Self Directing Your Retirement Plan
Control Your Financial Destiny...
Lance W. Newton
For more than 15 years I’ve worked in insurance, banking and real estate. I enjoy sharing information with and learning from those who read my blogs. I welcome your feedback and comments.
Feel free to email me at lance@selfdirectioncentral.com .Linked in Profile
Syndicate
Creating and Sustaining Self Direction
How Long Can Working People Ignore Reality?
Ripples of "The New Normal" hit the big time at the Wall Street Journal
The "New Normal" I am referring to is that most Baby Boomers are going to be retiring on a tiny fraction of their working incomes, mostly derived from a shaky Social Security System. What a prospect!Blogging away for years now with about 60-100 hits per day on this site, I have often felt that I was pretty much alone in my views about the level of "Middle Class Denial" (let's call it "MCD" and make it a syndrome) regarding pension realities. Baby Boomers are applying for Social Security (SS) at a reported rate of 10,000 per day, many on the first day they are eligible for benefits. I've heard from people old enough to qualify for SS, who have experienced a blow-up in their career that ... << MORE >>
A Change in Self Direction for 2011
The Case for More and Better Self Direction
When I first began blogging at Self Direction Central a few years years ago, the focus of my work life was Self Directed Pensions. I had the good fortune to work for two good Self Directed pension
trustees and learn a great deal about the strengths and weaknesses of those plans. On the blog I was able to express my personal opinions and observations from experience especially about the need
for good due diligence. I was always very distressed when I saw people make investments without thoroughly researching who was getting their money and how it is really being invested. Now I realize that this is not that much different from investing with any mutual fund, even those with a good track record. After all, ... << MORE >>
Job Hoppers and Self Directed Retirement Plans
Some Pension Considerations for Job Hoppers
I recently read an interesting article posted on BNET by author Penelope Trunk, titled "Why Job Hoppers Make the Best Employees" . This article introduced me to Ms. Trunks career blog at www.penelopetrunk.com which I am enjoying on many levels. My comments on this topic are directed toward private sector workers, although workers in the public sector are likely to face the necessity of taking more responsibility for their own financial security as public pensions may be reduced or even eliminated in the future if public budgets cannot be balanced. In most cases, cash strapped, profit oriented private sector employers are looking for ways to decrease pension liabilities whereever and whenever they can, by any means they can.
Everybody in Gen X and Gen Y will need to get more involved in securing their financial future. The transfer payments funding Social Security went negative in 2009, meaning that contributions from workers to Social Security were less than the payments being made to retirees drawing Social Security. Do you want to bet your retirement on Social Security?
As a Baby Boomer, I have lived trough the golden era of stable middle-class employment and participated in the not so gradual decline of that era (See "Going Down With the Joneses "). The recent Financial Recession (reminds me of the old line, "when your neighbor is laid off, it's a recession, when you are laid off, it's a Depression") I wrote an article entitled "Broken Promises" to discuss some of the realities of pensions in the modern work place and in her article, Ms. Trunk reminded me of a number of the positives to Job Hopping and a changing view of job hoppers. Early in my work life, I took some grief for changing jobs after just a few years. Lacking a specialized education, I changed jobs to learn new skills and to increase my salary and it worked pretty well except in the area of my pension.
Like most brainwashed Americans I spent less time planning for retirement than for my annual vacation and when I left a job, for the most part I left the pension contributions I accumulated with the employer plan where they had accumulated or in a couple of cases, rolled them over into a cash account at H and R Block, who did my taxes. In one case, I took an early distribution and paid the 10% penalty for the ready cash. None of these approaches effectively maximized my control or results from my pension assets.
Failing to Plan means Planning to Fail
The cost of my failure to plan is reflected in the asset balance in my Pension. My point is this: If you are going to be a job hopper, take the time to learn the ins and outs of Self Directed Retirement Plans and set up one or more plans that suit your situation. When you move from one position to another, you are in control of all of your assets and do not abdicate control to others. If you take no responsibility for results, you will get the minimum results from "professional investment managers" that will keep them employed and out of jail. Don't worry about them, (in 2009 25 Hedge fund managers were paid more than $1 Billion in personal compensation and the highest paid earned $4 Billion) invest some time in your own retirement.
If you have your own business with no employees, this will likely take the form of a Self Directed 401k, which is far more flexible than a Self Directed IRA. If you work for a large employer that offers a 401k or any plan that offers matching contributions, take advantage up to the maximum amount for matching and consider an additional IRA contribution. In any case, it is time for Job Hoppers of all ages to pay attention to and take advantage of the control that is offered through Self Direction of retirement assets and I don't mean just selecting a family of mutual funds and forgetting the investment for 20 years.
The Changing Employment Landscape
I suspect that our employment system is evolving into a simple two tier system. One tier will be that of generic service workers who basically need all of their meager earnings to subsist. Employees in this tier should do everything possible to fund an IRA or Roth IRA account every year that they work. This means financial sacrifice of some kind and doing without something now to fund something in the future. This will be a very difficult choice for workers in this tier.
The other tier will consist of knowledge workers with specialized skills that are transferrable and incent employers to do a bit more to retain them. A good example of this is technical and scientific work related to National Defense. This is not the type of work likely to be outsourced to Chindia or Malaysia. Workers in this type of area and other technical areas will get more pension benefits from employers than service workers. Workers in healthcare will see increased demand, but need to understand their pension options.
In all cases going forward, Americans need to take much more responsibility and become far more active in the direct management of their pension in order to produce better results for their own future.
I recently read an interesting article posted on BNET by author Penelope Trunk, titled "Why Job Hoppers Make the Best Employees" . This article introduced me to Ms. Trunks career blog at www.penelopetrunk.com which I am enjoying on many levels. My comments on this topic are directed toward private sector workers, although workers in the public sector are likely to face the necessity of taking more responsibility for their own financial security as public pensions may be reduced or even eliminated in the future if public budgets cannot be balanced. In most cases, cash strapped, profit oriented private sector employers are looking for ways to decrease pension liabilities whereever and whenever they can, by any means they can.
Everybody in Gen X and Gen Y will need to get more involved in securing their financial future. The transfer payments funding Social Security went negative in 2009, meaning that contributions from workers to Social Security were less than the payments being made to retirees drawing Social Security. Do you want to bet your retirement on Social Security?
As a Baby Boomer, I have lived trough the golden era of stable middle-class employment and participated in the not so gradual decline of that era (See "Going Down With the Joneses "). The recent Financial Recession (reminds me of the old line, "when your neighbor is laid off, it's a recession, when you are laid off, it's a Depression") I wrote an article entitled "Broken Promises" to discuss some of the realities of pensions in the modern work place and in her article, Ms. Trunk reminded me of a number of the positives to Job Hopping and a changing view of job hoppers. Early in my work life, I took some grief for changing jobs after just a few years. Lacking a specialized education, I changed jobs to learn new skills and to increase my salary and it worked pretty well except in the area of my pension.
Like most brainwashed Americans I spent less time planning for retirement than for my annual vacation and when I left a job, for the most part I left the pension contributions I accumulated with the employer plan where they had accumulated or in a couple of cases, rolled them over into a cash account at H and R Block, who did my taxes. In one case, I took an early distribution and paid the 10% penalty for the ready cash. None of these approaches effectively maximized my control or results from my pension assets.
Failing to Plan means Planning to Fail
The cost of my failure to plan is reflected in the asset balance in my Pension. My point is this: If you are going to be a job hopper, take the time to learn the ins and outs of Self Directed Retirement Plans and set up one or more plans that suit your situation. When you move from one position to another, you are in control of all of your assets and do not abdicate control to others. If you take no responsibility for results, you will get the minimum results from "professional investment managers" that will keep them employed and out of jail. Don't worry about them, (in 2009 25 Hedge fund managers were paid more than $1 Billion in personal compensation and the highest paid earned $4 Billion) invest some time in your own retirement.
If you have your own business with no employees, this will likely take the form of a Self Directed 401k, which is far more flexible than a Self Directed IRA. If you work for a large employer that offers a 401k or any plan that offers matching contributions, take advantage up to the maximum amount for matching and consider an additional IRA contribution. In any case, it is time for Job Hoppers of all ages to pay attention to and take advantage of the control that is offered through Self Direction of retirement assets and I don't mean just selecting a family of mutual funds and forgetting the investment for 20 years.
The Changing Employment Landscape
I suspect that our employment system is evolving into a simple two tier system. One tier will be that of generic service workers who basically need all of their meager earnings to subsist. Employees in this tier should do everything possible to fund an IRA or Roth IRA account every year that they work. This means financial sacrifice of some kind and doing without something now to fund something in the future. This will be a very difficult choice for workers in this tier.
The other tier will consist of knowledge workers with specialized skills that are transferrable and incent employers to do a bit more to retain them. A good example of this is technical and scientific work related to National Defense. This is not the type of work likely to be outsourced to Chindia or Malaysia. Workers in this type of area and other technical areas will get more pension benefits from employers than service workers. Workers in healthcare will see increased demand, but need to understand their pension options.
In all cases going forward, Americans need to take much more responsibility and become far more active in the direct management of their pension in order to produce better results for their own future.
Rethinking Your "Retirement Plan"
What is a retirement plan?
I read an online article today that really got me thinking about what it means to have a "Retirement Plan” and just what it means to have one.
The sad fact is that most people between the ages of 50 and 60 do not have a formal retirement plan. Recent economic events have impacted this age group more than almost any other, since most in
this
group have been hit with a double whammy of declining home equity and declines in the value of traditional securities investments in a 401k or other qualified pension plan, if they have an
employer
that still offers one. This is the same group that has been setting records for consumption, borrowing and spending for years.
For people under 50 the recession has reinforced the need to give more thought to what ...
Are IRA Assets Protected From Creditors?
Protection Varies by State and Type of Plan
Most people assume that the assets in an IRA are 100% protected from Creditors. Almost everyone remembers that the NFL Pension assets of accused murderer and ex-football star O.J. Simpson were protected against a civil action by the family of his ex-wife. His plan was a Qualifed Plan and not an IRA and were protected from garnishment in that suit. Your legal and/or tax professionals should be familiar or get familiar with State statutes that may override Federal protections in certain, limited situations.
Asset protection of pensions includes some gray areas of the law and the treatment of retirement assets is affected by several factors. The Bankruptcy Reform Act of 2005 provided a good deal of clarification regarding access to assets in both Qualified and Non-Qualified Plans. There is also a useful discussion of asset protection in various plans at: http://www.petershannonco.com/timely_tax_topics2.htm .
The two ...<< MORE >>
Most people assume that the assets in an IRA are 100% protected from Creditors. Almost everyone remembers that the NFL Pension assets of accused murderer and ex-football star O.J. Simpson were protected against a civil action by the family of his ex-wife. His plan was a Qualifed Plan and not an IRA and were protected from garnishment in that suit. Your legal and/or tax professionals should be familiar or get familiar with State statutes that may override Federal protections in certain, limited situations.
Asset protection of pensions includes some gray areas of the law and the treatment of retirement assets is affected by several factors. The Bankruptcy Reform Act of 2005 provided a good deal of clarification regarding access to assets in both Qualified and Non-Qualified Plans. There is also a useful discussion of asset protection in various plans at: http://www.petershannonco.com/timely_tax_topics2.htm .
The two ...<< MORE >>
Budgeting for Pension Contributions
Anyone Can Save to Make Pension Contributions to a Self Directed Retirement Plan
If they really want to, any working person can find a way to save for the future in the form of tax deductible contributions to an IRA, or for the self employed, an Individual (k) plan or other Self Directed Retirement Plan (SDRP). After many presentations on SDRP's I get audience members pulling me aside to tell me that what I am saying makes sense, but that they don't make enough or are simply unable to save for retirement.
Because I already know the answer, I always ask them a direct question; "Do you have a written monthly budget that you update weekly?" 99% of the time, they say, "no I do not, or I've been meaning to do that" or something similar. Since there are 52 weeks in a year, if you find $50 of fluff somewhere in your budget you can ...<< MORE >>
If they really want to, any working person can find a way to save for the future in the form of tax deductible contributions to an IRA, or for the self employed, an Individual (k) plan or other Self Directed Retirement Plan (SDRP). After many presentations on SDRP's I get audience members pulling me aside to tell me that what I am saying makes sense, but that they don't make enough or are simply unable to save for retirement.
Because I already know the answer, I always ask them a direct question; "Do you have a written monthly budget that you update weekly?" 99% of the time, they say, "no I do not, or I've been meaning to do that" or something similar. Since there are 52 weeks in a year, if you find $50 of fluff somewhere in your budget you can ...<< MORE >>
Frequently Asked Questions: Real Estate Purchase in an IRA
More answers to your many questions on Purchasing Real Estate in an IRA!
The response to my entry on the direct purchase of Real Estate using IRA assets was amazing. There were so many good questions that I decided to share some questions and answers. Let me know if you have more questions. Please note, we will use the word IRA, but many other types of Self Directed Retirement Plans (SDRP's) allow the direct purchase of Real Estate.
Q: We are getting ready to purchase some investment rental properties with our self direct IRA’s. Can we discuss the following questions about our new self direct IRA?
A: Yes, but remember I cannot help you with tax, legal or investment advice as I am not not a professional advisor, simply an educator. If your current professionals do not know the answers, refer them to me and I can help them find that ...<< MORE >>
Getting Started with Self Directed Retirement Plans
On Demand Webinar "Getting Started with Self Directed Retirement Plans"
Many of my readers have suggested that I find a way to include recordings of my webinars on my site. This recent webinar on Self Directed Retirement Plans includes a discussion of basic plan features and a couple of speakers on alternative investments in Real Estate and Structured Settlement Annuities. To download and play the entire webinar you will need Windows Media Player. You can click on the link below to download the .wmv file.
As always, I welcome your feedback and questions or suggestions for new topics.
Getting Started with Self Directed Retirement Plans. 5 minutes of a pre-recorded webinar available for download and viewing with Windows Media Player
...<< MORE >>
Many of my readers have suggested that I find a way to include recordings of my webinars on my site. This recent webinar on Self Directed Retirement Plans includes a discussion of basic plan features and a couple of speakers on alternative investments in Real Estate and Structured Settlement Annuities. To download and play the entire webinar you will need Windows Media Player. You can click on the link below to download the .wmv file.
As always, I welcome your feedback and questions or suggestions for new topics.
Getting Started with Self Directed Retirement Plans. 5 minutes of a pre-recorded webinar available for download and viewing with Windows Media Player
...<< MORE >>
Bernie Madoff Gets 150 Year Prison Sentence, but Who Really Pays?
Everyone Pays for What Bernie did if the same thing happens again...
They said that people in the courtroom cheered when the 150 year sentence was announced on the "Day of Reckoning" for Mr. Madoff. Since Bernie is 71, this is a life sentence. He will lose his lavish lifestyle on Park Avenue in trade for a small prison cell where he is still guaranteed free a free room, 3 square meals a day and the best of free health care. There are more than 48 million Americans who do not have the "luxury" of health care benefits, and I would guess that many of those have no free room are not guaranteed 3 squares a day, so to that extent Bernie is still ahead of many Americans.
Who Else Loses?
Of course the innocent members of his family (there must be some) ...<< MORE >>
They said that people in the courtroom cheered when the 150 year sentence was announced on the "Day of Reckoning" for Mr. Madoff. Since Bernie is 71, this is a life sentence. He will lose his lavish lifestyle on Park Avenue in trade for a small prison cell where he is still guaranteed free a free room, 3 square meals a day and the best of free health care. There are more than 48 million Americans who do not have the "luxury" of health care benefits, and I would guess that many of those have no free room are not guaranteed 3 squares a day, so to that extent Bernie is still ahead of many Americans.
Who Else Loses?
Of course the innocent members of his family (there must be some) ...<< MORE >>
Did You Know You Can Buy Bank Owned REO Investment Properties in your IRA?
Buy Deeply Discounted Cash Flow Real Estate in your Self Directed Retirement Plan
Everyone has heard about the exceptional values in the real estate marketplace represented by Bank Owned, "Real Estate Owned Properties" (REO). Banks which have foreclosed on properties are marketing them through retail channels that include Brokers and Agents that specialize in REO properties. These brokers and agents in particular are familiar with the processes and procedures used when dealing with the Asset Managers and Loan Servicers who control the sale of these deeply discounted properties. On a daily basis, investors are buying properties that yield very competitive cash on cash returns in California and many other states and there is the possibility of future appreciation over time on top of monthly returns.
Not everyone is aware that you can make Alternative Investments in a Self Directed Retirement Plan including the purchase of REO real estate for investment.
The process ...<< MORE >>
Everyone has heard about the exceptional values in the real estate marketplace represented by Bank Owned, "Real Estate Owned Properties" (REO). Banks which have foreclosed on properties are marketing them through retail channels that include Brokers and Agents that specialize in REO properties. These brokers and agents in particular are familiar with the processes and procedures used when dealing with the Asset Managers and Loan Servicers who control the sale of these deeply discounted properties. On a daily basis, investors are buying properties that yield very competitive cash on cash returns in California and many other states and there is the possibility of future appreciation over time on top of monthly returns.
Not everyone is aware that you can make Alternative Investments in a Self Directed Retirement Plan including the purchase of REO real estate for investment.
The process ...<< MORE >>