Your IRA can hold more than mutual funds. Here's the whole hour, on your schedule.

Jeff MinnickWell, Edwin, thank you for having me. It's a pleasure to present here to the I Am Off the Clock community, and yeah, excited to share this knowledge about retirement accounts. As you mentioned, you know, it's not something they teach in school. Hopefully you have parents or a mentor that taught you about retirement accounts, so hopefully this information will be helpful, and, you know, the community here can realize some of the different opportunities that are available, and ways to diversify and invest just outside of the market after our presentation today.

Jeff MinnickYeah, so happy to dive into the presentation here, and get started. I'll go ahead and, get this fired up, and we'll, start covering some of the information, and then, obviously, any questions that you have, just let me know. I'll be happy to cover those with you. Make sure I address all those questions. And I'm also going to share my contact information, so if you're not comfortable answering… asking the question aloud in front of the group, you'll be able to reach out to me directly, and… And, I'll make sure I address all those questions for you. Well, again, what I'm going to be covering here today is how to build tax-free wealth by investing in private funds and other alternative assets using a self-Directed IRA or 401(k). Again, my name is Jeff Minnick, I'm the Vice President of Relationship Management here at Directed IRA. We are a self-Directed IRA custodian based out of Phoenix, Arizona. I have 14 years in the self-Directed IRA industry, hold several certifications, and again, my contact information is here, so feel free to scan the QR code, call me, email me, you can even text that number if you have any questions about the material I'm going over today.

Jeff MinnickWhen I first got started in the self-Directed IRA industry, I was working for one of the largest competitors in the industry, and the very first training material I received was the self-Directed IRA handbook. This book is written by Mat Sorensen. He is the CEO of Directed IRA. He's also a tax attorney and a partner in a law firm. He is the industry guru, or expert, if you will. As I mentioned, tax attorney that has dedicated his life's work to researching self-directed IRAs and becoming the expert on that. So, for anyone that wants an even deeper dive into maybe some of the legal reasonings behind why you can make these investments in your retirement account. or if you have your own self-Directed IRA and just want to become more knowledgeable, this is the premier book to have. You can purchase this on Amazon or Mat Sorensen's website, but it's really the best material you can have for learning about self-directed IRAs. When I found out that the author of the self-Directed IRA handbook, my first training material, had opened his own trust company, Directed IRA, doing business as a Directed Trust Company here in Arizona, it made perfect sense. It was a full-circle moment to come here and work for Mat Sorensen.

Jeff MinnickSo, Directed IRA, Directed Trust Company, we're a licensed and regulated trust company, here in the state of Arizona. That means we're audited and examined. We manage a little over $3.5 billion of assets under custody. We have about 35,000 clients currently. While that pales in comparison to the size of Fidelity or a Vanguard, it makes us one of the significant players in the self-Directed IRA space. Now, being founded by tax attorneys, of course I have to give the disclaimer here. Edwin, thank you for kind of covering this already, but the information I'm going to cover today, it's strictly for educational purposes. If you're interested in making an investment, always consult with your tax professional, your accountant, your CPA, an attorney. This presentation is not meant to be investment advice, or constitute financial advice. So what are we going to cover? Everyone's favorite topic, retirement accounts. I know it can sometimes be considered dry and boring, but I think once you understand the power of these retirement accounts, they really become tools. Tools that you can use to build generational wealth.

Jeff MinnickSo the strategies and the accounts that I'm going to talk about today, this is the reason why Peter Thiel has a $5 billion Roth IRA account currently. You know, he used these tools to his advantage, to set up not just himself, but also generations of his family for success. So I'm going to cover a few different topics today. Primarily, what is a self-directed account, and what investments can you make and hold in that account? What other types of retirement plans or accounts are available that can be self-directed? And then what are the rules when you're self-directing, so you can stay within those guidelines? I'm going to cover the benefits of investing in some of these alternative assets. That aren't correlated to the stock market? And then finally, I'll cover how to get started with an account. Not often I think clients move their retirement funds around, so make sure that I cover that in depth, so you can feel confident, you know, if you do want to get started with your own self-Directed IRA, you'll understand exactly how to open, fund, and invest that account.

Jeff MinnickEver since ERISA created retirement accounts in 1974, your retirement plan is able to hold almost anything. Now, as Edwin mentioned, it's not… The account that's going to allow you to hold these investments, it's where that account is held, or who is the custodian of that account. You know, here at Directed IRA, we are willing as a custodian to hold any investment allowed by law. Some of the larger IRA custodians, Fidelity's, Charles Schwab, Vanguards, they've chosen to hold only publicly traded assets. So it's a business decision that's been made to not hold private or alternative assets. Those assets can be a little more difficult to value, makes the tax reporting on the IRA custodian a little bit more difficult. So there's just some extra administrative burden that those large companies aren't willing to deal with. They've grown to such economies of scale that they don't necessarily have to hold these types of assets. So, I'll start off here with the font that you can see in the red. The IRS clearly gives us a list of assets that cannot be held in a retirement account.

Jeff MinnickWhen it comes to what can be held. Again, that's open-ended, you can be very creative, but they do specifically tell us that life insurance contracts, S-corporation stock. And certain collectibles. Think alcoholic beverages or wine collections, firearms, maybe collectible cars. Those are assets that cannot be held as an investment in a retirement account. But, outside of stocks, bonds, mutual funds, ETFs, and REITs. Clients at Directed IRA are primarily holding investments in private funds. This could be a private real estate fund or syndication. They're invested in private companies or stock. Again, the Peter Thiel method. Investing in, pre-IPO shares of Facebook and other companies, PayPal, before they went public. You can invest in things like real estate. You know, that could be residential, commercial, industrial real estate. You could fix and flip properties. You could hold cash-flowing rental properties in your retirement account. Even short-term rental properties, like Airbnb, can be held as an investment in your retirement account. Another common investment we see, energy and natural resources, think oil and gas investments, investing in specific wells or funds that have been set up to pool those wells together.

Jeff MinnickPrecious metals, gold and silver bullion. Cryptocurrency. Bitcoin has been on a little bit of a rise here again. That's a common investment, clients are holding in their accounts here. You can also invest in things like tax lien certificates, promissory notes. I'm gonna go over an example later about how I was able to use some of my own self-directed accounts to lend money and generate interest back into my retirement account, secured by real estate. And then there's other creative investments. The, couple examples of the most creative investments I've ever seen, I had a client that actually bought Super Bowl tickets in their Roth IRA, so they were able to then sell those tickets for a significant profit, and keep all of that profit tax-free, because they used a Roth IRA. Another creative investment I saw was, a client actually held the rights to a killer whale in their retirement account. So when that whale was performing at SeaWorld, they would be compensated. A very strange investment, not something that I personally know much about, but I think what the beauty of the self-directed accounts are is if you are not a stock market expert, if you couldn't tell me the companies that make up your mutual fund.

Jeff MinnickIf you want to invest in something that you know are more comfortable with. A self-Directed IRA gives you the ability to do that. So, we always say here at Directed IRA, take control of your retirement account and invest in what you know. If you understand real estate and the real estate market more than you understand the, stock market. a self-Directed IRA is going to give you the ability to make investments in something you're more comfortable with. There are a number of different retirement plans that can all be self-directed. So, that term, self-directed, describes the investing that you're doing. The account is still a traditional IRA, Roth IRA, some of the other account types that I'll go over here. So it still follows the same rules when it comes to contributions, how much you can contribute to the account or the plan, and distributions, when you have to take funds out for required minimum distributions. Or when you're eligible to start taking distributions without a penalty. Two of the more common retirement vehicles that we set up here at Directed IRA are the traditional IRAs and Roth IRAs.

Jeff MinnickNow, I'm sure most of you guys have heard of these account types. You know, a traditional IRA is a tax-deferred account. Essentially, when you contribute to that account, the money is going in pre-tax, before you paid taxes on that money. Investments within the account then can be made, and that account grows tax-free. Tax-sheltered until you ultimately hit retirement age, legal retirement age, being 59 and a half years of age, and now you can begin taking distributions from the account. When you take distributions from a traditional IRA after 59 and a half, you'll pay taxes on the distributions. So, the whole concept here with the traditional IRA is, while you're working, you're earning a high level of income, you can save in this traditional IRA vehicle. Defer the taxes until you're retired, and then begin taking distributions. Hopefully, when you're retired, you're no longer earning a high level of income, you're maybe in a lower tax bracket. At least conceptually, that's… that's the idea behind the traditional IRA. I would say… The other side of the equation here, though, is who is going to be retired at 59 and a half? What's to say that's going to happen? What's to say you're not going to still continue to be working, or your income is going to be lower than maybe it's currently at?

Jeff MinnickThe other thing to consider is, what's to say that tax rates are going to be lower when it's… when… by the time you hit 59 and a half and are ready to begin distributing money out of that account? You've been saving and deferring taxes all these years? So a traditional IRA, excellent savings vehicle, very common retirement account for most people to have. But, I would say it's not the ideal account for growing truly tax-free wealth. that's where you may want to consider a Roth IRA account. here at Directed IRA, myself, personally, I'm a huge proponent of the Roth IRA. with the Roth IRA, you're saving after taxes. So any contributions you're making to a Roth IRA, or a Roth 401(k), you're making the contribution after you pay the tax. You can then take those savings, invest them, and grow that account tax-free. And the huge benefit of the Roth IRA is, once you reach legal retirement age. And that account is seasoned for 5 years, you can take qualified distributions that are 100% tax-free. I think of the Roth IRA as paying tax on the seed now, rather than the crop later. What could that Roth IRA grow… what could that balance grow to be through your investing over a course of 10, 15, 20, 30 years?

Jeff MinnickBeing able to pay tax on the money that was contributed, and not have to pay tax on all the growth and earnings is a huge tax benefit, and a great way to build wealth. There are very few, I would say, tools out there that allow you to really, truly grow tax-free wealth, and the Roth IRA is one of them. There are other types of plans that can also be self-directed, so for any of those individuals that are self-employed, you may be familiar with the SEP IRA, or the Solo 401(k)plan. SEP IRAs. They are retirement accounts that allow you the, they're tied to a business, so they allow you to contribute 25% of the income derived from that business up to a maximum of $72,000. That's a much greater contribution limit than the $7,500 or $8,600 you can currently contribute to a traditional or Roth IRA account. But again, not everyone qualifies. Not everyone's self-employed or has their own small business that can adopt or sponsor a SEP IRA. Again, the SEP IRA, like a traditional IRA, so still gonna have to pay taxes on the distributions when you eventually retire and begin to distribute money out.

Jeff MinnickI would say if you are a sole proprietor, self-employed, you may want to consider looking at a Solo 401(k) plan. This is an excellent plan if you qualify. Again, it's for individuals that are self-employed without any full-time employees, or part-time employees. So again, Solo 401(k) plans also have very large contribution limits. They allow you to put up to $72,000 for the current tax year, or $80,000 if you're over 50 years of age. But again, those contributions are derived from income you pay yourself from the business. The nice thing about a Solo 401(k) plan is anybody that's worked for a W-2 employer, you may have contributed to a 401(k)plan and received a match from the employer. The Solo 401(k) plan, you are essentially the employer and the employee. And because you're the greatest employee that company has ever had, of course you're going to give yourself, as the employer, the full 25% match that's allotted. So, a Solo 401(k) plan allows you to really maximize contributions each year to a retirement account.

Jeff MinnickAnd it allows you to even show less income, let's say, than a SEP IRA. So, again, a great plan if you are self-employed or a sole proprietor. Even if you have a side hustle, you may want to consider establishing a Solo 401(k) plan. So talk with your accountant or CPA. They can make sure you qualify and talk to you about that type of plan. Solo 401(k) plans can be tax-deferred or after-tax, like a Roth IRA. Another huge benefit of that plan is each year, as you're generating income from your business, you can do some tax strategy and planning. Maybe there's a year where you need a deduction or a write-off, so you're going to contribute pre-tax to your plan. Another year, you may not need those same deductions. You may want to contribute after-tax to a Roth component. So a Solo 401(k) plan has a lot of flexibility that some of these other retirement plans do not. Really, just another excellent plan for those that do qualify. The other accounts that I want to cover with you here tonight are the Health Savings Account and the Coverdell Education Savings Account. How many people like paying for their medical expenses, or child's education expenses? It seems like the cost just continues to go up each year, so really taking advantage of some of these plans can help you save for those inevitable expenses that may be coming down the pipeline.

Jeff MinnickA health savings account, again, not everyone qualifies. You have to have a HSA-eligible, high-deductible healthcare plan. Even if you said, Jeff, my deductible's pretty high, it must be HSA eligible, check with your healthcare provider. Unfortunately, not all high-deductible healthcare plans are HSA eligible, so you do definitely want to confirm that. But if you qualify for a health savings account, it has 3 times the tax benefits. When you contribute to an HSA, you receive a deduction for that contribution, so you get the immediate tax write-off or benefit up front. That account can be invested and grow, just like these other accounts we're talking about, and grow tax-free. And then, when you take distributions, as long as they're being taken to pay for qualified medical expenses, the distributions are tax-free, like a Roth IRA. It's almost like you get the benefits of a traditional IRA when you contribute, and a Roth IRA when you distribute. A very, very impressive plan to take advantage of if you, again, qualify for it. A Coverdell Education Savings Account, I would say, is somewhat similar to a 529 plan.

Jeff MinnickThis is a plan that allows you to contribute up to $2,000 a year and save for, again, qualified education expenses. This could be tuition, room and board, books, there's a number of different expenses that are considered qualified education expenses, but this grows similar to a Roth IRA. After the contribution is made, investments can be made to grow the account tax-free, and again, as long as we're distributing money to pay for a qualified education expense, it also will come out tax-free. So these are the primary plans that we end up establishing for clients. Again, you may not qualify for all of them, but it's not uncommon for our clients to have multiple self-directed accounts, depending on which ones they qualify for. They're trying to maximize contributions to these plans each year, so that they can then invest that money in something they know and they're comfortable with to build that wealth and use it, again, for retirement, for their medical expenses, or for their education expenses. They're all essentially have their unique set of tax benefits, and understanding these retirement accounts is the key to then taking advantage of these tools, contributing to them, and investing them.

Jeff MinnickThe last thing I'll mention with these self-directed accounts, for those of you that are married, you may have an account for yourself, your spouse may have an account, you may have set up accounts for your children. With self-directed IRAs, these accounts could be partnered or bundled together to make investments. So, certain investments may have an investment minimum. If your account doesn't have sufficient funds, perhaps you and your spouse combined could meet that minimum. So. Oftentimes, clients will think about themselves first, what accounts they qualify for, but make sure that you're also taking care of other friends and family members. They have retirement savings or healthcare expenses, education expenses that they're saving for. all of this capital can be pooled together and invested together. That way, you get to share in the same rates of return.

Jeff MinnickIt's a great question. Actually, 529 accounts cannot be self-directed. So, they are state-sponsored plans. Whereas many of the accounts we're talking about are mandated by ERISA and the IRS. So, unfortunately, no. A 529 plan cannot be invested the same way. That's why we talk about the Coverdell Education Savings Account. That account, very similar to the 529 plan in that it's for education, but it is… you do have the ability to self-direct that and invest it outside of just the market.

Jeff Minnickyou know, what are the benefits of not just having an IRA account at Fidelity with an advisor invested in the market, but actually investing in private assets? Investing in private funds or real estate with your IRA or 401(k)? You know, some of the main reasons that clients Take on this more active role in managing their retirement account, is they want diversification. You know, if you're investing in real estate or private funds, these aren't necessarily correlated to the stock market or interest rates. You know, private funds allow investors to invest in something they know and are more comfortable with, and really provide true diversification. I was speaking with a client earlier this week, and they said, well, Jeff, I'm pretty diversified. I'm in stocks, bonds, mutual funds, ETFs. My advisor's done a good job of diversifying my account. Those are all assets still tied to the stock market, though. So, I would say many self-directed account holders are arguing that by investing in these non-correlated assets, these hard assets, if you will, they are truly diversifying the portfolio. I think, another large reason why clients are investing this way is obviously the tax savings. You know, we just talked about how these accounts either grow tax-deferred or completely tax-free.

Jeff MinnickIRAs, 401(k)s, other qualified plans, they're tax-exempt trusts. They allow you to grow the income completely tax-free, so you can compound those returns, and then you get to control when you take distributions from the accounts. It's also a very passive investment. If you're investing, let's say, in a private fund, like a private real estate opportunity. As the investor, you're not sourcing the deals, you're not developing the underlying strategy. It's truly a very passive investment that can be made. It's also very predictable. You know, your IRA is going to generate returns, or collect the returns on the investment based on the performance of that private fund and its operator. You know, those terms are often going to be disclosed up front, so you know exactly when you're going to be receiving payouts. It's all of these reasons why clients are ultimately, again. deciding, I'm not just going to set it and forget it, leave my account to my advisor to manage for me. I'm going to take a more active role and invest in some assets that, you know, may take a little bit more work on my end, but again, allow me to control that more.

Jeff MinnickNow, we've talked about, you know, the benefits of investing with self-directed IRAs, but let's make sure we cover the rules. There are some plan regulations that you need to be aware of when you're self-directing your own retirement account. And the first main rule I want to cover is that you and your IRA are not one and the same. So you personally cannot transact with your own IRA account. I'll give you an example of this. Let's say you have purchased a rental property, maybe it's an investment property that you own personally, or you own in an LLC that you're 100% owner of and manager of. It may sound advantageous to sell that property to your Roth IRA account. Now, when I eventually sell that investment property, I will get to receive 100% of the profits tax-free to my Roth IRA account. Unfortunately, the IRS thought of this, you cannot transact with your own IRA. So, I always tell clients, if you own assets personally, or in an entity, like an LLC, that you manage and own personally, your IRA cannot transact. Buy from, sell to, lend to.

Jeff MinnickIf you have your own private company, your IRA could not invest in your own private company. IRS basically argues that, you know, there's maybe a conflict of interest there. Whether it's your intention or not, you may give yourself a sweetheart deal. So they've just clearly defined black and white. you cannot transact with your own IRA account. Now, there are also a few other disqualified persons that your IRA cannot transact with. And this includes your parents and grandparents, children and grandchildren, your spouse, Your son-in-law and your daughter-in-law. So I like to think of this as kind of up and down your family tree. Let's go back to that… that investment property scenario again. you could argue that maybe it's not you that owns the rental property, it's your spouse that owns the rental property. What if they sold the property to my Roth IRA so I can now keep all my profits tax-free? Again, unfortunately, the IRS clearly thought of that. Can't do transactions with your spouse either. Same could be said with, like, your parents or grandparents. Again, another real estate example, let's say you owned a rental property in your Roth IRA account, and you wanted to rent that property to your parents, so they could stay there in their elderly years, perhaps. Or your kids while they're away at school.

Jeff MinnickAgain, your IRA cannot transact with parents, grandparents, children, or grandchildren, so that would be disqualified. This is not to say that your IRA cannot transact with family members. So, brothers, sisters, aunts, uncles, nieces, nephews, maybe other distant family members, even your father-in-law and mother-in-law are not considered disqualified. So, that same scenario of maybe renting a property that's held in your Roth IRA to your children not being allowed, or your parents not being allowed. You could potentially rent that property to a brother or sister, an aunt, an uncle, a niece, a nephew. So the rule here is that, again, there are specific people your IRA cannot transact with. And the reason for that is, you know, there may be some personal benefit that you're receiving in addition to growing your retirement account. So again, don't want to transact with disqualified persons, and this is an important rule to remember and keep track of as you begin to self-direct your retirement account. But there are many other individuals that your IRA is able to transact with and create deals with.

Jeff MinnickGreat distinction, yes, you're absolutely correct. So, again. If I was going to purchase an asset that my spouse had titled in their name, that would be me transacting with my spouse directly. Now, if we came together and said, okay, we're going to invest in a new property, we're not purchasing from a disqualified person, but my IRA is going to put up half of the funds, and my spouse's IRA is going to put up half the funds. In that scenario, we're co-investing together into the same asset, and we're not transacting with the disqualified person. So that is something that can be structured. And the reason that works is, again, you're co-investing together in a new asset, as opposed to doing a direct transaction with the disqualified person.

Jeff MinnickYeah, very important distinction there. I actually have a client that has set up self-directed accounts for himself and his spouse. His 14 grandchildren all have Roth IRAs that he started. They have pooled all the capital together, and they go out and fix and flip properties together. Now, his grandkids, their Roth IRAs started with small $5,000 balances. Separately, they wouldn't have been able to do these transactions on their own. Together, as a collective, they have enough capital to go out and flip properties. Even though they may own a very small percentage of the overall transaction or deal, they're still sharing in the rate of return. So, they're still generating the same rates of return when that property is eventually flipped and sold as everyone else in that transaction. Somewhat of a unique outlier there to have, you know, 16 retirement accounts together, pooling capital for a deal, but it just shows the creativity that, you know, self-directed account holders have when they put together these transactions. Alright, so how do you get to personally benefit? You know, this is all great, we're building wealth in retirement accounts, but how do you get to personally benefit? You're gonna benefit when you take your distributions. So again, once you hit legal retirement age, 59 and a half years of age, that's when you're able to start taking distributions out of these accounts.

Jeff MinnickAgain, to either cover living expenses for your retirement, or pay for your qualified education expenses, pay for your qualified medical expenses. For those that want to get started with your own self-Directed IRA, it's a pretty easy process. It's going to involve 3 steps. You need to, first, open your self-Directed IRA account, next, you need to get your account funded, and then finally, the fun part, you get to actually direct those funds into an investment. Now, opening an account, very easy. It can be done in as little as 5 minutes. We actually have an online application where you could complete, let's say, an application for a traditional IRA, or Roth IRA, or health savings account, all the different account types that we talked about today. The process, again, completed all online, sign your application electronically, we'll process that application within a single business day, and then send you a welcome email confirming that your account is now established, and you can move on to the next step, which is Step 2. There's 3 primary ways of funding a self-Directed IRA account.

Jeff MinnickThe I would say more common ways people are funding their accounts here is they're taking existing retirement savings that they have in an IRA, or a 401(k), or other employer plan, and moving a portion of that or all of that to their self-directed account. So I'll cover transfers and rollovers here in depth. But you may also fund your account with just a new contribution. You know, as we talked about, if you're under 50 years of age, you can contribute $7,500 to a traditional or Roth IRA for tax year 2026. If you're 50 and over, it's $8,600 that you're able to contribute this year. So if you haven't made your contribution to your IRA account yet, you can, again, send a check, wire, or an ACH to actually make a contribution and fund your account that way. Checks, obviously, slowest method. Gonna take time to get that check in the mail, get those funds cleared. An ACH, a little bit faster, since it's sent electronically. Still needs to clear, though. A wire, guaranteed funds, available same day or the following day, depending on when the wire hits. So a contribution. Very common. Typically, we'll see clients do that on an annual basis. As they're approaching the tax deadline or their contribution deadline, you know, they'll maximize that and contribute to their account.

Jeff MinnickThe other options for funding the account, though, is transferring funds or rolling over funds. Now, I will hear clients use these terms interchangeably, but they are very different in practice. A transfer is when you're moving IRA to IRA. So if you have some savings, retirement savings, already in a traditional IRA, you can transfer any portion of that to a self-directed traditional IRA. You don't have to transfer the entire balance. You can transfer just an amount that's needed, let's say, for an alternative investment opportunity, and maintain the balance at your Fidelity or Schwab IRA with a more traditional custodian. So, IRA accounts are portable, meaning you have the ability to transfer money back and forth between IRA custodians as often as you'd like. Traditional IRAs, Roth IRAs, and SEP IRAs can all be transferred and have that portability. If you are a individual with a SIMPLE IRA, there is a little caveat here. SIMPLE IRAs, again, employer-sponsored IRA, similar to, like, a SEP, The SIMPLE IRA has to be established and funded for 2 years prior to you being able to move the funds. So, if you're in that scenario, you may have to check to see if you're eligible to transfer funds just yet.

Jeff MinnickBut again, traditional IRAs, Roth IRAs, SEP IRAs, any portion can be transferred at any time. Now, for a rollover, this is when we're moving money from an employer plan to an IRA account. Employer plans typically are 401(k)s, but it could be 401(a)s, 403(b)s, thrift savings plans, 457(b)s, other pension plans. These are, again, plans that are sponsored by an employer. When you have an employer plan, they're all different. Each employer sets up their own plan with their own rules, their own match, they choose their investment menu of options that you can choose from. But they're all different. So, when I hear that clients have money saved in an employer-based plan, like a 401(k), my immediate next question is. Is that employer plan with a current employer, or from a previous employer? If it's from a previous employer. you can absolutely roll those funds over into a self-Directed IRA account.

Jeff MinnickIf you have funds with your current employer, though, you'll have to do a little bit of homework. You're going to have to check with your 401(k) plan administrator to see if you're eligible to roll that money over. Again, every plan's a little different. Some plans allow you to move money while you're still in service, other plans do not. So, the key here is you're going to need to confirm your rollover eligibility. When you call your 401(k)plan administrator, you're going to ask, are you allowed to do an in-service rollover? While I'm still in service, working for that employer, am I eligible to access some savings and roll it out of their plan into my own IRA account? they'll be able to confirm that. If you're unsure of who your 401(k)plan administrator is, check with your HR department. They probably have a point of contact that they can connect you with to ask these questions and determine your rollover eligibility. With the rollover process, you're gonna have to actually reach out to the 401(k)plan administrator, fill out some rollover paperwork, and they're going to issue a check and mail it to your new IRA custodian.

Jeff MinnickYes, it's 2026, but 99% of rollovers are still processed as checks through the mail. So, whereas a transfer may only take 5 to 7 business days for money to be moved, a rollover can sometimes take 2 to 3 weeks, sometimes longer, depending on the employer. So, you want to take this into consideration if you're looking at alternative investment opportunities. Make sure that you have your account open and funded in plenty of time so you can act on those opportunities when they arise. I can't tell you how many times I've had clients that I've talked to about a self-directed account. They've held off on getting started, but they're still looking at good opportunities. I just had a client last week call me and say, Jeff, I've identified a piece of property I want to buy with my IRA. I'm closing Friday. How quickly can I get my account open and funded? Unfortunately, that's not enough time. He may have to extend the closing deadline, and that may be a reason he loses this particular deal. So, again, make sure you open and fund your account well in advance, so you're ready to invest in the opportunities when they arise.

Jeff MinnickThat final step of investing is the best part of having a self-directed account. When you've identified the right investment opportunity, you've done your due diligence, you've done the research, you've decided that's the right fit for your account. You're gonna fill out a couple forms to initiate things. You're going to complete a direction of investment form. You can think of this as the authorization. Your custodian needs to send capital to the investment. So this form's basically going to ask, what is the investment name, what's the dollar amount needed, and where is the capital going? You're going to sign that form electronically to provide that authorization. And that's gonna be accompanied by a supporting document. Now, if you were buying real estate, it would be a copy of your purchase contract. If you were lending money in the form of, let's say, of a promissory note, it'd be a copy of the promissory note agreement. If you're investing in a private fund, it's going to be your subscription agreement. The key here is the vesting titling on the supporting documents. When you're investing, again, you and your IRA are not one and the same. So. the way you reflect that it's your retirement account investing is through this format you see here. So if you have an account with Directed IRA, It wouldn't be Jeff Minnick that's on the subscription agreement subscribing to the fund. It would be Directed Trust Company, FBO, for benefit of, Jeff Minnick Roth IRA.

Jeff MinnickNow, we have an investments team here that's gonna support you and make sure that all of your documentation is titled correctly before we actually go ahead and fund an investment. So you're going to have support here. Even with funding your account, we understand you're moving your retirement funds. That's typically a person's life savings. They don't want to mess it up. They don't want to do something wrong and put those funds at risk. So we have an excellent funding team here that will actually hold your hand and walk you through the funding process. Sure, these accounts are self-directed, you make the investment decisions, you control the account. But Directed IRA and our team is here to support you to make sure that we're… you're running… you're making transactions and following the guidelines and the rules, and there's support to make sure these are… that these steps are happening as quickly as possible. I'll give you a quick demonstration of our online portal here. When you have an account with Directed IRA and you're ready to make an investment, this is what you're going to see. So, for example, if you wanted to invest in a private fund, let's say a real estate syndication. After logging into your account. choosing the account you're going to be investing with, you would click on Private Fund. You'll answer a series of questions that'll populate your direction of investment form, you can upload your supporting documents, and as soon as that's complete, our team will review it and handle the rest.

Jeff MinnickYou know, they'll follow up if any corrections or changes need to be made, but the investment process is extremely straightforward. It may not be as easy as clicking and buying stock in your Fidelity account, but we've really simplified it to make it as easy as possible. bringing all of this information home, I want to walk you guys through an example of a real-life investment that was made using my self-directed Roth IRA account and my self-directed health savings account. I think once you see this in action, you'll realize the power of these tools, and get those creative juices flowing about how you can start maybe thinking about using those retirement savings a little bit differently. I am a member of our local Real Estate Investor Association group, and have a number of contacts within my network that are constantly buying and flipping real estate, and sometimes they need a little bit of financing, you know, for their deals. Maybe they've gone to the bank and maxed out financing there, and their rehab just needs a little bit more financing so they can get the project over the finish line and maybe get it to sell.

Jeff MinnickNow, those individuals could go to a hard money lender and pay hard money lending rates to borrow money, or they could borrow money from my self-directed accounts. I may be able to undercut a hard money lender by, you know, a certain percentage, so it makes borrowing from me and my retirement accounts a little bit more attractive. This particular loan, the borrower needed essentially $100,000 to finish their rehab of a property. I decided to use my Roth IRA and my health savings account to fund this loan. Now, the Roth IRA funded 75% of the deal, or $75,000. My health savings account, which Doesn't have that balance, was able to fund 25% of the deal, or $25,000. With the promissory note and the agreement. Me, acting on behalf of my retirement accounts, and the borrower are able to agree to whatever terms we'd like. So we're able to set those terms. They have to be reasonable terms. I can't loan money at 0% interest with no, no closing date, never to be paid back. That would be a gift, not an investment. So, they have to be reasonable, but again.

Jeff MinnickWe're able to determine exactly what those terms are. This particular note, it was simple interest, 10% interest annually. payments were made monthly, there was 2 points up front, or 2% paid at the closing, and it was an 18-month term. There was a balloon payment option to extend at the end. The… the… Return on investment from this $100,000 loan that I was providing was essentially going to be a 12% return on investment, just because of the interest and the 2%, the points up front. Now, the promissory note contract that we drafted. Again, it didn't say Jeff Minnick was the lender, it said Directed Trust Company for benefit of Jeff Minnick Roth IRA. Asked the undivided interest 75%. become a Directed Trust Company for benefit of Jeff Minnick Health Savings Account, as to the undivided interest of 25%. This is extremely important. This is reflecting who is lending the money, so that when those interest payments are received, they can be allocated to the respective accounts based on that 75-25 split. We ended up closing at a local title company.

Jeff MinnickDirected IRA as custodian, set a wire to provide the capital to the borrower. The note ended up being secured through, real property, the actual deed of trust, and a copy of that deed of trust and the actual promissory note were the documents that were held at Directed IRA as custodian. If the IRS ever wanted to audit, say, where did that $100,000 go? My custodian has documentation to show exactly what investment was made and what's being held in place of that cash in my account. The best part about this entire investment, all the interest payments were made back to my accounts, completely tax-free. Interest to my Roth IRA was tax-free. Interest to my health savings account was completely tax-free. Now, the borrower ended up keeping the property as a rental after all of this. They refinanced to longer-term financing with their traditional bank. My Roth IRA and health savings account were paid… were made whole through the payoff and the refinance. I could now deploy that capital into another deal. So, this didn't even run the full 18 months. I was able to deploy that capital again.

Jeff MinnickAnd this is where compounding can help. Imagine if you could do transactions like this several times throughout the course of the year. Now you're really growing and compounding the account and building that wealth. Key points to remember, couldn't loan the money to myself, couldn't loan it to my spouse, parents, grandparents, children, or grandchildren, so abided by those disqualified people, and didn't do any self-dealing here. The terms, like we talked about, they were up to me and the borrower to agree upon. And, the last thing I want to mention here, we've talked about pooling different retirement accounts together to go in on a deal together and co-invest on a deal. There is a way to pool that capital through an LLC. So, unlike this example where the titling reflected the divided interest, the 75-25%, there's a way to actually form a newly formed company, have your retirement accounts be members of that company. You, as the account owner, can be a manager of that entity or that LLC, and it can set up its own checking account. It's often referred to as having checkbook control of your retirement funds, so if you're interested in learning more about IRA LLCs or having checkbook control, please reach out to me. Some more, Advanced structure, but very, very common, and we can absolutely help with that.

Jeff MinnickIt's great having Mat Sorensen, our CEO at Directed IRA, be a member of… be a partner in the law firm. That law firm knows how to set up these entities properly for an IRA LLC, so we've got great resources there for you. Now. For those that are still with us here, I appreciate you going through the presentation. I have a special promotion for anybody that wants to get started with the self-directed account. We're gonna use the promo code OFFTheClock200. It's gonna give you $200 off your first year fee when you set up your self-directed account here. Obviously, the QR code will take you to my calendar, so you can book a call if you need help getting started. You've also got my contact information, so feel free to call or text me at that number, email me if you have any questions about getting started here. Be happy to see you off on your self-directed journey, and make sure you get your account open and funded properly. So you can start doing some exciting investments.

Jeff MinnickSo, as far as, like, a 401(k) plan, I would say it doesn't matter if it's matched or not. Again, the key here is, are you eligible to roll that money out to an IRA? So again, if it's your current employer plan, you'll have to check on that rollover eligibility. If it's a previous employer plan, you may be… you'll be eligible to roll that to an IRA account. I have a number of clients that, when they leave one company and start with another, they take their old 401(k) and they roll it into their new employer plan. That… that portion of their plan that came from the old employer can be moved out. Their, new contributions made through the new employer plan, that's where they really need to check on their rollover eligibility.

Jeff MinnickYou know, great questions. Yeah, I'd say the primary investments that we end up holding is private funds or private equity investments. A lot of private fund investments, whether you're developing, let's say. Multifamily properties, apartment complexes, hotels, private fund investments is a very common investment that I see clients using the account for. Also, the Peter Thiel kind of method, investing in angel investments, you know, pre-IPO, startup companies, that's a very common investment. And then I would also say real estate. Now, real estate could be investing in fix and flip properties, rental properties, you could even argue investments in funds, you know, it's still basically real estate. but also the private lending aspect. Like that scenario I was talking about, where, you know, I was able to loan money from my accounts, it's still secured by real estate, that promissory note. So, those are the primary investments. Private funds, private companies, real estate, you know, and then private lending. The other investments that I've seen growing in popularity, precious metals and cryptocurrency, I think, you know, to hedge against inflation, some clients are looking to invest in gold and silver, and they get the same tax benefits by using a self-directed account for that.

Jeff MinnickThe biggest mistakes I see people make is when they try to personally benefit from their retirement accounts investment.

Jeff MinnickSelf-dealing. Again, you and your IRA not being one and the same. I can't tell you how many clients say, well, maybe I have a business and I'm a contractor, so I'm gonna buy a property, a rental property for my Roth IRA, but then I'm gonna hire my own company to do all the rehab work. you know, in a roundabout way, they're personally benefiting from their IRA's investment, so you don't want to do that. Or, I'm going to try to pay myself a little salary for managing all of this. You know, I'm basically acting as an advisor to my own account, so I want to compensate myself for my time. Can't do that. You know, another common one is buying a rental property. Let's say it's an Airbnb 50 weeks out of the year, but the other 2 weeks out of the year, they want to go and use it as a vacation property for them and their family. You know, people will ask, you know, how is this being policed? you know, I don't know, and I can't give you a good answer for that, but what I can say is the penalty, if you get caught engaging in a prohibited transaction, such as self-dealing, the IRA ceases to exist January 1st, the year that prohibited transaction occurred.

Jeff MinnickAnd, you lose the tax advantage status. So, the penalty, I think, is severe enough to deter people from doing that. But if you're making investments for your self-Directed IRA, It should be building the account. You don't want to also be personally benefiting. And it's okay to cherry-pick which deals you do in your IRA, and which deals you do personally. Not every deal's gonna be a good fit for your IRA, or vice versa. So it's not uncommon for many of our clients to really evaluate the investment and determine if it makes sense to use their IRA or not.

Jeff MinnickYou are. So, you know, Directed IRA, we have a few competitors in the industry that are also self-directed custodians, but you can transfer funds back and forth to any IRA custodian. Not uncommon for clients to have a self-directed account here at Directed IRA, for their private or alternative investments. They still maintain an account at Fidelity or Schwab. That holds their publicly traded assets. They move money between the two as often as they'd like, As the opportunities arise. And I'll also mention, you can still hold publicly traded assets in a self-Directed IRA. Now, are we going to be as cost-effective as Schwab if you're just buying and trading stock? Probably not. You know, I'd probably say if that's all you're doing, go ahead and keep your account at Schwab. That's what they specialize in. But, let's say you're investing in private funds with your retirement account. Maybe a deal has run its course, money's been returned back to your account. And you're trying to identify the next alternative opportunity. Rather than leave that money in cash not working for you, or have to transfer it to another custodian and wait for the transfer time frame. you could say Directed IRA, I want to invest, let's say, in the S&P 500.

Jeff MinnickI want to just invest in an ETF or a mutual fund so I can keep that money working. Now, when I identify my next alternative investment, I sell my shares quickly. moving that money back into a cash position so I can redeploy for my next alternative investment. So, whether you're transferring between two custodians for opportunities, or you're in between and also using your self-directed account to invest in publicly traded assets, these are strategies that are available to you.

Jeff MinnickI would say typically no. So, let's say you're the general partner of the fund, you're managing the fund, being compensated for that work that you're doing. very likely you're not going to be able to use your own self-directed account to invest in the fund. You know, that would be that self-dealing prohibited transaction there. Now, on certain scenarios, though, I have seen it done where the general partner is foregoing any compensation. Again, it typically involves having an attorney review the investment, write an opinion letter, so that your custodian is comfortable allowing you to use your IRA and holding that as an investment for your account. But in very specific scenarios, if the deal is structured properly, it may be possible.

Jeff MinnickThank you, guys.