- Hi, Clint Coons with Anderson Business Advisors,
and in this video, we're gonna talk about tax-free access
to your retirement accounts.
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All right, let's get started.
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Okay, so retirement accounts.
Now they changed the law,
if you haven't been up on it, or not.
Under the CARES Act now, there are new ways
to access your retirement funds, tax-free.
Now you gotta hear that, tax-free.
Who doesn't love tax-free access to retirement funds?
Now, you know, if you have a Roth IRA, not a problem,
but many of us don't.
We have traditional IRAs.
We have 401k plans.
Well, if you're utilizing them the right way,
and besides there's a limited opportunity here,
you can get access to that money,
and not pay any tax on it today,
and have use of it for a set period of time.
How great is that?
Because I don't know where you're thinking right now,
where you think where the real estate market's gonna go,
but personally, I've already seen changes happen
in the market.
I've probably done more deals this first quarter
of this year, than I did, I would say all of last year.
I mean, it was just like a flood gate opened up,
starting in February.
People started getting nervous,
and they wanted to dump properties.
And if you're in a position
where you can pick up those properties,
the terms can be phenomenal.
Now, here's the thing.
In order to do that, if you're a cash buyer,
you're gonna be able to get right in front of that line
of other individuals that are out there.
So what you should be focusing on,
is how to put myself in a position right now,
where I have a lot of cash,
so I can make the types of offers
that help get me to the front of line,
so I can close first on these deals.
But here's what you can do under the CARES Act,
if you have retirement plans.
Number one if you have an IRA,
okay, or a 401k,
you can access those funds,
you can go and you can take out a distribution
of $100,000
distribution, okay.
You can take a 100K distribution.
Now, the reason you're taking this money out,
is what you're gonna have to certify, if they ask you to,
is that you're taking it out,
because your life has been affected
as a result of the national pandemic,
and you need money, because things are more expensive.
Things have changed,
and you can't meet your living expenses.
You've had this economic impact.
Well, I think for many individuals,
that's a simple statement to make, right?
Things have gone up, toilet paper costs a lot more, right?
I mean, there's ways we can establish that.
Now you gotta use the money they say as a result of that.
So if you were a real estate investor,
you gotta pay your mortgage on your properties.
If you're trying to hire,
you have contractors that are no longer working,
but you still have expenses going out.
I mean, there's ways in which we can run this,
that you're covering these expenses.
So what I tell people is,
let's say you got two pots of money.
You have your savings over here, all right,
that you've been burning through,
more and more over the last several months.
And you've got your 401k, IRA money,
that you haven't touched.
Well, stop using these funds.
Save these funds for your investing
and take money out, and start using these funds
to pay the expenses you were covering with this.
The reason why, is that those monies now should be saved.
They keep your powder dry.
You've heard that statement before,
to make your investments going forwards.
So switch the funds that you're using.
Now, if you're gonna follow this strategy right here,
what I'd like you to do as well,
is open up a new bank account, probably.
Get a new account, open up,
and just put these funds in there.
So, if anybody were ever to look,
and I doubt it would ever happen,
but let's say you did get audited.
You could just show all the expenditures coming
from this one account here, that holds these funds,
to pay these expenses.
Now, don't imply from this,
that they have to be used strictly
for COVID-related expenses.
It's pretty loosely worded.
It just, your life has to be affected as a result of it,
and that's why you need the money.
So you're able to pull out 100K, per person.
So a husband and wife, if you each have 100,000 bucks
in your separate IRAs, you can pull that money out.
Now here's a rule with it though.
You take that money out,
it's gonna be treated as a 60-day roll over, okay,
for three years, all right.
So you have until December 31st of 2022,
to pay this money back.
As long as you get the money paid back within three years,
there's no taxes on that money, all right.
So this is a great way to pull money out now,
set yourself up, so you've got all your expenses covered,
so you can take your other money
and do some investing with it.
Tap into your 401k.
So if you're, like I said earlier,
if you're married, that's 200K you can pull out.
So this is one thing,
this is available until the end of the year.
You have until December 31st to pull this money out,
and treat it as a perpetual 60-day rollover,
and not have to pay it back until three years,
completely tax-free.
No 10% early withdrawal.
Now if you can't pay it back in that time, that's fine.
There's still no early withdrawal penalty,
but you will have to pay income taxes,
at that point in time on that money.
Now, another thing to consider, as well.
let's say you had an IRA
that's holding onto a syndication right now.
When you pull assets out of an IRA,
people always think they have to be cashed.
You can actually take physical assets, as well.
They just can't exceed $100,000.
So if you had a syndication interest, you can pull that out.
Now, why would I do that?
Well, number one, if I'm holding the syndication in my IRA,
that's taxable on the income,
related to the debt finance portion.
You can watch one of my other videos,
where I talk about UDFI, Unrelated Debt Financed Income,
and the problem investors face in using IRAs.
Well, this is one way to solve it, pull it out,
pull the syndication out, and then three years later,
you don't need to put the syndication back in.
You just have to put back equivalent value,
another $100,000.
So you can fix yourself,
in that situation, if you made that mistake.
So now all the distributions from the syndication
come to you personally.
Why would I do that?
Because I need the income to live on.
So now I'm getting the monthly income stream,
from my syndication, or quarterly income stream,
and then when it's sold, the gains flow to me.
They're not gonna be taxable,
double tax, mean taxed once at the IRA level,
and then again, when I pull it out.
So this is something where,
if you haven't been thinking about it,
it'd be a great opportunity for you
to click on the link right below here,
to set up a strategy session with someone in my firm,
to discuss your retirement plan, your IRA,
and how to access this $100,000.
Now another way which you can pull money out,
is with the 401k.
So the rules with the 401k have changed.
It used to be that the most you could borrow
from your 401k is $50,000,
or 50% of your vested balance, all right,
the lesser thereof.
So if you had $80,000 in your 401k,
the most you could take out is 40K.
That's 50% of the 80.
Now the new rules under the CARES Act,
states that you can pull out 100%
of your vested balance, up to $100,000, the lesser thereof.
So in that example I just gave you,
you could pull $80,000 out of your 401k.
But here's the thing.
You gotta have the money in there.
So how do you get the money into your 401k?
Simple, if you've got an IRA, I'll give you an example
of what I've been doing for some individuals.
Let's say you've got two people, go by husband and wife.
Okay, husband, he has his IRA with 100K.
Wife's over here.
She has her IRA
with 90K.
So we create a Solo
for this couple.
And we have the husband, he rolls his in.
He has $100,000 account balance.
Wife rolls her in, and she has a $90,000 account balance.
After that's money in, is inside of the Solo 401k.
Then they turn around,
and they loan the money out to themselves, loan the money.
He takes out a loan for 100K, 'cause that's the maximum,
100% of the vested balance.
She can take out a loan of $90,000 out of her account.
So we just pulled $190,000 out of a plan,
under a loan arrangement.
Now, the difference between this,
and the distribution example, I just gave you,
that you have to repay in three years.
This one here, it's six years to repay, all right.
So you have six years to repay the money.
For the first year, you don't have to repay anything,
but in the second year,
you have to start paying back principal plus interest.
Wait, who are you paying the interest back to?
You're paying it back to yourself.
So you're becoming your own bank, with these plans.
So this is another way,
in which you can have money available to you,
to cover your your expenses that you're currently having,
but also it frees up cash for investing going forward.
So know that you have two different options here,
in which to access cash, and you can use both.
We've worked with some people,
or maybe they have 300,000 in here, and $400,000,
and they roll it in, into their Solo 401k.
Now they've got 300 and $400,000.
So out of here, we take out 200K.
Of that 200K, 100K is a loan, okay,
and 100K is a distribution that we just talked about.
So that equals $200,000.
So they take out $100,000 loan, $100,000 distribution.
Guess what this guy's gonna do?
He's gonna take out 200K as well.
That's $400,000 you just pulled out of a retirement account,
tax-free, okay.
You know, these things are available,
if you know about them, and how to take advantage of 'em.
So, it's something that we do here at Anderson all the time.
We set up these types of plans.
We go through these different strategies for individuals.
The key here, you want to make sure
that you have check writing privileges with these plans.
The great thing about having also your money
inside of your Solo 401k,
if you watched some of my other videos on it,
is that it's a great vehicle for investing.
So as you see the opportunities coming up,
if you want to buy property in your retirement plan,
you can do so, right through the Solo 401k
if it's set up the right way.
It has to be a plan that you establish.
You just can't walk into Charles Schwab, and use their plan.
It will not work.
You have to have a plan
that allows you to invest in real estate,
to engage in private notes, and things like that.
If you don't, then you won't be able
to make those types of investments.
Set yourself up now, because I think there's gonna be
unprecedented opportunity, as I talked about,
for real estate investors into the future.
If you're not ready for it,
when the opportunity presents itself,
you will not be able to take action.
These things can take sometimes three to four weeks
to get set up.
And what I mean by that, is by having the money available,
so you can pull it out.
Setting up the plan's not the issue.
It's getting the money in there that can slow this down.
So it's best to start on it sooner, rather than later.
All right everyone, take care and be safe.
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