Going from Capital Accumulation to Management of your IRA or 401(k)

I did not mention this in my Bio – I am on the Board of Directors of a community bank in organization – a de novo bank.  The FDIC approved the bank’s application earlier this week.  At our board meeting, the CEO mentioned we are moving from the capital accumulation stage to the governance (management) stage of our organization.  Like you, I try to hone my listening skills and apply what I hear to other areas of my life.   Such is the case here.  I thought about my own Roth IRA and how I got started investing in real estate in the early 90’s.  I thought about the stages of approval, capital accumulation and now, management.

Approval for IRA and 401(k):

IRA accounts have had the authority to be established and housed with a custodian for alternative investments since 1974.  In my early days of retirement real estate investing it was a struggle because few knew about it and there were few banks that had stepped forward to be custodians.

Solo 401(k) plans were created through tax law and allowed beginning in 2002.  These plans are designed primarily for the self-employed with no employees and owners that do not control other entities with employees.

Capital Accumulation:

We often think only of contributions to retirement accounts.  Many of us have been contributing (accumulating capital) for many years.  Our mature retirement accounts can be transferred or rolled over from the typical brokerage account to more closely held management and checkbook control.  Rather than concentrating on the contributions, we can now direct our funds to a greater breadth of investment choices.  For instance, many of my clients have transferred funds that started in a employer company 401(k), ended up in an IRA to remove them from the company and then ended up in a solo 401(k) in a new for-profit retirement business - unretired boomers!

Management of your IRA or Solo 401(k):

So, here we are.  We have been approved and raised our capital.  Now we are in the management phase of our venture.  With the correct setup and structure, we can manage our investments in anything allowable.  All investments are allowed for IRAs, except collectibles, sub-chapter S corporation stock, or life insurance.  Only collectibles are not allowed for solo 401(k) investments.  By the way, I purchased 40 acres in the Upper Peninsula of Michigan years ago.  It has a 180 degree view of Lake Superior and the only good drinking water in miles.  I sleep well at night!