Save Thousands By Converting Your IRA To A Roth IRA in 2010

New rules beginning on January 1st, 2010, will allow you to convert your existing IRA into a Roth IRA regardless of your income level. This could potentially save you thousands or even hundreds of thousands in taxes. For more on this see the following article by Dr. Steve Sjuggerud from Daily Wealth.

"Thank God for Obama," my accountant, Hank Hurst, said to me yesterday...

"I know people are out of work. But accountants like me have never been so busy, thanks to all the new and potential tax changes and regulatory changes."

Hank went on about these changes. What interested me the most is a government boondoggle... a program that can save you hundreds of thousands of dollars in your tax money.

For this to make sense for you, you have to answer "yes" to these three questions:

• First question: Do you expect U.S. federal income tax rates in the future will be higher than today?

The answer should be obvious... At the trajectory we're on, with massive government debts (not to mention future health care and Social Security liabilities), higher tax rates are a certainty.

• Next question: Do you believe capital gains tax rates and dividend tax rates in the future will be higher than today?

Obviously, this should have the same answer as the first question.

• Last question: Do you think inflation in the future will be higher than today?

This should be obvious, too... At the rate our government is "printing" money and spending it, future inflation is a foregone conclusion.

If you answered "yes" to these three things, then you should seriously consider getting in on this deal. Here's the story:

The U.S. government needs your money now. So it's willing to do something foolish to get your money today, instead of waiting until you retire. The government has created a loophole that allows us to exploit its desperation for cash.

If the government were smart, it would wait, and take $400,000 from you in the future instead of asking for $40,000 today. But it needs money now, and it'll take what it can get.

So starting on January 1, 2010, ANY American, regardless of income, can convert his IRA to a Roth IRA with no penalties. You have to pay income tax due, but you get a special "grace" period until April 15, 2013 to fully pay it.

When you do this conversion, all your money grows tax-free... It can grow to millions, and the government can't tax it ever again.

If you believe those three questions above should be answered "yes," then you're beating the government at its own game. Let me show you...

Let's say you have a traditional IRA with $100,000 today. That might grow to $1 million in 20 years. At that point, you'd have to pay nearly $400,000 in taxes to get the money out (using a 39.6% income tax rate). But the joke is on you... because a good portion of the "gain" on your investment will probably be from inflation.

If you take this deal and convert your traditional IRA to a Roth IRA, then you have to pay $40,000 in taxes by April 2013. But if you've got the cash elsewhere, you don't have to take it out of your IRA. So in 20 years, $100,000 will turn into $1 million, with no taxes due at the end. The $40,000 today is the cost of not paying $400,000 in taxes in the future.

Now that's a simple example. Most people contribute yearly, and then withdraw yearly when they retire – they're forced to withdraw money annually by law in a traditional IRA. That way, the government can collect its taxes. But in this Roth, you already paid your taxes. You can take your money out any time... no penalties, no taxes.

This deal is not right for everyone. If you're close to retirement age already, or if you expect to be in a low tax bracket when you retire, it probably doesn't make sense for you.

But if you're younger... and you're worried about big government and inflation... it's the best way I know to beat the government at its own game. Instead of getting taxed on inflation, you can use inflation to your advantage. Your money "inflates" tax free in your Roth IRA.

There are a lot of ins and outs here. And the big risk, I'm afraid to say, is if the government changes the rules. Also, I'm not a tax advisor – far from it! So don't take it from me. Do your homework. Talk to your tax man (or talk to mine... you can reach Hank by e-mail at info@hurstcpa.com).

If you believe higher taxes and higher inflation are in your future, then this 2010 Roth deal is worth considering.

Dailywealth.com offers a free daily investment newsletter which focuses on contrarian investment opportunities.

Alternative Investments: Where To Find And Finance Them

The popularity of alternative investments has grown tremendously over the past few years. This helped spawn the creation of NuWire Investor, along with many other alternative investment focused companies. No matter how Wall Street tries to slice and dice it, the stock market just doesn’t cut it for every investor. There are lots of investors who want more control over their investments, or the opportunity to invest in things that are outside of the mainstream. Alternative investments are certainly not for everyone, but they are great for the right kind of investor. Since many alternative investments fall outside the mainstream, locating them can sometimes be difficult…enter NuWire Investor’s Opportunity platform.

Our Opportunity platform is still new, and we admit there are some kinks still to be worked out, but it offers a place for Investors and alternative investment providers to come together (for FREE I might add). If you are interested in alternative investments, or if you sell alternative investments, I encourage you to take some time to visit our Opportunity platform.

Once you find an alternative investment you like, then the next question for many people is how you are going to finance it. Some of the more mainstream investments, such as domestic real estate, are fairly easy to finance, but it can become a little trickier with today’s lending climate. Some opportunities that you can find on our site, though, have made arrangements with hedge funds and the like in order to offer investors incredible financing packages. A couple developments are offering 90 percent LTV investor financing (even for stated borrowers) at decent rates. Try getting that from a local bank:

https://www.nuwireinvestor.com/opportunities/go-zone-investment-opportunity--500-nuwire-special-51879.aspx (This developer even offers a $500 discount for NuWire readers--We like those!)

http://www.nuwireinvestor.com/opportunities/walt-disney-world-good-neighbor-hotelvilla-orlandofl-investment-opportunity-in-51873.aspx

In addition, there is also the possibility of using one's retirement funds to buy alternative investments; this structure is called a self-directed IRA. There are several providers that can set up these account structures, with the main difference among them being whether or not you want checkbook control. The largest custodial self-directed IRA provider is Entrust and the largest checkbook self-directed IRA provider is Guidant Financial Group, who recently made the Inc 500 list of fastest-growing businesses, at #384. (Full disclosure: Guidant Financial Group and NuWire, Inc. are owned by the same parent corporation.) Typically, the drawback to the checkbook account is the cost, but some creative developers are offering to pay for clients' self-directed IRA accounts:

http://www.nuwireinvestor.com/opportunities/free-self-directed-ira-account-to-invest-in-orlando-51907.aspx

http://www.mexicorealestatetours.com/mexico-real-estate-ira

Alternative investments are here to stay, and if you happen to be one of those investors who prefer to take more control over their investments, or who just prefer to stray from the ordinary, I urge you to monitor (and add to, if you sell these investments) our Opportunity platform. The more involvement we get from the alternative investment world, the better this website will become. If you choose to take up one of the offers, I also encourage you to come back after completing the transaction and let the NuWire community know how your experience went. You can do this by leaving a comment on the opportunity itself, or by simply sending us an email at info@nuwireinvestor.com and we can pass on the message. We are excited about this new Opportunity platform and hopefully as an alternative investor, you are, too.

Are Private Loans Suitable For Your IRA?

One of the advantages--also, in fact, a potential disadvantage--of a self-directed IRA is that there are a plethora of investment opportunities to choose from. Today we are specifically going to look at private loans. Private loans are loans made from an individual to another, so no banks are involved. In terms of private loans as an investment vehicle, there are, of course, pros and cons.

Private loans can potentially provide investors with substantial returns. Typically, borrowers turn to private loans--knowing they are going to be more expensive than traditional bank loans--because they can’t qualify or don’t have time to wait for bank loans. Again, this can present both a risk and an opportunity for investors. In addition, private loans can also be secured against assets--including most notably including real estate--helping to minimize risk factors.

Investors considering private loans need to take several factors into account. First off, they need to make sure to judge the adherent risk involved with the particular loan accurately. There is a reason these borrowers are turning to private lenders for money, and investors need to find the balance between risk and return. Secondly, banks make their money by lending money; they have the process and paperwork down to a science. They know exactly what they need to do and what they need to have the borrower sign in order to ensure that they have maximum protection under the law. As a private investor you would be wise to do the same. Make sure your contract is good and that you are taking all necessary steps to validate the contract. If it needs to be recorded at the court house, make sure that gets done, and so on. Lastly, private investors need to understand what to do if the borrower defaults. What process do they need to follow in order to collect? With private loans made to friends or family this part becomes especially hard to swallow, but if investors are truly looking out for their investment, they need to take appropriate action.

Now let’s look at some of the things self-directed IRA investors need to keep in mind when investing in private loans. One of the biggest factors that self-directed IRA investors need to understand is the prohibited party rule. When investing your self-directed IRA funds, there are certain people with whom you are not allowed to deal. According to the IRS the following people are all disqualified:

1. The IRA owner; his or her ancestors (i.e. parents, grandparents); his or her lineal descendents (i.e. children or grandchildren)
2. The spouse of the IRA owner
3. Financial advisors and other fiduciaries
4. Any entity owned 50% or more by a disqualified party (such as a business half-owned or more by the IRA holder’s daughter)

If you deal with any of these people, you are going to be in direct violation of the rules and will be heavily penalized. Outside those mentioned above, you are able to deal with who you wish, however remember this next point: As the person in charge of your IRA’s investments, you have a fiduciary responsibility to the IRA. That means that if you decide you want to lend money to your brother, girlfriend or anyone else with whom you have a relationship, you are required to put the best interest of the IRA ahead of your relationship. If your sister defaults and you don’t send her to collections, the IRS could find that you’ve violated your responsibilities and still hit you with all the penalties. This is not a situation you should take lightly, so as a self-directed IRA lender, you need to make sure that if you lend money to someone you have a relationship with, you are willing to do what is necessary to act in the best interest of your IRA. Make sure they understand this upfront, too, so that if push comes to shove, the will be prepared.

Another thing to keep in mind when investing in private loans with your self-directed IRA is that loans are not always liquid. Make sure you are aware of the mandatory distribution rules (required distributions start at age 70.5) as well as when you might need to access those funds for retirement expenses.

With that in mind, if you take the appropriate precautions, private loans can be a great investment for their IRA. Personally, if I were making private loans in my IRA, I would limit them to secured loans (preferably real estate) at fairly low LTVs. I want to know that the money in my IRA is safe and secure, but I also want to see it grow. Done correctly, private lending can achieve both those goals. Compared to what is going on in the stock market and real estate markets right now, making private loans seems like a pretty good option. If you are making real estate loans right now, though, make sure the LTV is low enough to account for possible value loss.

One telling sign as to the validity of private loans within self-directed IRAs can be found in a client survey done by Guidant Financial Group recently, in this survey they found that private lending within self-directed IRAs had increased 131 percent since 2005. That’s a huge increase in self-directed IRA private loan activity, and in today’s market I certainly can’t say I blame them.

Real Estate IRA: What Is It? Which Type Is Best?

A real estate IRA is just another name for a self-directed IRA. For those who are unfamiliar with self-directed IRAs, they are IRA accounts that let you invest your retirement funds into a wide range of alternative investments: from real estate to tax liens to cattle breeding ranches. There are only a few restrictions: namely that you can’t invest in collectibles or life insurance, and you and some members of your immediate family can’t personally receive benefits from your IRA investments. For the complete list of rules and regulations, talk with a custodian, self-directed IRA facilitator or an attorney familiar with IRA regulations.

Through a self-directed IRA or real estate IRA, one can invest in almost any type of real estate, domestic or foreign. In my personal experience, the only issue that I have ever faced was with foreign real estate, and the problem was with the country, not the real estate IRA. The country in which we were investing had never seen nor heard of a real estate IRA, and properly registering the title became a long and grueling process. To be fair, this was a developing country with a very unsophisticated and very manual property registration process. To date, it is the only country where I have encountered this difficulty, but if you use a real estate IRA to buy property in any developing country, then I would plan for delays.

Real Estate IRA: Which type should I get?

There are two types of real estate IRAs. The first is the traditional one, which is done through a self-directed IRA custodian. The biggest self-directed IRA custodian is Equity Trust. Setting up your real estate IRA in this manner will have the smallest upfront fees, but will include on going fees tied to the value of your IRA account. These can add up over time, especially if you have a large account. Keep in mind that there are also some time sensitive investments that may be difficult to invest in because of the approval process with the custodian. This is typically the best real estate IRA type for those who have less than $50,000, and who can spare the extra time.

The second type of real estate IRA is the checkbook control real estate IRA. As the name suggests, a checkbook control account has its own checking account and checkbook. The holder is designated as the representative and can issue checks at will. This does not, however, release the holder from the rules governing IRAs, and with more freedom comes more responsibility. In the other model, if you attempt to enter a prohibited transaction, your IRA custodian will likely stop you. In the checkbook control model, account holders must use their own discretion, and the penalties are severe if one enters into a prohibited transaction. There are several self-directed IRA facilitators who can create the accounts, the largest of which is Guidant Financial Group. The main benefit of the checkbook account is that you can react quickly to investment opportunities, and you can avoid a lot of hassle and additional paperwork. Most real estate investors know that the best opportunities don’t last long, so being able to react quickly is vital to success. This route is not cheap on the front end, but it has fewer ongoing fees, and the fees are not tied to account size. This can be a good option for investors with more than $50,000 or that are dealing with time sensitive investments.