5 Things You Wish You Knew About Your IRA
Today's comment is by Larry Grossman, Certified Financial Planner, managing director of Sovereign International Asset Management Inc. and a member of The Sovereign Society Council of Experts. This commentary was originally published last May, but we received such a large response that weâ€™re running it again for anyone who missed out on this advice last spring.
Dear A-Letter Reader:
Judging from the number of questions I received about the below article when it was first published in May, I know individuals, particularly Baby Boomers, are extremely nervous about their retirement. They want to be happy, safe and financially secure for the rest of their natural lives. And this blissful existence hangs on structuring their retirement plan correctly. Thatâ€™s where I come in.
I've discovered - no matter how many articles I've written or presentations I've given on retirement plans - the same questions keep coming up.
1. "You can't really take an IRA or Pension Plan offshore can you?" (Sometimes they add, "My broker, CPA or advisor told me you can't do this.")
For over 15 years now I've assisted individuals like you in liberating their retirement plans. The ERISA code, which governs Qualified Plans, and the IRC, which governs SEPs and IRAs clearly mentions several of the methods I have used over the years. Additionally the codes clearly tell you what you can't do more than they tell you what you can. None of the techniques I recommend are listed as "Prohibited or Disqualifying Transactions." I've worked with a number of custodians over the years who allow their clients to take their retirement plans offshore using the methods I have developed. So believe me, it's definitely legal.
2. "Aren't IRAs and Retirement Plans protected from the attacks of creditors?"
Not really. In my updated report I just wrote for The Sovereign Society, The Ultimate Retirement Protection Program, I specifically addressed this subject. And I talked about some of these frightening attacks on retirement plans in a commentary I wrote for The A-Letter on March 30. Suffice to say, the rules are written with just enough wiggle room that some very smart attorneys have figured out how to really attack those assets. Don't let part of your hard earned retirement plan assets disappear through a frivolous lawsuit.
3. "Don't I lose a lot of investment flexibility if I take my plan offshore?"
No, actually just the opposite. Once you take your retirement plan offshore, you can take advantage of an entire global spectrum of investments that most U.S. citizens can't even imagine. Why wouldn't you want to invest in the world's best investments no matter where they are? We live in a global village where information is available 24 hours a day from anywhere in the world. Yet our market remains closed to most global investments. Why? Money! And they want yours to stay here! The rules don't restrict you this way. Only your rigid inflexible custodian (who is rife with their own conflicts of interest) keeps you tied down.
4. "How can I reduce my taxes?"
To which I always reply, "Do you have a retirement plan?" I'm always amazed by the number of investors who take elaborate measures to try to reduce their income taxes but miss the best one out there - contributing to a retirement fund. And by the way, this is already approved by the IRS.
And the rules have changed! You can now contribute more to your retirement plan. You can target key employees and you can even exclude others. There are plans where you can contribute up to 100% of your income pre-tax. (Of course there are limitations and each investor's situation is unique.)
5. "Is there one custodian I can use who will let me do all of these wonderful things you're talking about?" (Sometimes they ask me: "I want to invest part of my retirement plan in Real Estate in Panama and I want to use the rest to buy some of the funds Eric Rosemann talks about. Which custodian would be the best to use?")
Until recently, this question was hard to answer. Why? Some custodians will let you invest in foreign real estate but not funds. Others will let you invest in funds but not real estate. That's why for the last year and a half, I've been working to establish my own IRA Custodian. One where investors can liberate their Retirement Plans in one convenient location and take advantage of all global investments in one place without the pain and expense of multiple custodians.
I'm pleased to announce my new service just started earlier this summer. The name of the company is Sovereign Pension Services. For now, the contact information remains the same as my existing firm. If you would like more information on anything I've discussed, please feel free to contact my firm or me.
LARRY GROSSMAN, CFP, CIMA