Intro to Self-Directed Retirement Accounts

01 IRAs & 401k are not limited to just stocks and bonds

• Invest in virtually anything except life insurance and collectibles such as art and jewelry

02 IRA & 401k custodians like Empower, Fidelity, Schwab, TIAA, and Vanguard won’t facilitate non-stock investments

03 This is where self-directed investing comes into play

Some rules you must know before kicking things off

01 Your IRA or 401k must be in in your possession. It cannot be held in the plan of your current employer. If the account you are considering is sponsored by your current employer, your plan must allow for an in-service rollover. This would allow you to take control of your account and move it into possession.

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02 When it comes to self-directing your retirement, the most important rule is that you cannot gain immediate and direct benefit from your self-directed retirement account. This means no vacation houses; no buying a house and living in it. You yourself cannot benefit today from your retirement plan. Only future, retired YOU can benefit.

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03 Not only can you not benefit from your account, but your self-directed retirement account cannot benefit from you. This means no active participation in deals you fund with your account. No sweat equity can be put into your deals.

As a result:

– You cannot invest into a flip you will manage

– You cannot invest in a multifamily property you will manage

– You cannot “extend credit” to your account aka – all expenses must come from the retirement account, all income must go to the retirement account.

​04 Because of this, at Wall to Main, we like to use the phrase, “consider your retirement account likes it’s another person”.

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​05 And because your retirement account cannot earn active income, this means that all income must be from passive activities. We believe multifamily is the perfect passive activity for your retirement account. Learn why with our Intro to Passive Investing Series

​06 Remember how you cannot gain immediate and direct benefit from your retirement account? Well the IRS considers your family to be YOU as well. The chart below shows the people in your life who are considered “disqualified persons” aka people you cannot invest your retirement with. No mixing of retirement funds and cash accounts, no buying a house and renting it to your family. Don’t do business with your family – full stop.

 As you can see, any linear ascendant or descendant is considered disqualified, as well as spouses of those family members. Luckily though, siblings, nieces, nephews, aunts, uncles, and cousins are all perfectly fine to invest with.

​07 But remember how we said “consider your retirement account like it’s another person”? The same goes for the disqualified people in your life – your spouse, your parents, your children.

Their IRAs and 401k’s are not them. They are a separate entity.

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​08 This means your retirement account can invest with your spouse’s retirement account. Your retirement can invest with your children’s. You can even create a holding company to pool all your family’s retirement funds together. In fact – that’s what we’ve done at Wall to Main! This is the true power of self-directed investing.

Disqualified Persons