Feeling good about your investments? For many, that question goes far beyond assessing risk, returns, or strictly financial measurements. For them, it’s not just what their money is doing for them, but also what is it doing for others, how it is giving back to the community at large. The growth of socially conscious investing has created hundreds of specialty mutual funds – from those that avoid purveyors of tobacco and alcohol to others that promote sustainable environmental solutions. According to Forbes, $1 of every $9 invested is directed into these types of funds, and these funds have grown by 22% just in the last two years.
At NuView IRA, many of our clients share a similar concern about the use of their funds. They use their IRAs and rollover 401Ks to restore neighborhoods, start businesses in their communities, lend money to entrepreneurs, and otherwise redistribute Wall Street funds by giving back into their home town. Whether the local benefits are by design, or are accidental, the effects are equally impressive.
The great thing about a self-directed IRA is you don’t necessarily have to sacrifice your returns when your IRA is doing good for others. A close friend called me last week about putting an IRA to work in an unusual way. Through a loan, and its process, his IRA has fundamentally changed the life of the borrower. Though I’ll change the names a bit, the facts are completely true:
Jose is a 57-year-old experienced tractor trailer driver who recently lost his job in the San Francisco Bay area. His wife is dealing with the difficulties of living with Polio and is unable to work. Needless to say, it didn’t take long for Jose to get behind on his mortgage, and he was facing eminent foreclosure action.
After scanning the wanted ads, he was able to find an opportunity for a short-haul driving contract nearby, but during the interview he learned that the cold storage warehouse required him to own or lease a truck. Because Jose was a few months behind in his mortgage, and despite the promise of new work, the banks would not finance his purchase.
Fortunately, the owner of the warehouse company was aware that an IRA could lend funds to an individual, secured by a lien on the vehicle. It only took one phone call to his friend that had an IRA to draw up a note listing the terms of the agreement, and the collateral was secured. Within a few days, NuView IRA was directed by the client to wire his IRA funds to complete the purchase of the truck for Jose.
Jose and the IRA lender decided on the terms: a 9% interest rate amortized over 48 months. Also, all of the insurance and maintenance reports on the vehicle were to be maintained in order for the loan to be in good standing. Furthermore, the note called for the payments to be made directly from the warehouse, before Jose was paid for his contracted work.
What has this meant to Jose? Everything. He is undergoing a loan modification to keep his home, and his wife is now able to receive the medical care that she needs. They can both enjoy the security of not just his job, but also the increasing equity in the equipment that can ensure his continued employment.
What did this mean to the IRA holder? A 9% return secured by a tangible asset – and the sense that he made a difference, not just in his own future, but in someone else’s as well.
This holiday season, there are many ways we can give back. What is your self-directed IRA doing?
