Small Business Owners Can Kill 2 Birds with 1 Stone Using Alternative Investment Strategies:
“Planning for Retirement & Improved Business Cash Flow”
Small-to-medium sized business owners should take heed of an important investment strategy known as the self-directed IRA, solo 401(k), SEP and SIMPLE.
Not only are there tax benefits, but the benefits of a self-directed IRA as an alternative investment option can help the small-to-medium sized business owner and his or her family plan for long-term personal goals, like retirement.
The bottom line: it is extremely important to diversify one’s assets – this can be achieved by allocating a portion of assets and funds into alternative investments. In particular, the “true self-directed IRA” is one of the best vehicles to accomplish such diversification.
The media is even widely discussing these benefits:
A recent Today Show video (view it here) discussed this investment vehicle:
>> when does it make sense to go to something as alternative as these alternative IRAs ?
>> if you have an asset that you think is going to have explosive growth. it might make sense to look at this. one of the benefits of IRAs is that the assets in the account grow tax-deferred until you have to pull them out at age 70 1/2 or a roth IRA grows tax deferred forever because you pay taxes up front. that can be hugely beneficial. there are hitches as well. you’ve got to be careful in these accounts of what we call self-dealing which basically means you can derive no benefit from your IRA until you pull the investments out. I think the easiest way to think about it is if you bought a vacation property and you put it in your IRA , you could not live there. you could not stay there. your family can’t stay there. the proceeds you get from renting the property out has to go right back to the IRA and even if you were to need to fix the roof on this vacation place, you can’t do it yourself because the IRA — the government might actually look and say, hey, that represents a contribution of more than $5,000 a year and in that case, the whole transaction, the whole account and the tax benefits fall apart.
>> so I’m hearing two things. the point you made me think there is no way I will want to put a house in my IRA and maybe in the olden days, house prices will go up and you felt comfortable. would you — how would you put a house in your IRA today?
>> if you were looking at a distressed property. say you got an IRA someplace else or a 401(k) and you want to roll it over, use the money to buy one of the distressed properties, the key is finding one of these alternative IRA custodians who can actually take you through the process and make sure you don’t mess it up. and if you want to do this several times, if you want a vacation property , horses and cattle, separate IRAs so if you mess up one you don’t mess them all up.
It should be noted that it is easy for small business owners to place retirement planning on the back-burner. After all, running a business is complicated, which drives business owners to focus more on resolving today’s problems. Day-to-day operations can bring on enough stress that long-term planning is not paid the proper amount of attention.
But not only is retirement planning an area where small business owners tend to lack a sense of forward looking initiative; planning and forecasting how to change such forecasts is also an important business tactic that deserves – but does not necessarily get – adequate attention.The latter concern is important for the owner’s business itself, while the former is important to the business owners’ long-term goals and his or her family members’ goals. So often, the business owners rely on the vitality of their company to put food on the table.
Planning for The Future with Non-traditional Investments
Therefore, it is imperative to plan for the future by diversifying assets, in an always-changing financial landscape and economy.One of the most important benefits to planning ahead in such a way is so the business actually leverages certain opportunities to create a tax free real estate income that can be used for retirement, as well as generational wealth planning. As a result of the Economic Growth and Tax Relief Reconciliation Act, “many of the restrictions of what type of funds could be rolled into an IRA and what type of plans IRA funds could be rolled into were significantly relaxed.”
Focusing on improving the business’ cash flow can help provide a source of new funding for a self-directed IRA, 401k solo, SEP or SIMPLE retirement account. The business owner can achieve a well-diversified retirement portfolio and potentially build a legacy for his or her family when properly advised. Also, the new cash flow can be used to help improve the cash generated when the time comes the sell the business.
Focusing on improving the bottom line to diversify retirement portfolio by investing in a self-directed IRA is a means to kill two birds with one stone. The combined effort allows the business owner to plan for his or her future, as well as improve their business’ cash-flow over the long-haul.
Article Overview
Bottom-line, when a buyer is seeking to acquire an existing business, they are valuing the cash flow potential. All things being equal, the higher the cash flow, the higher the sales value. By seeking to leverage hidden cash flow from your business to fund a self-directed retirement account, you can kill to two birds with one stone. More cash for you and more cash for your business.
Creig Stephens is a retirement strategist specializing in helping the self-employed who fear they lack sufficient capital from their operations to funds their ideal retirement lifestyle. His diverse financial background and education, allows him to extract cash-flows from hidden business value to help grow small business retirement accounts.
He is managing partner for Crowne Equity Partners, LLC a firm specializing in B to C class multifamily apartments with 100+ units located in emerging markets. He provides the strategic vision and analytical skills to underwrite undervalued properties that provide significant returns for CEP’s private partners.
To learn more about “Self Directed IRA” for small business owners, go to www.cepinvestira.com or www.creigstephens.com “An Expert in Diversification” to get tactics to locate hidden business cash flow that can be used to diversify and fund your ideal retirement lifestyle.
