Many people are not aware and are not told about the options that they may have with a 401k Rollover. You see Bank of America, Charles Schwab and several other large investment firms starting to really advertise for clients to utilize 401k Rollover, with one catch they are not truly self-directed because they limit what you can roll your money into. One of the main investments that is usually not spoken about is real estate.
There is the constant argument of which investment is better for your 401k Rollover, land or stocks? While stocks are easy to buy and sell, easy to track, and companies are required to release information, real estate has many other advantages. The most important being that they cant make more land, Dubai excluded.
The general public as a whole are more comfortable with stocks because that is what they are told to do. Stocks however can become worthless and essentially lose all of it's value, think Bear Stearns, Lehman Brothers, or all the dot-com companies.
As a whole, Professor Jeremy Siegel of the University Of Pennsylvania's Wharton School of Business says that stocks show an average gain of seven percent a year when data are controlled for inflation. This average works when looking at many stocks over many years. It may or may not work for any individual stock; it doesn't work for three lousy decades in our memory-the 1930's, 1970's and this one.
There are several investors who have of course blown this average out of the water and there are some who have lost it all investing in stocks. The alternative with real estate is transparency. Each deal requires several levels of checks and balances, and precautionary measures that the investor can take. While the past year has shown ever the largest companies can ultimately become worthless, real estate will still have some value regardless of any economic downturn. You may not be able to sell or may have to hold the property longer but you will never receive a notice that your investment is gone and you have nothing.
Farm value in current dollars averaged $2,160 per acre nationwide on January 1, 2007, up from $974 in 1998, a 13.5 percent average annual gain according to the U.S. Department of Agriculture. Cropland during that period rose from $1,340 to $2,700; pasture rose from $489 to $1,116. That is just raw land. A range of properties, from rental houses to apartment buildings to parking lots, can provide a constant stream of income that will build IRA wealth. Many people think they don't have the money
to purchase income producing property simply because they lack savings.
However by utilizing you IRA and doing a 401k Rollover there several profitable purchases that can be easily financed. The most important factor when investing in real estate is that it can appreciate as well as have positive cash flow. Consider this, you purchase a parking lot that is generating a 12 percent return on your investment annually, including your positive cash flow. Then 10 years down the line as the city grows an parking becomes more scarce you sell the property and not only have you been collecting the income for 10 year you will earn the appreciation on the property as well.
All in all 401k Rollover allow you to invest in stocks, land, businesses, rentals, cattle, etc. My advice is to not put all of your eggs in one basket and invest in the simple model of diversification. Sounds simple yet the large majority always seems to turn a deaf ear to it.
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Friday, August 14, 2009
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A 401k rollover & self directed ira is moving your eligible retirement funds, such as money invested in plans like a 401k, 403b or 457.
ReplyDeleteA self directed ira, sometimes known as a "Checkbook Individual Retirement Account", allows Individual Retirement Account monies to be placed into a checking account, making the funds a more liquid asset.
Only 7 Days Left to Save on Taxes on Your Roth Conversions
ReplyDeleteWe all know and felt the crash of every world market last year. It was a complete financial disaster. Many clients did a Roth conversion only to see their account balances decimated by the market free fall, and huge tax bills looming on values that no longer exist. For those of you who fall under this category the government has implemented a great tax break that will allow you to recharacterize your Roth accounts and eliminate the tax liability on the lost account value.
For example say that in 2008 you converted $100,000 into a Roth account at a 25% tax rate, which generates a tax bill of $25,000. The value of the account today is only $40,000 leaving you with $60,000, that no longer exists, that you are required to pay taxes on. Fortunately with the tax code break for 2008 you can now recharacterize (convert) your Roth account back into an IRA account an the funds are treated as though they never left the IRA account. There is only one problem, the deadline to complete this transaction October 15th, 2009.
If you recharacterize your Roth back to an IRA or 401k account the funds only need to stay in the new account for 31 days before they can be transferred back to a new Roth account. The conversion has to be done as a trustee-to-trustee transfer.
Here are few key points to consider:
1) Type of transfer and how much. The original amount has to be transferred back to an IRA or 401k account regardless of the current value of the funds that were transferred.
2) The date in which the retirement funds were transferred to the Roth account.
3) It doesn't matter how many shares or what type of assets were reconverted they all qualify for the recharacterization.
401k investment information for 401k rollover plans. 401K Rollover or the Direct Rollover is how you continue to benefit from the tax-deferred growth of earnings being provided by your current 401K plan.
ReplyDeleteA roth ira is an individual retirement agreement, allowed under the tax law of the united states.
ReplyDelete