1. What is a Self-directed Individual Retirement Account? A self-directed Individual Retirement Account is one in which the account owner picks his or her own investments. Once the account owners have found an investment, My Retirement Account Services, LLC (MyRA) will take the steps necessary to acquire it. Investments are not limited to the traditional stocks, bonds and mutual funds. Our account owners may invest in real estate, private equity, promissory notes, precious metals and much, much more.
2. Why haven’t I heard of this before? When most people think of Individual Retirement Accounts, they think of the banks, brokers and financial advisors who typically market them. These vendors typically have a portfolio of stocks, bonds and mutual funds from which their account owners may pick investments. Their sales people are trained to sell those investment products. Many of them don’t know it’s possible to invest in anything other than those types of products. Even if they did, the non-traditional investments do not fit into their business model. There are a handful of companies like My Retirement Account Services, LLC who specialize in holding nontraditional investments. The word is getting out and non-traditional assets are becoming more and more popular.
3. What types of Individual Retirement Accounts are there? There are four basic types of Individual Retirement Accounts: Traditional IRA The Simplified Employee Pension Plan (SEP) Savings Incentive Match Plan for Employees (SIMPLE) Roth IRA
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4. How do I know which Individual Retirement Account is best for me? This choice is typically made between a Traditional and a Roth. With the Traditional IRA, the account owner receives a tax deduction for his or her contributions. With the Roth, there is no deduction for the contributions. As a result, when distributions are taken from the traditional, the distributions are taken as ordinary income and taxed at ordinary income tax rates. When distributions are taken from the Roth, the distributions are not added to ordinary income and are not taxed. Many account owners discuss their particular situations with their tax or accounting professional prior to making a choice.
5. Why do I need a custodian and/or administrator? You must have a custodian or administrator like My Retirement Account Services, LLC because the statute that created IRAs requires it.
6. How do I go about establishing an Individual Retirement Account? Establishing an Individual Retirement Account is typically as simple as filling out an application with your chosen custodian or administrator. My Retirement Account Services, LLC has such forms on its website (www.getmyra.com). You can also call 1-888-753-6972 and have our customer service representatives assist you in completing the forms.
7. How can I fund my Individual Retirement Account? You can fund your IRA by making the annual contributions, which for the Traditional is up to $5,000.00 in the 2010 tax year. If you are age 50 or older, you may add another $1,000.00. You may roll over funds from another IRA or qualified plan. You may contribute up to $5,000.00 in the 2010 tax year to a Roth as well and add the additional $1,000.00 if you’re 50 or older. With the Roth, you may also 888-753-6972
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convert an existing traditional IRA or other qualified plan. You may also roll over funds from an existing Roth 401k.
8. Are my contributions tax deductible? Generally speaking, contributions to a Traditional IRA are tax deductible. Certain people who also contribute to an employer-sponsored plan may have their deduction diminished or eliminated. Contributions to Roth IRAs are not tax deductible.
9. Can I contribute more than the annual limit? Any contribution over the annual limit is considered an excess contribution. Excess contributions are assessed a 6% excise tax each year until the excess is removed from the account. No excise tax is assessed if the excess is removed in the same tax year as it was contributed. The tax is assessed against the account owner.
10. How do I get money out of my account (distributions)? Money comes out of your account as distributions. Distributions can be taken penalty free at age 59 or older. If distributions are taken earlier, there is a 10% penalty assessed. Traditional IRA account owners must begin taking Required Minimum Distributions upon reaching age 70 . Roth IRA account owners must also meet a 5 year requirement as well as the age 59 requirement. The rule states that distributions may not be taken penalty free from a Roth until the account has aged 5 years from the date of the first contribution to a Roth account. Distributions may also be made from an IRA upon the death of the account owner. They can also be made for certain disabilities and for first time home purchases.
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11. What services will I receive for the money I’ve spent? With My Retirement Account Services, LLC, you will be assisted by a helpful, friendly staff that is knowledgeable in self-directed investing to help you through the acquisition or divestiture of investments in your IRA. My Retirement Account Services will do the record keeping for your account and provide you with quarterly statements that reflect the activity in and status of your account. The company also produces and supplies to you a monthly newsletter containing information pertinent to your self-directed account and self-directed investing.
12. Are there any special rules of which I should be aware before I get started? Yes. To be a successful investor with a self-directed IRA you must be familiar with the types of investments you can make with your account and the persons with whom you may invest and those with whom you may not, the prohibited transactions rules. My Retirement Account Services, LLC strongly recommends that each account owner develop a team of professionals to assist with his or her investing. The team should include an attorney, a tax or accounting professional and an investment advisor. Each member should be familiar with self-directed investing.
13. What happens if I break those rules? If you or one of your beneficiaries break the prohibited transaction rules, you risk having your account disqualified. The account will be deemed as distributed to you as of the first day of the year in which the prohibited transaction took place. It will be distributed at the fair market value of the account as of that date. The account owner will pay taxes on the distribution at his or her ordinary income tax rate. If the account owner is under age 59 , he or she will also pay the 10% penalty for an early distribution. If the IRS determines that it is applicable, it may also assess a 100% excise tax as a penalty as well.
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This is one of the reasons that My Retirement Account Services, LLC recommends that account owners have a team of professionals to assist them with their investing.
14. What is the best way for me to avoid breaking those rules? The best way to avoid breaking the rules is to have a good understanding of them yourself. There are a number of publications in the My Retirement Account Services, LLC My Learning Center that will be helpful in giving you a firm understanding of those rules. In addition to the above, have at your disposal a financial team consisting of an attorney, a tax or accounting professional and a financial advisor.
15. Are there any special tax considerations of which I should be aware? There may be tax considerations if you are using debt financing to acquire an asset or if you are operating a business inside your IRA. If either of these is present, you may be subject to unrelated business income tax (UBIT). Please consult your tax or accounting professional if you suspect you may be subject to UBIT.
16. Are there liability issues of which I should be aware (can my IRA be sued)? Yes. Your IRA can be sued. Many of the causes of such suits can be insured against. In most instances, IRAs and other retirement accounts are exempt from post-judgment execution. Speak with an attorney in your home jurisdiction to determine the extent of the exemption where you reside.
17. In what assets may I invest? With a My Retirement Account Services, LLC IRA, you may invest in all of the traditional assets one typically thinks of in IRAs. In addition, you may invest in real
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estate, private equity, promissory notes, precious metals, oil and gas ventures, tax liens and many, many other things. You are only limited by your own creativity.
18. Are there assets in which I cannot invest? Yes. 26 USC 408, the statute that gives rise to the IRA, lists:
Life Insurance Policies
Collectibles, including artwork, rugs, automobiles, alcoholic beverages, gems, metals (though there are some exceptions)
Coins (there are some exceptions)
Subchapter S Corporations
19. What happens to my un-invested cash? At My Retirement Account Services, LLC, un-invested cash is held in an interestbearing, FDIC-insured money market account. All interest earned on these deposits are paid into the account owner’s account.
20. Are IRAs insured like bank accounts? No. Individual Retirement Accounts are not insured like bank accounts. The uninvested cash is insured (see 19 above) by the FDIC. There is no similar insurance program for the IRAs themselves.
21. If I don’t have sufficient funds in my IRA, can I invest with others? Yes. You may partner with others to make investments. Be aware of the prohibited transaction rules as you do. Seek counsel from your financial team as you move forward.
22. If I don’t have sufficient funds in my IRA, can I borrow money to make up the difference? Yes. You can borrow money to purchase assets in your IRA. The loan must be a nonrecourse loan (one in which the asset purchased serves as the sole source of recovery for the lender should there be a default on the loan). There are companies that specialize in
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non-recourse lending. Please call My Retirement Account Services, LLC at 1-888-7536972 and ask our customer service representatives for the names of some of these.
23. How do I buy real estate in my IRA? Buying real estate in your IRA is similar to purchasing real estate personally. Remember that the property must be titled in the name of your IRA. My Retirement Account Services, LLC will be signing the documents on behalf of your IRA. All expenses related to the purchase and maintenance of the property, including insurance and taxes, must be paid from your IRA.
24. Can I buy real estate that I own personally with my IRA? No. You cannot sell property you own personally to your IRA. Similarly, you cannot buy property owned by your IRA from the IRA.
25. Can I live in real estate owned by my IRA? No. Neither you nor any other disqualified person can live in property owned by your IRA
26. If I buy real estate that needs work, can I do the work myself? No. You should have the work done by a non-disqualified third party.
27. How do I pay for the work? All of the work must be paid for through your IRA.
28. If I buy rental property, can I manage the property? Technically speaking you probably can manage the property so long as you do so without compensation. However, it is not recommended. Managing the property provides too many opportunities to inadvertently engage in a prohibited transaction. It is best to have a non-disqualified third party manage the property.
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29. Do I have to buy and hold or can I purchase, renovate and sell? Yes. You can buy, renovate and sell. You do not have to buy and hold. Remember that you may not do any of the renovation work yourself.
30. How long do real estate transactions take to process? In today’s highly automated world, the transaction should not take much longer than one in which you are purchasing property personally. There is the chance, though, that transferring the paperwork between the title company and My Retirement Account Services, LLC may take longer than it would take if you were to personally go to the title office for a closing.
31. How do I buy private equity in my IRA? Buying private equity is a simple matter of finding the investment opportunity, doing the proper due diligence, and forwarding the necessary documentation to My Retirement Account Services, LLC for processing. These include My Retirement Account Services, LLC’s private equity investment forms, organizational documents for the company in which your IRA is investing like Articles of Incorporation (C-Corp), Articles of Organization (LLC), Limited Partnership Agreement or Joint Venture Agreement. MyRA may also ask for a Certificate of Good Standing for the company. You should also forward to MyRA the Private Placement Memorandum, Subscription Agreement, and Investor Questionnaire where appropriate. Once the investment has been funded, please make sure that the investment sponsor forwards proof of ownership to MyRA.
32. Does My Retirement Account Services, LLC perform any due diligence? No. These are self-directed investments; you, the account holder, found the investment. Members of your financial team may help with your due diligence effort.
33. How do I purchase precious metals in my IRA? Find a metals or coin broker. Do your due diligence on the broker. Determine what you’re purchasing. Forward the broker’s documentation to My Retirement Account Services, LLC along with MyRA’s forms for investing in precious metals.
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34. Are there any special rules that apply to these purchases? Yes. If you are investing in precious metals, My Retirement Account Services, LLC must physically hold the metal. MyRA uses a secure facility in Delaware to house its account holders’ metal.
35. Can I loan the funds in my IRA to others? Yes, you may. The loans can be secured or unsecured. The loans must be represented by a promissory note that describes all of the terms of the loan including method of repayment.
36. What are some of the other things in which I can invest? Over the years, account owners have invested in many things, including but not limited to the following:
Bankruptcy receivables
Horses
Cattle
Fire trucks
Musical instruments
Private seat licenses
Tickets to sporting events
37. How are these assets held? How the assets are held depends upon the asset. My Retirement Account Services, LLC will hold a deed to real estate in its vault. It will hold share certificates and other evidence of ownership for private equity investments in its vault. Precious metals will be held in a secure facility in Delaware. Other physical assets are represented by purchase agreements that are held in MyRA’s vault while the actual physical asset is held at a facility arranged by the account owner.
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38. Will I get a statement from My Retirement Account Services, LLC? Yes, you will get a quarterly statement from My Retirement Account Services, LLC.
39. Can I see my holdings online? Yes, you can see your account statements online.
40. What do I do if I have questions? Please call our customer service number at 888-753-MyRA (6972)
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