SIMPLE IRA at Vanguard to be used as a Self Directed IRA
Investor · Newberg, OR · Member since 2015 · 34 posts · 18 votes
There are so many posts here that I don't find myself asking to many questions... This may be answered elsewhere but I am having trouble figuring out the thought process with it before I head to my CPA. There is a lot of information out there so I guess I am just looking for some initial information- like a get started kind of thing.
I have been self employed for some time- I have a SIMPLE IRA. My wife has a traditional IRA and both are held at Vanguard. I am thinking of making these self directed- and using them to buy more property.
Does anyone know if I can use Vanguard for this?
Is there a way to invest in the same property with my SIMPLE and my wife's traditional?
Is there a guide somewhere on BP to look into how to get started with this process?
Yes, you should be able to put those funds to work in real estate.
The best thing to do will be to consult with a professional firm that offers self directed IRA and 401k plans, then follow up with your CPA. Most CPA's are not expert in this specialty field, but you will certainly want to have them on board with what you are doing.
If you are self-employed, have no full time employees other than you and your wife, and if your SIMPLE IRA is more than 2 years old, the best option would likely be a Solo 401k. This is a plan that could potentially hold funds belonging to both you and your wife, and is also much more generous than the SIMPLE IRA when it comes to new contributions.
If your current SIMPLE IRA is less than two years old, it cannot yet be rolled over to a 401k. You could look into an IRA based self-directed program in that case.
While you may be able to hold the funds of your plan with an institution like Vanguard, they will not be able to assist you with implementing such a plan. Their business is selling equities and funds, not creating custom retirement plans and educating clients with regards to the rules surrounding the use of tax sheltered retirement savings for non-traditional asset investing such as real estate.
With the Solo 401k, for example, the plan is in the form of a trust and you can be the trustee. As trustee, you can select a bank and/or brokerage to hold the funds of the 401k. You can then deploy that plan capital into any allowable investment, which includes stocks, real estate and a whole lot in between.
Yes, you should be able to put those funds to work in real estate.
The best thing to do will be to consult with a professional firm that offers self directed IRA and 401k plans, then follow up with your CPA. Most CPA's are not expert in this specialty field, but you will certainly want to have them on board with what you are doing.
If you are self-employed, have no full time employees other than you and your wife, and if your SIMPLE IRA is more than 2 years old, the best option would likely be a Solo 401k. This is a plan that could potentially hold funds belonging to both you and your wife, and is also much more generous than the SIMPLE IRA when it comes to new contributions.
If your current SIMPLE IRA is less than two years old, it cannot yet be rolled over to a 401k. You could look into an IRA based self-directed program in that case.
While you may be able to hold the funds of your plan with an institution like Vanguard, they will not be able to assist you with implementing such a plan. Their business is selling equities and funds, not creating custom retirement plans and educating clients with regards to the rules surrounding the use of tax sheltered retirement savings for non-traditional asset investing such as real estate.
With the Solo 401k, for example, the plan is in the form of a trust and you can be the trustee. As trustee, you can select a bank and/or brokerage to hold the funds of the 401k. You can then deploy that plan capital into any allowable investment, which includes stocks, real estate and a whole lot in between.
Hi Demetri,
You will not be able to invest in real estate when you have your funds in an account with Vanguard. You will need to move your account to a custodian who allows for alternative investments.
I highly recommend www.mysolo401K.net
Their website is full of great information and they welcome you to call in with any additional questions you may have.
Brian from Safeguard Advisors gave you an informed answer. However, when going to their website, it seems they are making the statement that if your solo 401K obtains mortgage financing that you will need to personally guarantee the loan. It is just not worded/written clearly on their site.
A Non recourse loan means You Never personally guarantee a loan!!! Only the property guarantees the debt.
This is what their site says:
Lending Guidelines
This type of loan is higher risk to the lender, and their underwriting policies are going to me more conservative as a result. Typical guidelines you might find are as follows:
Down payment of at least 30%. Condos as high as 50%
10% – 15% cash reserves in the plan at the time of the loan
Terms range from 5/1 arms to 25 year fixed rate loans
Rates will generally be 1% – 1.5% higher than a typical investor loan with a personal guarantee. A range of 4.75% – 6.25% is common, depending on the loan terms.
Clean, cash flow properties work well. Options are limited for properties requiring extensive repairs or raw land. http://www.ira123.com/learn/ira-mortgages-lending/
Please see the following site, it may be written more clearly for you https://www.mysolo401k.net/reale-state-401k-purchase-methods/
Also, make sure to check each companies fees. They can vary from a few hundred dollars to a few thousand.
@Demetri T., I'm curious to know what you ended up going with. I recently asked this question in another thread. I have W2 income now, and want to shelter some of that without losing control over it.
Demetri, I have sent you a PM with a recommendation for setting up an SDIRA (I think the rules may not allow doing so on the open board).
My wife and I set up our SDIRA with this person's company in 2011 and have been very pleased. I would also like to add that outside of people who offer SDIRAs, others' knowledge about how they operate is extremely limited.
Example: we wanted to buy another investment property using the SDIRA. Literally none of the at least six bankers had a clue about SDIRAs. One even told me I had to amend my tax returns- on a pre-tax retirement account! From getting similar reactions from several bankers, I realized the fancy titles on the bankers' business cards mean little to nothing in the SDIRA world.
After having no success with these bankers, I contacted the representative I PMed you about. It turns out it was all about how I was presenting the information. Problem solved. Also, the company in question has a pretty good phone staff. We have found that they can answer most questions. There have been only one or two that they couldn't answer. They referred me to the original representative and his advice and information has always been spot on. Believe me, you will have a lot of questions before and after setting up your SDIRA. Choose wisely.
Yes IRAs can be pooled to invest in the same property. This can be done under a TIC or by pooling the IRA funds in the same LLC--known as IRA LLC.