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Moving funds in/out IRA

Edge

Contributor
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Sep 20, 2007
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Kansas
I was part of a discussion with some investors a few weeks back about how to tap IRA funds and all the rules and regs that go along with it. There are many reasons to want to tap IRA funds or move large amounts of funds into IRAs, i'll leave those to another discussion, but I wanted to bounce off an idea I have to do this.

The basics of an option contract is that it is a zero-sum game. There is a buyer and a seller of each contract. What if your IRA was the buyer and your personal brokerage account was the seller? Seems like an endless amount of possibilities with transferring large amounts of money in/out of an IRA as needed.

Thoughts??
 

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Diane Kennedy

Bronze Contributor
Aug 31, 2007
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I was part of a discussion with some investors a few weeks back about how to tap IRA funds and all the rules and regs that go along with it. There are many reasons to want to tap IRA funds or move large amounts of funds into IRAs, i'll leave those to another discussion, but I wanted to bounce off an idea I have to do this.
Interesting that you see getting to self-directed funds as having a lot of regulations. As long as you avoid self-dealing and just a couple of prohibited transactions, you're usually okay. I definitely recommend a couple of things if you're going to invest with your IRA though (1) a pension custodian who knows what they are doing. I strongly recommend PENSCO for that. (2) an IRA LLC. This allows you to administer your own funds without having to wait for a check from your custodian.

The basics of an option contract is that it is a zero-sum game. There is a buyer and a seller of each contract. What if your IRA was the buyer and your personal brokerage account was the seller? Seems like an endless amount of possibilities with transferring large amounts of money in/out of an IRA as needed.

Thoughts??
You can't self-deal with a pension. If you do, the entire amount of your pension is immediately taxable and subject to penalties.
 
OP
OP
Edge

Edge

Contributor
FASTLANE INSIDER
Summit Attendee
Sep 20, 2007
349
71
59
43
Kansas
You can't self-deal with a pension. If you do, the entire amount of your pension is immediately taxable and subject to penalties.
Thanks for the response Diane! I understand you can't self deal and I think I worded my example in a bad way. I was really thinking of ways to synthetically hold opposite ends of a trade, not simply holding a long XYZ call in one account and short XYZ in another account.

For example, a covered call is the synthetic equivalent of a short put. So if you had a covered call position in one account and a long put in the other account, you would synthetically hold opposite ends of the same trade.

I quess a simpler example would be holding TWM shares in one account and IWM shares in the other account. TWM is the inverse ETF of IWM. I just like the idea of options better because at expiration, one side of the trade is worth zero so the other side holds all the value.
 

AJGlobal

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Aug 14, 2007
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Interesting that you see getting to self-directed funds as having a lot of regulations. As long as you avoid self-dealing and just a couple of prohibited transactions, you're usually okay. I definitely recommend a couple of things if you're going to invest with your IRA though (1) a pension custodian who knows what they are doing. I strongly recommend PENSCO for that. (2) an IRA LLC. This allows you to administer your own funds without having to wait for a check from your custodian.



You can't self-deal with a pension. If you do, the entire amount of your pension is immediately taxable and subject to penalties.
So wait, I'm confused..........my wife and I (well we are not married so for this discussion it needs to be brought up) and we have IRA's. Because we are not married we each have a SIMPLE IRA and then she has roth IRA. She is an employee of my company so I put the max into the Simple's every year. I believe its $11k a year. Plus we max out her Roth IRA which I can't do cause I show to much income.

We choose this route and kept our payroll down to $36k a year a peice to help cut down on the SS tax, then whatever is left over from the company for profits I just show it on my 1040 as income from corps. Are you saying I can use this IRA money and move it around to do other things with it without paying a penalty on all the tax defferment I have been getting for the past 10 years ?
 

Diane Kennedy

Bronze Contributor
Aug 31, 2007
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So wait, I'm confused..........my wife and I (well we are not married so for this discussion it needs to be brought up) and we have IRA's. Because we are not married we each have a SIMPLE IRA and then she has roth IRA. She is an employee of my company so I put the max into the Simple's every year. I believe its $11k a year. Plus we max out her Roth IRA which I can't do cause I show to much income.

We choose this route and kept our payroll down to $36k a year a peice to help cut down on the SS tax, then whatever is left over from the company for profits I just show it on my 1040 as income from corps. Are you saying I can use this IRA money and move it around to do other things with it without paying a penalty on all the tax defferment I have been getting for the past 10 years ?
Just re-discovered this thread.

You absolutely can self-direct pension money. So you have a SIMPLE and your partner has a SIMPLE and Roth. All three of those plans can be self-directed.

There are some rules: You can't buy life insurance and you can't invest in collectibles. You also can't benefit a disqualified person. In this case, you would be "disqualified" as it relates to your pension plan.

So, let's talk about what you could do.

Let's say you have $30K in your SIMPLE and your partner has $30K in her SIMPLE. You could combine those two in an invesment in real estate. Maybe invest in someone else's deal as a limited partner or buy a house to flip or property to hold and rent. You can't get a loan in your name, but your pension can get a loan with 30% down. (So, in this case, you're talking about buying a $200K property with $60K down)

I've got one client who began self-dealing with his Roth account, buying stock in software start-ups and even using the Roth to fund his own software start-up. He now has over $1 million in his Roth....all TAX FREE!

In another thead we talked about the issue of being able to access the money. You can't take a distribution until you're 59 1/2 without a penalty. There are a few exceptions to that.

This is a very brief overview of what's possible. I wrote a book on it - so obviously could go on and on...
 

AJGlobal

Contributor
Read Millionaire Fastlane
Aug 14, 2007
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Phoenix, AZ
Just re-discovered this thread.

You absolutely can self-direct pension money. So you have a SIMPLE and your partner has a SIMPLE and Roth. All three of those plans can be self-directed.

There are some rules: You can't buy life insurance and you can't invest in collectibles. You also can't benefit a disqualified person. In this case, you would be "disqualified" as it relates to your pension plan.

So, let's talk about what you could do.

Let's say you have $30K in your SIMPLE and your partner has $30K in her SIMPLE. You could combine those two in an invesment in real estate. Maybe invest in someone else's deal as a limited partner or buy a house to flip or property to hold and rent. You can't get a loan in your name, but your pension can get a loan with 30% down. (So, in this case, you're talking about buying a $200K property with $60K down)

I've got one client who began self-dealing with his Roth account, buying stock in software start-ups and even using the Roth to fund his own software start-up. He now has over $1 million in his Roth....all TAX FREE!

In another thead we talked about the issue of being able to access the money. You can't take a distribution until you're 59 1/2 without a penalty. There are a few exceptions to that.

This is a very brief overview of what's possible. I wrote a book on it - so obviously could go on and on...
WOW!!!! I didn't know that. We have been saving in those accounts for close to 10 years and have a good amount of money in them to play with. With the RE market being the way it is we have been talking about looking to purchase another investment property (she has her RE license as well) so I will explore this option. Thanks for the info !!!!! BTW where can I find your book ?
 

CarrieW

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I know how everyone so enjoys my ?'s lol so here it goes.

Im intreseted in possibly setting up a ira of some sort to forex trade in. I am on social security disability and I married (not sure about either) I believe one of those 2 things allows me to open an account in my own name. (social security earnings are taxable for me and im a non working spouse of a wage earner not sure if Im thinking of the right retirement account with the non working spouse part.)

So since Im already disabled would I be allowed to make withdraws from the account tax free? or do you have to become disabled after opening the account? or am I not allowed to have one at all?

thanks!
 

Russ H

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Diane-- which book is this?

And also, it's my understanding that if I took *my* IRA funds and invested them in RE, I cannot have any part of running the property-- I must have a different person/entity do all of the mgt and repairs/improvements (at least that's what all of the self-directed IRA places told us).

We figured out a way to make it work, though. I'll email ya. :)

-Russ H.
 

Diane Kennedy

Bronze Contributor
Aug 31, 2007
795
209
49
Im intreseted in possibly setting up a ira of some sort to forex trade in. I am on social security disability and I married (not sure about either) I believe one of those 2 things allows me to open an account in my own name. (social security earnings are taxable for me and im a non working spouse of a wage earner not sure if Im thinking of the right retirement account with the non working spouse part.)
Carrie, you can open an account as a non-working spouse, but unfortunately the SS income won't count. The income has to be "earned" income, which means you pay payroll tax or self-employment tax on it.
 

Diane Kennedy

Bronze Contributor
Aug 31, 2007
795
209
49
Diane-- which book is this?

And also, it's my understanding that if I took *my* IRA funds and invested them in RE, I cannot have any part of running the property-- I must have a different person/entity do all of the mgt and repairs/improvements (at least that's what all of the self-directed IRA places told us).

-Russ H.
The book is "The Insider's Guide to Tax Free Real Estate Investing". You can find it on Amazon or at my website.

You can't do the management, but can do the administration, if you use an IRA LLC. There is a bit of a fine line there - you can administer the LLC, which means you make sure rents are paid, repairs/fix up are done...but you cna't actually go fix the roof yourself.

Maybe I should do a post later on the IRA LLC...
 

AJGlobal

Contributor
Read Millionaire Fastlane
Aug 14, 2007
175
57
39
Phoenix, AZ
The book is "The Insider's Guide to Tax Free Real Estate Investing". You can find it on Amazon or at my website.

You can't do the management, but can do the administration, if you use an IRA LLC. There is a bit of a fine line there - you can administer the LLC, which means you make sure rents are paid, repairs/fix up are done...but you cna't actually go fix the roof yourself.

Maybe I should do a post later on the IRA LLC...
Thanks so much, I will be buying it today !!!!!!!!!!
 

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