Mitt Romney and the Mystery Behind His IRA

August 17, 2012

During Romney’s time at Bain Capital LLC, the company used a SEP-IRA that had a maximum contribution limit of about $30,000 per year. Assuming Romney maxed out these tax-deferred contributions, he would have invested approximately $450,000 in his individual retirement account during his tenure at Bain. BUT, he may have up to 227 times that amount in his IRA! The baffling mystery about Mitt Romney’s significant wealth is how he was able to build up between $21 million and $102 million in his IRA during the 15 years he was at Bain Capital.

So how did he do it? Of course, we don’t know, but there are several theories out there that attempt to make sense of it all.

One theory is that Romney contributed to his IRA using the low-basis, low-value stock he received as a partner at Bain Capital in the different buyouts the company did while he was there. Another theory is that Romney contributed limited-partnership interests to his IRA in Bain’s buyouts, and quite possibly only at a fraction of their market value.

While there are limitations concerning the amount of money that can be contributed tax-deferred to an IRA, there are no restrictions on the amount that the contributed funds can earn, and can continue to earn, on a tax-deferred basis, even after the contributions have stopped. Therefore, in the future when Romney withdraws funds from his IRA, the IRS will get a hefty sum of money in taxes. Too bad his money isn’t invested in a Roth IRA!

Diversify!

August 13, 2012

Diversification is a strategy that should be deployed by anyone who cannot accurately predict the future – which is just about everyone. While the stock market provides an ability to spread investment risks over geography, company size, market sectors, and other categories, the fact remains that public exchanges cannot provide full diversification.

You cannot own titled real estate purchased from your broker in your IRA – instead, he will likely offer a choice of publically traded Real Estate Investment Trusts (REITS). You cannot own gold bullion in your IRA if you rely on the stock market – rather, the market will proffer equity interests in mining companies instead. Most business startups have no access to public markets at all, with investors unaware of the potential attractive returns to the early equity participants.

Without a self-directed IRA from our Florida self-directed IRA administration company, it is unlikely that full diversification can be achieved in a retirement account. Whether you are looking for cash flow from property rentals, private lending and investing in tax liens, or instead investing for future appreciation in precious metals, limited partnerships or new business ventures, the choice is yours with a self-directed IRA. Call us at 407-367-3472 to learn more!

True diversification lies with understanding you choices, taking time to know the market, and executing your purchases with confidence, then staying involved in your investments.

Finding Opportunity in Private Placements

August 7, 2012

A hush sweeps over the ballroom of a four star Orlando Resort as a well-dressed CEO and CFO stride to the stage. They now have exactly 20 minutes to convince a sea of well-heeled investors and venture capitalists that their new business venture has a compelling market advantage, will enjoy meteoric growth, and one day, be acquired or “go-public”. They are seeking a five million dollar infusion for further product development and market expansion.

Meanwhile, across town, several leading bankers from competitive firms meet in secret at a private business club to discuss the chartering of a new community bank to serve an underrepresented business segment of the marketplace. It will take a minimum of $6 million to launch the bank, and over the course of raising capital, involve from 400-600 individual investors.

In 2006, there were 179 new banks chartered in the United States, led by 21 new financial institutions in both California and Florida. Over $1 billion was raised for these banks – all from the bank principals, board members and private individuals. In the same year, venture capital funds based in the US raised over $24 Billion – representing a mixture of pension plan dollars, combined with investments from high net worth individuals. Florida Venture, the sponsor of the annual ballroom event, has assisted in raising over $1.4 Billion for new companies headquartered in the Sunshine State.

What does each of these groups have in common? They each represent an opportunity for private investors to risk capital in order to potentially reap the rewards of significant growth – outside the traditional stock market choices. Just as importantly, these investments may be accessible to IRAs and Individual 401(k) plans through a self-directed administrator such as NuView IRA in Orlando.

While your stock broker may consider private investments a risk not worth taking, it may provide an important avenue to diversify your holdings and spread your risks across another class of investments. Here are just a few of the pros and cons of private placement investments:

Advantages:

  • Ability to meet/know the principals involved
  • Utilize your personal knowledge of an industry
  • Get in on the ground floor
  • Access large up-side potential
  • Help the company grow – through referrals, etc…
  • Participate in the excitement of funding a new venture

Disadvantages:

  • May be difficult to exit the investment quickly
  • May require investor qualification
  • True Market Value may be a challenge to determine
  • Company may have limited operating history to judge performance
  • Could be higher investment risk
  • May not be subject to certain government reporting requirements

The challenge of investing in private placements often can be locating the opportunity. If your interest is banking, most states will post a listing of denovo (newly chartered) banks on their state regulatory website, together with contact information. For other private ventures, you may turn to the myriad of venture capital clubs that meet routinely in cities across the country – one such listing is found on www.venturea.com. Simply by talking with financial professionals such as bankers, lawyers, CPAs, opportunities may also be uncovered right in your own community.

Regardless of the source, the responsibility is on the investor to properly vet the company, do the research and make a calculated decision on risk vs. reward. Self-directing your IRA or tax deferred funds may also prove to be the best source of capital for you, especially if the investment may be illiquid for several years – and the funds are not needed short term.


Glen Mather is President of NuView IRA, Inc., a leading self-directed IRA administrator in Orlando. He can be contacted at 407-367-3472 or gmather@nuviewira.com

Self-Directed IRAs

August 3, 2012

Last week, the Romney team visited the Villages, a sprawling community of over 100,000 residents over the age of 55, only about an hour from the NuView headquarters in Orlando. What does this group have in common? And why do politicians consider this a critical stop to deliver their stump speech? These residents have an obsession with protecting their social security, Medicare, and retirement plans. Politicians use this group as a surrogate to prove their policies are “senior-friendly”. I’m told that until you are retired, you cannot understand the helplessness of relying on personal savings, which have been ravaged by low interest rates and stock market uncertainty.

If only those of us who are still working had the same obsession about saving and investing wisely! Most workers continue to rely solely on the advice of money managers, or mutual fund managers to ensure their retirement is adequately invested. When the market takes a dip, participants in employer sponsored plans often scale back their contributions, due to a lack of confidence in their investments or their advisors. Most professional financial advisors see lower stock market prices as a golden opportunity to buy, while human nature moves investors to become more cautious and withdraw.

It’s time that we all woke up to the fact that no institution, money manager, or even financial advisor has more at stake than you do – in the health of your retirement funds. Despite the droning platitudes of the politicians, their ability to ensure a stress-free retirement for you is limited by huge budget deficits, tax stalemates, and the burgeoning growth in the number of taxpayers moving into their retirement years.

If you feel inadequate in making good investment decisions, find several friends, associates and professionals who can serve as your advisors – and avoid being influenced only by one source. Just as you wouldn’t subject yourself to a critical medical procedure without a second opinion, don’t move forward with important investment choices without consulting with several advisors.

As stated in the Wall Street Journal, over the next ten years, private investment choices are likely to outpace the public markets. Ensure that you understand all your options, including a self-directed individual retirement account that can access those private investment choices. You may find that understanding your options for investing in rental real estate, private lending, or buying precious metals through your IRA may be easier than reading a 100 page disclosure on the latest IPO. The best result is one that results in making your retirement political proof, providing a greater insulation against the potential damages of future policy decisions, and less reliant on the governments “dividends”.

 

The Basics of Self-Directed IRAs

July 27, 2012

Vice president of NuView IRA, Jason DeBono, explains the basics of self-directed IRAs.

Financial Advisors: Ignore the Opportunity of Self-Direction at your Own Peril!

July 10, 2012

As President of NuView IRA, a leading retirement plan administration company in Orlando, I have the opportunity to speak to hundreds of investors and investor advisors each month. The single-most common question that is posed to our staff is… “Why haven’t I heard about self-directed retirement plans earlier?”

IRA or retirement plan beneficiaries generally look to their CPA, attorney or Financial Advisor to inform them of their investment choices… all their choices – including opportunities outside of the conventional stock market selections. Many times clients will change advisors that appear uninformed or unaware of investment vehicles that provide more attractive returnsthan general market choices.

The Wall Street Journal recent headlines trumpeted the Billions of dollars that are flowing out of the stock market to other investment choices. This certainly has drawn the attention of fund managers, brokers and the investment community as a whole. The key is that as a fee based Financial Advisor, both you and your clients can reap a powerful reward when you add self-directed retirement services to your investment portfolio.

While most financial planners continue to offer the usual mix of mutual funds, stock, bonds, annuities and other market based investments – we are seeing the higher net worth client moving toward LLCs, private placements, mortgages and real estate as part of their retirement portfolio. The investment strategy may be increased return, lower risk, greater cash flow (especially important for clients in the distribution phase of their life) or just diversification.

The next generation of Financial Advisors will include these “non-traditional” retirement investments as part of their investment strategy – and continue to earn their contractual fees and commissions over the total assets of the client.

At NuView IRA in Orlando, we are not permitted to offer our clients investment advice – as third party-administrators and recordkeepers – we instruct our clients to seek out the best possible advisors – then make an informed investment decision. Our role is to make sure that the client’s paperwork, administration and reporting meet the IRS requirements.

As a self-directed IRA administrator in Orlando, we are approved to provide Continuing Education credit for Financial Advisors – and as such, hundreds of Advisors are learning about self-direction and the possibilities it can hold for them and their clients. If you wish to learn more, please contact your local Entrust affiliate to discover the power and possibilities of unlocking your retirement plan.


Glen Mather is President of NuView IRA, Inc., a leading self-directed IRA administrator in Orlando. He can be contacted at 407-367-3472 or gmather@nuviewira.com

Bad News? What Bad News!

July 2, 2012

What a great time! Banks are no longer lending, no one wants to buy, and people are not paying their taxes. The Washington crowd is in disarray, the Federal Reserve is practically out of tricks, and the prospects of another recession, we are told, is a statistical possibility.

Certainly those thrust out of work or those underemployed are bearing a very painful burden during these difficult times. We do need policies and leadership in all branches of government to make the tough choices to rebuild our economy to one of sustained and steady growth.

But, to investors, the timing may never be more fortunate. Let’s take a few examples, including a personal illustration, to clearly see the opportunities that are available for those that can risk capital.

In July of last year, together with a partner, my retirement plan purchased 50% interest in a two bedroom, one bath 1200 sq ft home in Lake County. In a better economy, we could not have purchased this home, with a dock on a canal leading to Lake Dora for $27,000. A renter has signed a lease for $500/month, providing a gross return after property taxes and insurance of over 11%, even after we spend another $8,000 for a new roof. As the investment is in my retirement plan, all gains will grow tax free.

Recently, I was invited by Fox 35 news to do a piece for their newscast on unique assets that can be purchased with an IRA. Needless to say, the market had just dropped by 600 points and people were in a panic. Keith Landry came by our office and produced a piece explaining how tax liens can be a great way for an individual investor to diversify. Sandra Edmonds of CFRI often provides workshops on how this can be done, and we have many IRA holders that self-direct their IRA funds into these investments. According to a local expert, Doug Gale, President of REO-America, returns of 6-8% are what one can expect, but can fluctuate, according to the market and those showing up to bid on the on-line auctions.

The best news of all, however, is that self-directed IRA holders can lend their money, backed by real estate. This opens the powerful option of real estate investors utilizing private individual’s retirement accounts to fund their purchases.

This type of lending, at rates determined between the borrower and the IRA owner/lender, can provide a great return to the borrower’s IRA while providing much needed capital to the real estate investor. At our self-directed IRA administration company in Orlando, we have clients lending money at rates from 8-16% – all directed by the IRA holder. There is no better time to ask your friends and neighbors about their IRA and their desire to invest in your project or purchase. All lending can be backed by a first or second mortgage on the property.

With a self-directed IRA from our Orlando retirement plan administration company, you will start to see your options in a much different light. Invest in anything the IRS doesn’t prohibit, unrestricted by the limited choices available from your current administrator. From start-ups to LLCs to foreign currency, all can be available to you tax deferred, or in the case of a Roth IRA, tax free.

Just think – if the economy was booming, real estate prices would be double to triple today’s prices, banks would be lending regardless of risk, and everyone would be paying their property taxes. If you have a self-directed IRA, thank goodness it isn’t!


Glen Mather is President of NuView IRA, Inc., a leading self-directed IRA administrator in Orlando. He can be contacted at 407-367-3472 or gmather@nuviewira.com

Self-Directing: Unlocking your IRA

June 19, 2012

Did you know that you can invest in real estate, mortgages, leases, and other asset backed investments inside your retirement plan?

Indeed, since 1975 self-directed plans have been available, although relatively few IRA holders have taken the time to understand their options and take advantage of such retirement plans.


There are three things you should know when you self-direct your retirement plan:

  • Which retirement plans are best – Traditional IRA, Roth IRA, SEP, Simple or Individual(k)
  • What types of investments you want to make within the plan
  • Understand the IRS rules of self-dealing and prohibited transactions

The IRS rules regarding prohibited transactions are not too complex, yet one should consult a tax advisor for specific advice. Disqualified people include your immediate family (except siblings) employers (in a qualified plan), certain partners, fiduciaries and other categories spelled out in IRS code. IRA owners may not borrow money from their IRA, sell property to it, receive unreasonable compensation for managing it, or use it as security for a loan. There are also several named categories, such a collectables which also may not be held by your IRA.

The opportunities outside these prohibited transactions are significant. You may buy, sell or exchange investment property inside your self-directed retirement account. You can partner with friends, relatives and business associates to purchase property, and then lease it to anyone that is not a disqualified person. You can roll property from one retirement plan to another – or even take property from your plan as a distribution.

We have seen clients form investment groups, combining IRA and non-IRA funds to purchase and hold property, rehab and turn properties or simply lend out the funds in the form of notes and mortgages.

In addition to these ideas, an IRA may also invest in partnerships, LLCs, private stock offerings, loans (both secured and unsecured), tax lien certificates, purchase options, joint ventures and other investments.

So if you are confident in your abilities to make your own investment decisions, have the desire to reduce or eliminate the tax consequences on your gains, and have the resources to invest – self-direction may prove to be a wise choice for your retirement plan.


Glen Mather is President of NuView IRA, Inc., a leading self-directed IRA administrator in Orlando. He can be contacted at 407-367-3472 or gmather@nuviewira.com

Banking on your IRA – Through Lending

June 14, 2012

A few years ago, a trio of elderly investors arrived at the reception area of my office in Orlando unannounced and without an appointment, a relatively rare occurrence. Being a good host, I invited them into my conference room, offered them coffee – then I placed several brochures in front of them, describing our self-directed IRA services.

I presumed the group had come to learn more about our business, so I immediately launched into my normal impassioned message on the power of self-direction by “Unlocking Your IRATM”. No sooner had I started, the lone female jumped up and said “Thank God – you do self-directed IRAs and you are local!” Evidently, the group had been self-directing their IRAs for years, but their retirement account administrator’s company had been bought out by a large corporation out of state and they were now frustrated by long delays and poor service. The spokeswomen of the group said; “we have been issuing mortgages from our IRAs for over 20 years and we don’t want to stop now!”

As President of NuView, a leading self-directed IRA administrator in Orlando, I’ve come to appreciate the passion that some of our clients have for lending their IRAs. There can be many reasons that individuals choose this avenue for their retirement plan investments:

  • Easy to Manage: Unlike most real estate purchases, lending through your IRA generally requires minimal management once the loan is in place.
  • Provides Liquidity: While some LLC, Private Placement or Real Estate investments may have a long gestation period, loan payments can be structured monthly, quarterly or annually, providing cash balances that are especially important for individuals that require routine withdrawals or those facing required minimum withdrawals after reaching the age of 70.5 years.
  • Permits Flexibility of Terms: The IRA holder can create the terms of the note to properly reflect the amount of risk he is willing to take vs. the amount of interest that the borrower is willing to pay. For example, the down-payment or interest rate can be increased based on the strength of the borrower’s financial statement or credit rating.
  • Provides Security: Loans can be secured by first or second mortgages, providing the IRA recourse should the borrower default. In the unlikely event that foreclosure is required; the IRA should pay any expenses in obtaining payment or collection on the loan.
  • Can Result in Significant Returns: Our account holders issue first and second mortgages from their IRAs at rates from 8% – 16%, with many charging loan origination fees (points). While some clients locate their own mortgages, many rely on local companies that will match their funds to borrowers, or will aggregate several IRAs into one mortgage.

As with all investments that you make, we would suggest that you speak to your legal and financial advisors regarding the structure of any loan that you would issue from your self-directed IRA. Many times title companies are happy to provide the basic note and mortgage forms in order for you to get started.

I would encourage you to our office in Orlando for more information as to the very basic process by which, you too, can become an impassioned lender of your IRA.


Glen Mather is President of NuView IRA, Inc., a leading self-directed IRA administrator in Orlando. He can be contacted at 407-367-3472 or gmather@nuviewira.com

Why Own Gold, Silver, Platinum or Palladium in an IRA?

May 29, 2012

Only an IRA administrator would likely be aware that the ability of a private US citizen to own gold was returned on January 1, 1975. It shares a birthday with the first Individual Retirement Arrangement (IRA) – offering a tax-advantaged savings plan for retirees. The fact that those opportunities can be coalesced into purchasing precious metals for a retirement plan is finally taking root.

Interestingly, as a self-directed IRA administrator in Orlando, we do not and cannot give our thousands of IRA clients any advice regarding their investment choices. A self-directed account by its very nature is not influenced by the record-keeper, custodian or administrator of their account.

So, why are clients self-directing their IRA funds into Gold and other precious? Most cite the uncertainty of traditional investments and the desire to hold something tangible and not tied to a particular currency. While speculators often purchase the physical metals directly, many IRA holders that are trading in and out of their investments prefer mining stock as a surrogate. The majority of IRA custodians are unable or unwilling to hold title to the actual physical metals, although not constrained by the IRS.

For those that prefer the certainty that the IRA sanctioned precious metals provide (non-collectable Gold, Silver, Platinum and Palladium), additional due diligence is prudent to ensure that all the aspects of the investment process is followed.

Integrity: Buy and sell with a dealer with a sterling reputation. Calculate that costs are in line with the value desired, and that the dealer will be willing to sell to an IRA. This will require that based on a purchase request, the dealer will strike and hold a price for up to a three day receipt of funds.

Responsiveness: Deal with an IRA administrator in Orlando that can move quickly and effortlessly through the application and IRA funding process. Most importantly, the time to execute the purchase is critical – so ensure that you have a designated employee’s name and relationship established with your IRA administrator that will take responsibility on meeting your time constraints.

Fidelity of Storage: With an IRA, the holder must designate an authorized storage facility to house the precious metals. Ensure that your IRA administrator will provide multiple depositories from which you can choose, including both in the US as well as Canada. After all, once the purchase transaction is complete, the entire purpose of holding metals for security is diminished should your metals be incorrectly administered at the storage facility.

Whether for a long term investment, or for those seeking quicker gains, IRA clients have shown a historically unparalleled appetite for precious metals. The genie is out of the bottle, and will likely now be a constant in many self-directed retirement accounts.


Glen Mather is President of NuView IRA, Inc., a leading self-directed IRA administrator in Orlando. He can be contacted at 407-367-3472 or gmather@nuviewira.com