Cash in on the American Investor's Quest

A long-standing Internal Revenue Service ruling allows all Americans to invest their IRA funds, or 401(k) funds rolled into an IRA, in a wide variety of non-traditional investment types. With this type of IRA, called a Self-Directed IRA, individuals can invest in mortgages, private notes, structured settlements, factoring, and limited partnerships - just to name a few. Because these are IRS-permitted investments, made within a qualified retirement plan, rolling current retirement funds into a Self-Directed IRA to do this type of investing is penalty-free. Additionally, the taxes due on the growth of the investments are deferred until distribution begins at retirement. If a Self-Directed Roth IRA is involved, the earnings are tax-free when distributed at retirement. 

In order for your investors to take advantage of this opportunity, they must work with a qualified special asset custodian. Unlike most financial institutions offering IRAs, true Self-Directed IRA custodians allow clients to select from virtually any type of investment. Such investments as private notes, factoring, commercial paper, real estate, annuities, structured settlements, car paper and commercial leases, are possible choices for clients of firms that are truly Self-Directed. While clients can still include traditional investments such as stocks and mutual funds within their Self-Directed IRA, they also have the freedom to diversify their portfolio by adding a non-traditional asset like a private note or piece of real estate. Such institutions serve as a vital source of funds to those selling notes and those managing investment pools to purchase notes by assisting individuals, including "angel" investors, to invest their retirement funds in these types of assets. In many cases, these investors have large sums of money accumulated in their retirement accounts, which they can now put to work in non-traditional investments through the services of Self-Directed IRA institutions. 

The timing is excellent now for you, as a member of the Cash Flow industry, to take advantage of this little-known retirement planning tool, and the possibilities opened up by it. Daily headlines in the Wall Street Journal discuss economic uncertainties caused by mutual fund mismanagement, corporate accounting scandals and so on. As a result, more and more Americans are pulling out of traditional investments and are aggressively seeking non-traditional assets, like your private notes, as a primary or ancillary investment for their IRAs due to their potential for a higher return. 

Your challenge as a member of the Cash Flow industry is to take a proactive role in educating and informing the investors and professionals you work with about the benefits of Self-Directed IRAs. By becoming knowledgeable in this area of specialized IRA investing, the professionals you work with (e.g., CPAs, attorneys, and financial planners) will help their clients earn higher returns on investments, enabling themselves to increase their professional prestige and grow their client base as a result. Your investors will have the potential of a much higher return for their retirement account investments. You will not only strengthen the relationship you have cultivated with current investors by offering them an opportunity to earn more money without any additional out-of-pocket cash, but you will also have the opportunity to increase your investor pool by introducing this unique concept to new potential investors. 

Find out more about the opportunities Self-Directed IRAs offer you and your investors, and how you can build your business and grow your profits using this unique retirement planning tool. 

Michael P. Scott, vice president of PENSCO Trust Company, a self-directed IRA custodian specializing in alternative assets. For more information, contact PENSCO Trust Company at 866-818-4472 or via e-mail: penscotrust@mindspring.com 

("Reprinted and used with Permission of Author - 6-2004")