Is Congress Really Talking About Slashing Contribution Limits to 401ks including the Self-Directed Solo 401k ?

No. If they were, it would be big news to many of our clients, who went through the trouble of setting up a Self-Directed Solo 401k for their small businesses or consulting ventures. And there’s some talk in the media about Congressional Republicans pushing to slash allowable contribution limits to around $2,400.

The New York Times writes it up here:

House Republicans are considering a plan to sharply reduce the amount of income American workers can save in tax-deferred retirement accounts as part of a broad effort to rewrite the tax code, according to lobbyists, tax consultants and congressional Democrats.

Notably absent from the story: Any language that’s actually in a bill on the House floor. More than that, there’s also the notable absence of a single Republican lawmaker that has ever, ever publicly advocated to reduce allowable 401k contributions to that level.

Moreover, there’s not even a single named source on record saying that this is what the GOP is floating.

It would also put a major dent in the GOP brand, which at least ostensibly seeks to reduce the tax burden on working Americans and businesses.

It seems to us that a bunch of wonks at a planning session were looking at potential ways to offset revenue losses from a planned corporate income tax rate cut, and when they keyed in what they’d have to cap the allowable 401k contribution rate at to recoup the revenue loss, the computer spat out a figure close to $2,400. Nobody wanted to do it, but someone in the room ran to the media “on background,” unwilling to put his own name to the story, and the knuckleheads ran with it.

Our take: It is exceedingly unlikely that the GOP tax reform bill will contain any large reduction in allowable 401k contributions – at least not without a corresponding increase in contribution limits to alternative investment vehicles like IRAs and self-directed IRAs. Messing with 401ks – the primary retirement savings vehicle of the middle class – would be likely to cause an electoral revolt. The Obama administration had to quickly abandon a push to tax Section 529 plans a few years ago, as the Times notes in their article.

There is some legislative risk to those sitting on so-called “jumbo” IRAs, including jumbo self-directed IRAs, with assets above about $5 million. If any tax-advantaged investment account counts as ‘low-hanging fruit’ to revenue-hungry Congressional representatives, it’s those.

Naturally, self-directed IRA owners are over-represented among jumbo IRA account owners, because people that are able to amass $5 million or more in IRAs tend to be successful real estate and venture capital or private equity investors.

At this point, we don’t see any major legislative risks to the Self-Directed Solo 401k structure, though we’ll be keeping an eye on developments as the Republicans in Congress cobble together their expected proposal for tax reform.

Is Your Self-Directed IRA Too Complex? Here’s How to Break It Down

Admit it: you sometimes struggle with the concept of a Self-Directed IRA. It was hard enough to figure out an IRA where someone else was helping you a long, such as a 401(k) through your employer. And while there are a tremendous amount of rules and regulations with IRAs—and, hence, plenty of things for you to figure out when you self-direct—the truth is that the entire process is much more simple to break down than you might imagine.

That just leaves one question: how do you do it? Here are a few of our tips.

Ask the Basic Self-Directed IRA Questions

Forbes acknowledged the reality of the difficult-to-figure-out IRA recently. But what’s great about Forbes’ approach is that they were able to break it down into basic questions for your Self-Directed IRA:

  • Are you double-dipping? In other words, do you personally benefit from your ownership in the IRA, or is it separate from you? The IRS wants it to be separate.
  • Is your investment type allowed in the IRA? Most investment types are—in fact, the IRS explicitly marks down which investment types are not allowed. But it’s important to know which ones are prohibited.
  • Have you received a legal opinion about the investment? Until you talk to an expert, you’ll never truly know whether or not you’re crossing the line. And it’s always better to know.

These three questions do a good job of breaking down whether or not you’re following the rules—or planning on following them. And they’re simple enough that most people understand what the main issues are with Self-Directed IRAs. Even so, let’s see if we can break it down in even simpler terms so most investors can see just how accessible the strategy of a Self-Directed IRA truly is.

The Self-Directed IRA at its Most Basic

It’s that phrase “Self-Directed” that throws off many investors. We’re so used to seeing unfamiliar words in front of “IRA” that we think this means a completely new type of headache. But the truth is, all of your investments are self-directed. It’s your money, after all—you’re the one in charge of making the decisions. And that means that you’re self-directing your own retirement strategy, even if you have none at all.

Once you take that element out of the equation, you realize that a Self-Directed IRA is, at its heart, simply an IRA. You just use your own control over this IRA rather than outsource it to a fund manager’s. For example, if you buy real estate within your IRA, it’s your responsibility to seek out that real estate and secure the loan for your IRA, for example. Rather than trust someone else’s opinion entirely, you’re making investments based on what you see.

Another type of IRA is a Self-Directed IRA that holds precious metals like gold and silver. These are very simple, as well—your IRA holds the precious metals. That’s not difficult to figure out. The Self-Directed nature of the IRA means that you’re deciding what kinds of precious metals to holds, and how much. You’re in charge.

But there are plenty of prohibitions and restrictions that do deserve your attention. And therein lies the complexity of the Self-Directed IRA. Like fire, it’s a powerful tool when you know how to harness it. But if you don’t bother to learn, you might find yourself in need of someone who does know how to handle an IRA.

Help your own cause by working with a Self-Directed IRA administration firm. To find out more, call 866-7500-IRA or keep reading here at www.AmericanIRA.com.

How New Investors Can Avoid Self-Directed IRA Common Pitfalls

Although investing in a Self-Directed IRA doesn’t have to be a complicated mess in the slightest, there are some investors out there who are new to the concept. And when people plunge into new things they don’t understand, mistakes sometimes happen. The prudent investor is willing to take his or her time, have patience, and get to know a strategy before jumping in the deep end of the pool.

That’s why it’s important to take some time out and talk about the common Self-Directed IRA pitfalls…and how new IRA investors can avoid these same pitfalls.

Common Self-Directed IRA Mistake: Not Understanding the Withdrawals

According to USAToday, which recently wrote an article on this very topic, one of the most common mistakes was actually on the back end of investments—when investors start to take the money out of the account. Or, rather, when they forget that they’re actually supposed to.

Taking the proper RMD’s includes an onus on the taxpayer, which means that the IRS isn’t going to send you a letter and tell you exactly what to do. You’ll have to know that it’s time. Hopefully, you’re talking to an adequate tax professional on a regular basis who can help you in this regard, alerting you to the issues at hand. This is the kind of thing that you need to plan for well in advance, as well, because it means that those playing “catch-up” have to be aware that they’ll have to take distributions at a certain age. And, yes, you can face stiff penalties and fines if you don’t follow through on your end of the bargain in this regard.

Choosing the Wrong Type of IRA

Perhaps the most overlooked—and most important—mistake is made at the very beginning. This happens when someone chooses an account type that may not be right for their specific situation. For example, a Roth IRA means you put in taxed money on the front end. Other accounts may let you deduct your contributions, so you’re putting in “pre-tax” money into the account. Is one better than the other? Not necessarily. Your own financial situation and your goals for retirement will have an impact on the type of IRA you should choose.

If you’re unsure, it’s important to consult with a professional to get an idea of what you need. Not only will this professional help fill you in on the rules, but will help recommend the ideal vehicle for your investments—one that lines up with your goals and strategy more than the other options on the table.

Failing to Start

Perhaps one of the most important mistakes investors can make is to never get started in the first place. Sure, it’s true that there are some “catch up” rules in place with the IRS that allow late investors to get some money into their retirement accounts before reaching retirement age. But if you don’t invest early, most of the gains that come about as a result of exponential growth are left on the table. Those are gains that should ultimately go into your pocket—they shouldn’t be left out there for no one to enjoy.

That’s why it’s important to develop an investment plan and to get started as soon as possible. That means asking questions as the first step, even if you’re not sure where you want to put your money yet. Especially if you’re not sure where you want to put your money yet. You can continue to visit www.AmericanIRA.com to learn more about the Self-Directed IRA, or you can call 866-7500-IRA to learn  more.

Motel, Hotel and Real Estate IRA vs. a REIT

A well-located and well-run hotel is a proven moneymaker. Paris Hilton didn’t get all those designer handbags because her family was broke! Like most real estate investments, hotels and motels provide a combination of regular income with the potential for capital appreciation. While lodging businesses are more labor and resource intensive compared to traditional residential landlording, they also provide more revenue opportunities, such as vending, restaurant leasing, event hosting, banqueting, catering and advertising, to name a few. And it’s perfectly legal to own them within a Real Estate IRA.

REITs vs. a Real Estate IRA

If you like REITs, you should love Real Estate IRAs, if you’re a long-term investor. Many investors are attracted to owning real estate  within a REIT, or real estate investment trust, because of the tax efficiency. The problem with owning a straight C corporation is taxation: Dividends are not tax deductible to the corporation. So the C corporation owner pays taxes at the high corporate level, and then has to pay them again as ordinary personal income when he or she receives income from the underlying properties. That’s a tax double whammy.

The advantage of a REIT is that as long as the REIT pays out at least 90 percent of its revenues as dividends, and as long as the company maintains at least 75 percent of its portfolio in real estate and receives at least 75 percent of its income from real estate. If all three requirements are met, then the REIT does not pay tax at the corporation level. Everything flows through to the individual tax return, and you pay tax on the income, though you can still qualify for capital gains rates when you sell REIT shares at a profit.

That’s a big tax efficiency improvement compared to C corporations. But if you are tax sensitive, or if you are in a high-income tax bracket but you still want income, then consider direct ownership of real estate within a Real Estate IRA.

With a Real Estate IRA, all income from rents is tax deferred, as are all capital gains. This is true as long as the assets remain in the account. If you own the property within a Roth IRA, then all income and all capital gains are tax free, provided the money stays in the Roth account for at least five years.

While many investors choose to gain exposure to the real estate/lodging asset class via owning a REIT, or even a REIT mutual fund, skilled investors may do even better owning hotels, motels or other lodging businesses more directly within their own IRAs.

One key advantage: Investors who purchase properties directly, rather than relying on the stock market, are often able to buy at deep discounts relative to future cash flows. By avoiding a liquidity premium and a large company premium, and judiciously employing leverage, income-focused investors can frequently get a superior income on invested capital.

Before you make the leap, remember that you must obey certain rules when it comes to owning a lodging business within an IRA:

You cannot hire your spouse, children or grandchildren as staff (nephews and siblings are ok under current law). You also cannot hire them to do contracted work such as management, catering or landscaping. The same goes for your parents, your spouse’s parents and any entities they own. Otherwise you could violate prohibited transaction rules.

Furthermore, you can’t rent or lease space to yourself, nor any of the individuals mentioned above. You can’t let them stay in your property, even if they pay a fair market rent, and you cannot stay overnight in your own property. You also cannot pay yourself a salary for running the hotel on a day-to-day basis, or you could violate self-dealing rules. Doing so will likely violate

Do not mingle personal and investment funds. You can’t even stop at the market on the way to check on your policy and pick up a few light bulbs for your own property using your own checkbook or debit card. All purchases and contracts associated with your Real Estate IRA property must be paid using money from that IRA.

Hotels and motels can be liability-generating businesses, so it’s important to maintain liability, umbrella and other essential forms of insurance coverage, and to hold the property within an entity that walls it off not only form your own personal assets but from other assets held within your retirement account.

Those are the basics of owning hotels and motels within a Real Estate IRA. More information on hotel and motel purchase and ownership within a Real Estate IRA in an upcoming post.

Self-Directed IRA vs. 401(k) – Which Is Best For You?

When it comes to Self-Directed IRA investing – the practice of investing IRA or other tax-advantaged retirement funds in alternative investments and directing them yourself, personally – there are important differences between the IRA and 401(k) structures.

So knowing where to park your assets and under what circumstances is important for the Self-Directed IRA owner.

First, let’s look at what the IRA and 401(k) have in common:

  • Both protect current income and capital gains from taxation, both at the federal and state level.
  • Both offer Roth options, which don’t allow you to subtract your contributions from your taxable income for the year, but they do allow your assets within the account to compound tax-free for as long as you live, and make tax-free withdrawals of any assets that have been in the accounts for at least five years.

The rules are the same for both Self-Directed and conventional accounts – it’s just the assets within the Self-Directed accounts that are different.

But IRAs and 401(k)s have some important differences, too. For example:

  • Self-Directed 401(k)s may help shelter any leveraged assets from a special tax called unrelated debt-financed income tax. This is a tax on any current income or capital gains attributable to other people’s money, rather than your own. For example: If you buy an investment property for $200,000, and you borrow half of it, and receive $20,000 in rent the first year, and you still owe half the value of the property on the mortgage, then 50 percent of your rental income is subject to unrelated debt-financed income tax.

However, a quirk in the law means that assets held in 401(k) accounts, rather than IRAs, may be exempt from this tax.

Investors who plan to use a lot of leverage in their investing strategies may wish to lean towards a solo 401(k) for that reason – if they don’t plan on taking on any employees other than their spouse!

  • 401(k)s allow account owners to take loans. It’s illegal to borrow money directly from your IRA, with a narrow exception for a rollover not exceeding 60 days. But if you sponsor your own solo 401(k) plan, you can set up the plan to allow you to borrow against your 401(k) balance for any reason you like, for up to five years. This may be a convenient source of liquidity for small business owners undergoing a cash crunch, for dealing with a financial emergency or taking advantage of an investment opportunity. Again, the advantage here goes to 401(k) plans.
  • IRAs are better vehicles for heirs to inherit. This is because non-spousal beneficiaries who inherit a 401(k) account must empty the account – and pay income taxes on the liquidated assets – within five years of inheriting it. Often, this hits heirs during their own peak earning years, when the tax hit is at its peak. However, non-spousal IRA beneficiaries may be able to stretch the inherited IRA over their remaining expected life spans. This is a much more tax-efficient way to pass assets on to heirs. Advantage: IRAs – particularly Roth IRAs.
  • 401(k)s have much higher contribution limits than IRAs. IRA contributions are limited to $5,500 per year, with an additional $1,000 allowable for account owners over age 60 in so-called “catch-up” contributions. 401(k)s, on the other hand, allow for elective contributions of up to $18,000 (or $24,000 total for those over age 60). When you add in total potential matching contributions from the company, you can contribute up to a total combined amount of $54,000.

This is much greater than the potential new money contribution allowable for IRAs. And you can make pre-tax contributions to a solo 401(k) at any income level. In contrast, traditional IRAs limit your ability to make deductible contributions at higher income levels, and high incomes may limit or eliminate your ability to make Roth IRA contributions at all.

However, solo 401(k)s are suitable only for a defined market of self-employed individuals, independent contractors and those who own businesses with no full-time employees other than a spouse.

If this applies to you, then a solo 401(k) may be a terrific small business retirement plan option. Otherwise, you may want to consider a SEP IRA or SIMPLE IRA plan, depending on your circumstances. Both of them support Self-Directed IRA strategies.

American IRA, LLC is a family-owned business that focuses on helping owners of Self-Directed IRA accounts ensure their transactions are handled quickly and accurately and that they are properly documented in accordance with IRS rules. Our offices are located in Charlotte and Asheville, North Carolina, but we work with Self-Directed retirement account investors in all 50 states.

For more information on Self-Directed retirement investing, call American IRA today at 866-7500-IRA(472), or visit us online at www.americanira.com.

Real Estate IRA – Fire Insurance Claim Tips

Fires are among the most costly perils in the home insurance business. When you take out a fire insurance policy on a property you own within a Real Estate IRA, you are protecting yourself against a hazard that cost insurance companies, on average, nearly $40,000 per claim.

Sure, none of us like paying insurance premiums. But when you look at the potential costs of a fire if your Real Estate IRA owned properties aren’t insured, those premiums begin looking a lot more reasonable.

Assess smoke damage. Just because your Real Estate IRA property didn’t burn doesn’t mean it wasn’t damaged. Smoke can cause damage to a home, resulting in a claim against your fire insurance policy. You may have to replace drywall, carpeting, wallpaper, drapes, do a major paint job, and undertake a number of other repairs just from smoke damage alone. Be sure to document this damage thoroughly.

Further, cleaning your own home after a fire or major smoke event is unsafe. You will likely need professional cleaning and mitigation. Professional clean-up firms bring special protective equipment, like hepafilter masks and special vacuums to protect their workers from harmful fumes, soot and other hazardous particulates. So ensure you are prepared to support your claim for compensation for these significant expenses.

Furthermore, some do-it-yourself repair attempts backfire, making stains and other damage worse, not better!

Document early and document everything. At a minimum, keep records of the following:

  • Date of damage or loss
  • Type of damage (smoke, flame, water damage from firefighting efforts, etc.)
  • Description of damage.
  • Injuries, if any
  • Identities of all parties involved
  • Condition of the Real Estate IRA property or home at the time of the fire
  • Description of any temporary repairs you made
  • Cost of temporary repairs (include estimates and receipts
  • Police or fire department reports
  • Insurance claim ID number
  • Insurance company authorizations for any temporary repairs you do

Additionally, it may be a good idea to insist the tenants living in your Real Estate IRA own renter’s insurance. While your insurance policies will cover damage to your property, including interior and exterior damage, it won’t cover your tenants’ belongings. Furthermore, since renter’s insurance also has liability protection for your tenants, it helps protect you against any damages your tenants may cause, such as accidental kitchen fires, etc.

Some additional tips:

  • Don’t throw away damaged property before the insurance adjustor sees it.
  • Hire only licensed and ensured contractors to do repairs. Ask for certificates of insurance before starting any work.
  • Don’t sign documents allowing the contractor to collect payments directly from the insurance company. While the practice is legal, in reality the consumer almost never benefits.
  • Consider filing claims for loss of use of your property, or loss of rental income while the Real Estate IRA property is uninhabitable. Your landlord insurance policy may provide coverage against this loss.
  • Ask for an advance against your final insurance claim. This advance can help you pay for needed mitigations and to help prevent further damage, such as wet rot and mold from accumulated water from firefighting attempts.

Protecting Real Estate IRA Properties from Wildfire Risk

This month’s devastating fires in Northern California are heartbreaking to behold. As of this writing, fires in Santa Rosa and surrounding areas have taken the lives of at least 15 people and destroyed some 1,500 structures within just 12 hours. Hundreds of homes have been totally destroyed, as have a number of vineyards and wineries as at least 115,000 acres have gone up in flames. Thousands have been forced to evacuate.

Real Estate IRA investors need to take steps to protect their investments (and their tenants) against the risk of wildfires. Here are some actions you or your property manager can take to lessen risk to your retirement security and more importantly, safeguard the lives of your tenants.

  • Create a defensible space around the Real Estate IRA This means eliminating possible fuel that wildfires can consume while beating a path for your property. In practice, this means clearing space at least 100 feet away from your home and other flammable structures. This defensible space is what officials at the National Fire Protection Association call the “home ignition zone.” If fire penetrates this zone, the house is likely to go next.
  • Obey evacuation orders from authorities and insist that your tenants do the same.
  • Keep the lawn mower short, especially during the summer and fall wildfire seasons for most of the country.
  • Remove lawn cuttings and other foliage debris as soon as you cut it. Don’t let dead leaves and dry cut grass pile up.
  • Trim or remove trees near the house. Eliminate dry or dead foliage. Prune branches so that none are hanging below 6 to 10 feet from the ground.
  • Clear debris from roofs, yards and gutters
  • Pull dead vegetation and other junk out from under decks. Don’t store anything under decks.
  • Clear dead vegetation and other fuel sources from within 10 feet of the home.
  • Check your roof tiles. Are any missing? Replace them. These tiles are crucial to fending off burning embers.
  • Install wire mesh in all vents – not more than 1/8th of an inch.
  • Contact your landlord’s insurance or fire insurance carrier. Some companies have teams of people that will visit your property and provide a fire risk assessment free of charge. Sometimes they will apply a fire-resistant spray coating to key areas of the home.
  • If your insurance company does not offer the site assessment service, contact firewise.org/riskassessment to arrange one.
  • Replace mulched areas with “hardscaping.” Emphasize landscape ideas using gravel, rock and stone, rather than plants. It’s lower-maintenance anyway, once you get it in place. At a minimum, get mulch and plantings at least five feet away from the foundation.
  • Coordinate fire prevention and mitigation efforts with neighbors. The more steps your neighbors take to protect their properties, the safer your properties are, too.
  • Invest in fireproof or fire-retardant materials in all your Real Estate IRA
  • If you have plantings, use low-flammability plants.
  • Don’t stack firewood against the house.
  • Separate grasses, shrubs and trees near your home, to prevent a ‘fire ladder effect’ that can quickly transport flames to your roof.
  • Paint your street number clearly on the curb and prominently on your mailbox as well as on your home.
  • Invest in fire-resistant windows. Windows are a vital defense to fires. If a window breaks, embers can enter the home and quickly ignite flammable belongings inside like drapes and blankets.
  • Sign up for automated emergency notifications. Your homeowner’s and landlord’s insurance agent can help with this.
  • Check and double-check smoke and fire alarms in your Real Estate IRA
  • Conduct an occasional check on your property to ensure tenants aren’t creating fire hazards.

Gold IRA Basics for Self-Directed IRA Owners who Diversify with Precious Metals

With the stock market continuing to make new highs, it might be a good time to take a bit of IRA money off the table and put it in something else. Of course, gold and other precious metals are always on the short list, and are popular choices among owners of self-directed IRAs. Gold, especially, has a proven track record of being a relatively stable store of value and an important ballast for Gold IRA portfolios in times of crisis and uncertainty that goes back thousands of years.

For larger portfolios, we believe that gold and precious metals have a place in anyone’s asset allocation. But before you start making purchases in your own IRA account, there are certain things every Gold IRA owner should be aware of.

  • You can’t buy gold or any other precious metal or retirement asset whatsoever from your spouse, your children or grandchildren, your parents or grandparents, or those of your spouse. You also can’t buy gold for your Gold IRA from any entities any of these people control. If you do, you’ll run afoul of prohibited transaction rules that apply to all self-directed retirement accounts, and potentially cause yourself to incur fines, penalties and a big income tax liability.
  • You can’t buy jewelry or gems, regardless of the quality of the gold in them. Direct ownership of jewelry and gemstones are both on the list of prohibited investments for IRAs and other retirement accounts – along with alcoholic beverages, life insurance and collectibles.
  • You can’t maintain physical possession of the gold. There are TV ads pushing ownership of gold coins that show a woman fondling gold coins on her dining room table. This is fine outside of retirement accounts. But if you want to own gold within your IRA, you can’t be storing it in your own home. If the IRS finds out, they’ll deem any gold you have in your possession to have been distributed, with all the taxes and penalties that would normally occur. You’ll lose the tax benefit of holding your gold within the IRA.
  • You can’t just buy any coins or bullion. Any gold you hold in your IRA – or any other self-directed retirement account for that matter, – must be in coin or bullion form, and must be from a mint that is known to mint coins or process bullion of sufficient purity and consistency. Not every type of coin or bullion qualifies. For example, the South African Krugerrand, while a well-known coin among numismatics enthusiasts and gold coin collectors and investors, is not suitable for your Gold IRA.

Here are some coins on the approved list:

  • American Eagles
  • Australian Kangaroo/nugget coins
  • Australian philharmonic coins
  • Canadian Maple Leafs
  • Chinese Gold Pandas
  • Proof American Eagles
  • American Buffalo Bullion Gold Coins
  • Credit Suisse/PAMP Suisse Gold Bars.

Some coins we know to be ineligible for IRA purposes include:

  • Austrian Coronas
  • S. Buffalo Proofs
  • British Britannia Coins
  • Belgian 20 Franc coins
  • Chilean 100 Peso coins
  • Dutch 10 Guilder
  • French 20 Franc coins
  • Hungarian 100 Koronas
  • S. Liberty Coins
  • South African Krugerrands
  • Other collectible or rare coins in general, other than those on the approved list.

This isn’t a knock on these coins. They may be fine investments for non-retirement accounts. And, of course, you can direct your IRA to invest in indirect gold ownership via gold and precious metals mutual funds, closed end funds or ETFs, via gold mining stocks, pooled accounts or futures contracts. But if you want to take a direct interest in gold, you have to hold it in one of the approved bullion or coin forms, and you must have a custodian hold it on your behalf.

How New Investors Can Avoid Self-Directed IRA Common Pitfalls

Although investing in a Self-Directed IRA doesn’t have to be a complicated mess in the slightest, there are some investors out there who are new to the concept. And when people plunge into new things they don’t understand, mistakes sometimes happen. The prudent investor is willing to take his or her time, have patience, and get to know a strategy before jumping in the deep end of the pool.

That’s why it’s important to take some time out and talk about the common Self-Directed IRA pitfalls…and how new IRA investors can avoid these same pitfalls.

Common Self-Directed IRA Mistake: Not Understanding the Withdrawals

According to USAToday, which recently wrote an article on this very topic, one of the most common mistakes was actually on the back end of investments—when investors start to take the money out of the account. Or, rather, when they forget that they’re actually supposed to.

Taking the proper RMD’s includes an onus on the taxpayer, which means that the IRS isn’t going to send you a letter and tell you exactly what to do. You’ll have to know that it’s time. Hopefully, you’re talking to an adequate tax professional on a regular basis that can help you in this regard, alerting you to the issues at hand. This is the kind of thing that you need to plan for well in advance, as well, because it means that those playing “catch-up” have to be aware that they’ll have to take distributions at a certain age. And, yes, you can face stiff penalties and fines if you don’t follow through on your end of the bargain in this regard.

Choosing the Wrong Type of IRA

Perhaps the most overlooked—and most important—mistake is made at the very beginning. This happens when someone chooses an account type that may not be right for their specific situation. For example, a Roth IRA means you put in taxed money on the front end. Other accounts may let you deduct your contributions, so you’re putting in “pre-tax” money into the account. Is one better than the other? Not necessarily. Your own financial situation and your goals for retirement will have an impact on the type of IRA you should choose.

If you’re unsure, it’s important to consult with a professional to get an idea of what you need. Not only will this professional help fill you in on the rules, but will help recommend the ideal vehicle for your investments—one that lines up with your goals and strategy more than the other options on the table.

Failing to Start

Perhaps one of the most important mistakes investors can make is to never get started in the first place. Sure, it’s true that there are some “catch up” rules in place with the IRS that allow late investors to get some money into their retirement accounts before reaching retirement age. But if you don’t invest early, most of the gains that come about as a result of exponential growth are left on the table. Those are gains that should ultimately go into your pocket—they shouldn’t be left out there for no one to enjoy.

That’s why it’s important to develop an investment plan and to get started as soon as possible. That means asking questions as the first step, even if you’re not sure where you want to put your money yet. Especially if you’re not sure where you want to put your money yet. You can continue to visit www.AmericanIRA.com to learn more about the Self-Directed IRA, or you can call 866-7500-IRA to learn  more.

October is the Best Month for Real Estate IRA Owners to Buy Properties

April is the cruelest month, wrote T.S. Eliot in his poem “The Wasteland.” But the best time for a Real Estate IRA investor to buy a home might be October.

That’s according to a study by RealtyTrac, a real estate industry research and data firm. The company looked at some 32 million single family home sales and condominium sales since the year 2000. From all that data, they found that October was the best month of the year for Real Estate IRA and other buyers to be able find deals at a discount from the full market value of the property.

According to RealtyTrac’s research, October buyers were able to close deals at an average 2.6 percent discount from the estimated full market value of the property. February came in 2nd, at an average discount of 2.4 percent, followed by July, during which buyers would score an average discount of 2.3 percent, and then December, when discounts from estimated full market value amounted to 2.2 percent.

For Real Estate IRA investors, this can make a significant difference in long-term ROIs.

The worst month for Real Estate IRA Buyers

Nationally, the worst month, by far, when buyers had to pay a 1.2 percent premium to estimated full market value, was April. In fact, April was the only month during which buyers tended to pay a premium compared to the estimated full market value of the property.

So maybe T.S. Eliot was right after all.

It also appears that the National Association of Realtors overstates property values by about 2 percent.

“The start of the school year and the holidays influence our buyer decisions and serve as a strategic indicator of the most advantageous times for buyers to land their lowest-priced deal.  Due to less buyer competition, October and November typically provide a dip in the SoCal real estate activity cycle,” said Mark Hughes, chief operating officer with First Team Real Estate, a California based agency, to RealtyTrac researchers. In his Southern California market, the best day to buy at a discount is October 1st.

There are, of course, significant seasonal factors in play, and these seasonal factors can vary widely by region and with the local economy. In Seattle, for instance, the best day for buyers to get a discount is April 1st, when days are still quite short.

The best single day of the year to buy? October 8th, on which buyers paid an average of 10.8 percent below estimated market value at the time of the sale. Next was November 26th, when buyers paid 10.6 percent below market value as estimated by RealtyTrac at the time of the sale, followed by December 31st, when buyers paid an average of 9.7 percent below market value.

The worst day to buy? January 19th. Buyers paid an average of 9.6 more than the estimated value of the property in those markets.

That said, there’s lots of noise in the data, and the best day and month for various markets can vary widely.

In the Charlotte area, the best single day for buyers to pull the trigger is October 15th. In Raleigh, it’s July 5th. In Greensboro-High Point it’s December 5th. And in Charleston it’s December 6th. Columbia’s best day for buyers was February 7th, Augusta-Richmond County’s best day for buyers was February 16th. Raleigh’s is July 5th.