financing is for economic stimulus, so you can quickly grow your business using funds set aside for retirement, without penalties. However, there are strict guidelines in place about the processes needed, as well as how the funds can be used. Not every retirement account will be eligible for use in business funding. Here are answers to some of the most common questions about using your retirement to purchase real estate.

Can I Use an Active 401(k) Account?

In most cases, no. You typically need to have terminated your relationship with the employer and have a dormant 401(k) in order for the funds to be eligible for business financing.

What Types of Retirement Funds Don’t Qualifying for Business Financing?

There are a few types of 401(k) and retirement funds which are not eligible to be used for real estate financing, which include the following:

  • IRA Death Benefits Distribution from a 3rd-Party Who isn’t Your Spouse
  • 457 Retirement Plans for Non-Government Agencies

Still wondering whether 401(k) real estate financing is the right option for your retirement funds? Contact one of our in-house finance experts for answers to any of your questions.

Self-directed IRAs are meant to benefit you when it’s time to retire, but not before. Unless an activity will improve your retirement plan, there’s a chance the transaction isn’t permitted. However, there are a number of ways you can safely invest without risk of violating the Internal Revenue Code (IRC). We’ve outlined some of the most common questions about permitted and prohibited ways to use a self-directed IRA.

What is a “Disqualified Party,” and How Does it Affect My Self-Directed IRA?

The primary factor which affects the kinds of transactions you’re able to perform with your self-directed IRA is whether your retirement fund is being used on behalf of a third party. Disqualified parties are defined as the following:

  • The IRA Owner or their Spouse
  • The IRA Owner’s Lineal Descendants or Ascendants
  • An Entity Which is Owned 50% or More by a Disqualified Party
  • A 10% Owner, Officer, Director or Highly-Compensated Employee of Such an Entity
  • A Fiduciary or Individual Providing Services to the IRA

What Types of Transactions are Prohibited?

You cannot directly, or indirectly, obtain or exchange property using the funds in your self-directed IRA. A number of transactions that are prohibited with these funds would include the following, in addition to others:

  • Purchasing a House for Immediate Residence
  • Using Your Retirement Fund as Loan Collateral
  • Paying for Your Child’s Education
  • Purchasing Collectibles or Antiques
  • Buying Yourself a Life Insurance Policy

Still curious whether a self-directed IRA is the right choice for your future? Contact one of our personal finance experts for more insight.

How Do I Choose a Third-Party Custodian for My Self-Directed IRA?

The Internal Revenue Service (IRS) requires a third-party custodian to oversee self-directed IRAs. It’s critical to identify an organization with a track record of helping their clients decisions which comply with all applicable regulations and benefit their retirement plan as much as possible. You want to go with a company that’s conservative and experienced, and has sufficient knowledge of the industry to help you make the right choices. Ensure transactions are processed quickly, and fees are competitive, so you can maintain as much control over your retirement fund as possible. Want to know more?  Contact New Day IRA today.

**The information in this article is for general information purposes only.  Nothing should be taken as legal advice for any individual case or situation.  You should consult an attorney about your specific legal case.