Don’t Roll Over and Play Dead

There is good news and bad news for people with significant retirement savings. The good news is that you have significant savings. The bad news is that it isn’t yours.

The game becomes how do I get my money and manage tax. People have been told for years that they’ll be in a lower tax bracket at retirement. This is only true if they have failed economically.

Real estate investments are a very real solution to maximize what you get from your retirement plan. The rules have changed because of inflation and longevity. Retirement in today’s world could be 30+ years. Loss of buying power not the loss of investments is your biggest threat.

Bonds or fixed income investments make us warm and fuzzy by providing nice current income and the feeling of safety. This, however, will self destruct in the real environment of inflation and longevity.

A three percent trend line inflation will create the necessity to have $2.40 to buy what $1.00 purchased 30 years earlier.

Stocks are a way to beat inflation but at what cost. As we age, volatility is more and more difficult to bear psychologically.

Today less than two percent of retirement assets in IRAs are invested in real estate. I believe this is because most people are unaware of the opportunity or they are shown a very complicated way to do it with significant negatives. Most people use the inside method whereby the property is held by a custodian inside the plan with significant restrictions and difficulties.

1. No leveraging or UDFI (Unrelated Debt Financed Income) is created meaning current income tax at a high rate.*
2. No current tax benefits from the real estate.
3. Future tax benefits would be lost by converting capital gains back to ordinary income when money is withdrawn as retirement income.
4. Estate tax benefits would also be lost in that there is no step up in basis at the time of death.
5. No personal usage of any real estate purchased as this would be a prohibited transaction.

The only reason people would want to do real estate in a plan is because they believe that real estate is by far their investment of choice.

There is a very attractive alternative. With our plan you can buy real estate in conjunction with the IRA. This would allow you to

1. leverage your investment
2. maintain tax benefits
3. receive estate benefits
4. personally use your investments

That’s right, you could use your IRA to buy a vacation home or other personal property. Even to obtain your personal dream residence. Also, your heirs will benefit from substantial tax advantages when the property is inherited.

Remember, you don’t need to rollover your 401(k) or IRA and play dead. There are very exciting alternatives. Real estate has some tremendous advantages over alternative investments. Over the last five years, residential real estate has appreciated an average of 12-25% annually. Real estate can provide steady income and property values tend to at least maintain themselves. Historically, appreciation has averaged 5-8% annually.

The reason that real estate fundamentals make sense is that demand has been and will continue to increase. Demographics hold this to be a fact. When interest rates go up, rental income also goes up. When interest rates go down, prices tend to appreciate more. The ultimate key to real estate is location, location, location.

We can help find valuable property to accomplish your goals. To find out additional details and how you might qualify, please contact me.

Pat Barton
(757) 478-8264
www.sandbridgehouses.com

*$10,050 of trust income results in a current tax bracket of 35% Federal.