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Are All IRA Investments The Same As Far As Exit Strategy?

Many people wonder about the best exit strategies for their IRA investments, and while removing the assets in your IRAs is inevitable, how you do that is key if you want to prevent incurring more tax liability than necessary. As experts in IRA Retirement Solutions we can help you find the best method for your exit strategy, and it may not be the standard cash distribution that most people think about. David Moore, with IRA Advantage, explains the options here.

Are All IRA Investments The Same As Far As Exit Strategy?

So, when we’re talking about IRA retirement solutions, and we talk about self-directed IRAs, really the solution they’re offering is just further diversification. If you look at a basic IRA, or basic 401K plan, you’re limited solely to Wall Street’s offerings, where if you’ve got a truly self-directed retirement account it’s going to allow you to buy anything the law allows.

What Do You Recommend As An Exit Strategy For IRA Retirement Solutions?

So, I guess you got to look at it and I think in traditional thought — and I always hate that word “traditional,” because it doesn’t really address the investments that we work with – but in traditional thought, everybody assumes that retirement accounts and what happens as far as exit strategies, the bottom line is whatever’s money is in the account, has to come out at some point. So, you’re always looking at building that account, making the best return you can, and then ultimately, you’ve got to look at how I’m going to get that money out of that plan without incurring any more tax liability than I need to.

One of the things that we’ve used a lot in the self-directed world that isn’t really often used out there and in retirement accounts as far as a solution, is just taking in-kind distribution. Everybody contemplates when you look at retirement accounts and you look at maybe objections to buying real estate or buying tangible assets with the account is, that their lack of liquidity is a bad thing. And the other part I often hear, and I think it’s actually talking points, is some investment advisors actually use for this stuff. They’ll talk about, “Well, you shouldn’t buy an IRA, or you shouldn’t buy real estate with your IRA,” because what happens, when you get RMD and you’ve spent all your money, you don’t have the money there to get the RMD, and now you’ve got a penalty.

Well, what is perceived to be a problem is actually a real opportunity. So, when we’re looking at traditional distributions, we always look at cash distributions. That’s actually not in my opinion, the best way to do it. You ought to be looking at in-kind distributions because you’ve got a couple different advantages there. If we just take, for example, a checkbook IRA. Well, a checkbook IRA uses a limited liability company to buy the investments. Well, who’s to say that you have to take a cash distribution?

Maybe you bought a property on the beach that someday you want to retire into or maybe you just want to own those investments. Maybe, actually, even if you look at Wall Street world, you want to take, instead of cash distributions, you want to actually be assigned something in-kind. Well, you could put your entire portfolio into a limited liability company and then be assigned a membership interest in that limited liability company instead of taking a cash distribution.

That thing actually gives you a couple benefits. One, the valuation that’s there and two, if you’re taking a minority interest in that limited liability company, you can actually discount that distribution by up to 40%. So something that is often looked at is a disadvantage where the tangible asset or using that structure with a limited liability company is actually a very large advantage, and it’s just a question of taking a look at what you’re wanting to buy, taking a look at what you want to do with it, whether you want cash out, whether you want in-kind assets out. But understand that everybody contemplates a cash distribution, and that’s just not accurate.

Are All IRA Investments The Same As Far As Exit Strategy

You can take in-kind items, you can take a membership interest in a property. You could take a property, you could take a note, you can take the in-kind distributions, as I said, and it actually offers many, many opportunities.

So, I would just put that out there. Take a look at what you’ve got, take a look at what you want to buy. Understand that self-directed accounts are going to allow you to own everything you currently own with let’s say, a Wall Street traditional account, but they’re going to also offer you the ability to buy anything else the law allows and a lot of those investments might be something that ultimately you want to own personally and the self-directed account’s going to allow you to get those assets over time if you choose to do that.

Truly understanding what your retirement options are takes the help of an expert. A simple call to IRA Advantage will get you the advice you need. Give us a call today, 503-619-0223.

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