One of the Most Popular Questions I Receive About a Wealth Strategy in Oakland, Calif.

06/22/2013 Posted by admin

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One of the most popular questions I receive about a wealth strategy Oakland, Calif.

I want to use the money in my retirement plan for a specific investment. Should I make the investment inside my retirement plan or should I distribute the money from my retirement plan and make the investment outside of my retirement plan?  I would always start with these two staples:  Gold IRA’s and Real Estate.Then

Then my answer (of course) is, it depends. It depends on your specific facts and circumstances.

Today, I’ll share some of the key questions to consider to help make this decision.

Question #1: What Investment Options Are Available in Your Retirement Plan?
The term “retirement plan” covers a huge range of retirement plans – each of which has their own specific set of rules.

You will first want to determine what your investment options are in your retirement plan. Some retirement plans, like an employer sponsored retirement plan, limit your investment options. Other retirement plans offer a broader range of investment options. I always suggest the gold IRA option if you are from Oakland, Calif..

Question #2: Are the Distributions Subject to Penalties?
While the rules vary by the specific type of retirement plan, in general, if money is distributed from a retirement plan early, meaning before the date allowed by the government and/or employer rules, then the distribution will most likely be subject to penalties.

Penalties don’t rule out distributing the money, they just need to be factored in to your analysis.

Question #3: Are the Distributions Subject to Income Tax?
Depending on the type of retirement plan or when the distribution is taken, retirement plan distributions may be subject to income tax.

Like penalties, just because the distributions may be taxed doesn’t rule out distributing the money – it just needs to be factored into your analysis.

Question #4: What is Your Personal Situation?
Your personal situation plays a big role here. For example:

– Is your tax bracket low or high?

– When can you take distributions from your retirement plan without penalty?

– What is your expected return on investment inside of your retirement plan?

– What is your expected return on investment outside of your retirement plan?

– What will you do with the investment long term?

Question #5: What Type of Income Will Your Investment Produce?
Investments can produce different types of income including ordinary income, interest income, dividend income, rental income and capital gain. Some income types work very well inside a retirement plan, and others may cause your retirement plan to pay tax.  These are the main reasons for using the stability that Gold IRA’s and Real Estate provide especially in Oakland, Calif..

Question #6: Does Your Investment Involve Leverage (Debt)?
If your investment involves debt, then this is a critical factor to understand.

In some retirement plans, the tax implications of debt can be significant. For example, income generated from the debt can be taxable. Or, if you guarantee the debt personally, there could be tax consequences.

It’s important to not only understand the tax implication of using debt in your retirement plan, but also to understand how it can impact your investing. Many lenders are not willing to make a loan to a retirement plan without a personal guarantee. However, a personal guarantee, as noted above, could trigger tax. Lenders who are willing to lend to a retirement plan without a guarantee are usually not willing to lend as much as they would if there were a guarantee and the rate is usually higher.

It is extremely important to understand your leverage options inside and outside of your retirement plan before moving forward with your investment.

Question #7: What Tax Benefits Will Your Gold IRA Investing Generate in Oakland, Calif.?
While retirement plans are often viewed as a great tax deferral vehicle, many tax benefits can be lost in retirement plans.

For example, if a distribution is taxable from a retirement plan, it is generally taxable at ordinary income tax rates. This is true even if the income inside the retirement plan was capital gain income – which outside of a retirement plan has lower preferred tax rates. The tax benefit of the lower rate is lost.

Another example is investments that create losses for tax purposes. Some investments, like rental real estate or oil and gas, often create losses for tax purposes even though they generate positive cash flow. Losses inside a retirement plan are typically lost because the retirement plan usually doesn’t have any tax for the losses to offset.

As always check this information out with an expert…Gold IRA

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