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How
You Can Retire With An IRA Worth $1,000,000
by
Ron LeGrand
I
know this sounds like another one of those glorified headlines to
get your attention without containing a lot of truth.
Well, I know it's a very strong statement and it sounds too
good to be true. But
what if it is true? What
if you could have a cool million dollars in your IRA within a few
years so you'd never have to worry about retirement income? What
if you could do this without writing another check to your IRA?
I
have some good news and some bad news . . . The good news is:
You can! The
bad news is: It requires work!
Is
it too much to ask for you to do some work for a few years so you
can retire rich? You've
got to work at something anyway, you might as well get rich while
doing it. The
information you're about to read is unknown to most of the world.
Most people think the way to grow your IRA is to make
annual contributions and let the manager of the IRA invest it in
stocks and mutual funds. Then,
over a period of 20 to 40 years, it grows into a large sum of
money for your retirement. That's
the thinking of conventional wisdom.
Let
me tell you how I feel about conventional wisdom.
It's almost always wrong!
Let's take a look at a better way.
Check it out for yourself and see if you agree.
I speak to groups of people all over the country and
sometimes I ask how many in the room have an IRA.
I have never had more than a third of the class answer yes.
So, why don't more people invest in an IRA?
Here's what they tell me:
- They
can't turn loose of the $2,000 or $4,000 maximum contribution.
Having the money at hand for immediate usage is a lot
more important than retirement.
- They
never thought about it.
- They
feel they can invest in other investments that can produce
more income.
- They
know they should but never seem to get around to it.
If
you're one of these people, it's probably time for you to wake up
and take action before it's too late.
You see, an IRA is about all we have left that our
"Uncle" will allow us to use to grow filthy rich without
paying taxes along the way. I
don't have to tell you money grows a whole lot faster if the IRS
isn't taking its 25 to 40% share as fast as you can make it.
Every dollar you send to the government is money that can't
earn you anything until the day you die.
Every dollar you can stash away that's tax-deferred or
tax-free can compound throughout the rest of your life.
For
example, let's say you kept an extra $10,000 out of the IRS's
hands this year and invested it at 15%, (which you easily can),
and it compounded for 20 years before you started using it.
How much do you think it would grow to?
How about . . . $197,155.
That's about two hundred grand you could have available for
retirement by wising up and keeping the ten grand you're now
giving away. This is
assuming you don't have to pay taxes as you go, and you don't in
your IRA.
"But
Ron, my accountant tells me I can't contribute more than $2,000
for me and $2,000 for my spouse each year.
Where did you come up with this $10,000 figure?"
Your
accountant may be right. There
is a limit to how much you can contribute.
But wait! Go
back and ask your accountant if there is any limit on how much
your IRA can make in a year from its investments. He'll scratch
his head and tell you no. . .
There
Is No Cap On How Much Income Your IRA Can Produce!
Incidentally,
if you have the nerve, ask him/her what their net worth is.
Go ahead, I dare you!
You probably won't like the answer.
I want you to remember, this is the person from whom you're
seeking financial advice.
Also
remember:
The
Broke Can't Teach You How To Be Rich . . . They're Not Qualified
"OK
Ron, so tell me how I can make my IRA wealthy without making any
contributions."
Keep
your shirt on, I'm getting there.
If you're a real estate entrepreneur, you're making money
from buying and selling or keeping houses.
If I've trained you, you're doing this by using little or
none of your own money. The
objective is to create cash and cash flow by leveraging your
brain, not your wallet or credit.
Your
IRA Can Do The Same Thing
That's
right. Your IRA can
buy houses, the same way you do.
You have to do the work, but your IRA gets the money,
tax-deferred or tax-free. Here's
a real life example in progress.
A student called me with a house in Atlanta that's worth
$575,000 in a gorgeous area.
The seller owed $492,000 with a $4,200 per month payment.
She was $13,000 in arrears.
After some back and forth she agreed to deed us the house
if we made up the $13,000 in back payments.
We
did our due diligence, verifying the facts and value with an
appraiser. We've
closed on the house and currently own it.
But, instead of taking title in a trust with me as
beneficiary, I took title in a trust with my IRA as beneficiary. I
had my IRA administrator send the check to the closing attorney
for the back payments, as well as instructions on how I wanted to
take title. He
created the trust, I didn't even have to appear at the closing.
Now
in this case, my IRA did have to come up with $13,000 to make this
deal work but normally when I get a deed, it's free or pretty
close to it. Keep
this in mind and don't get hung up on the down payment.
Let's look at the results:
We received $83,000 in equity for $13,000.
We've obtained a beautiful home in the same area several
Atlanta Braves have homes as well as Whitney Houston.
We've purchased with no liability and can sell the same
way. We simply took
over the mortgage "subject to."
So, what's our exit? It's
simple. Sell the same
way we bought it. Get
as much down as possible, preferably $80,000 and deed it to
someone else. Worst
case scenario we get $40,000 or $50,000 down and take back a
second. Or, take
something in trade. Easy
in, easy out.
Let's
review: If we get
$80,000 and subtract $13,000 before a payment comes due, we'll net
about $65,000. That's
$32,500 for my partner and $32,500 for me.
Whoops, that's not true, that's $32,500 for my IRA!
Tax deferred. What
if I did three or four of these a year?
That's a hundred grand I helped my IRA earn, tax deferred.
And we're only talking about this year.
What if I did this every year until I didn't want to
anymore because my IRA had more money than I could spend?
You
Can Do 5 Or 6 Deals In Your IRA On An Annual Basis Without It
Being Called A Business
At
least, this is what I've been told by the people who administer
IRA's. Of course,
there are a few rules and more questions. I
strongly suggest you do not do this without good, competent advice
and participation. I must warn you that Uncle Sam frowns on buying
a house in an IRA with the intent of flipping it quickly.
They may tax you on the profit.
Perhaps you may want to hold it in the IRA awhile before
you flip it. Perhaps
you'll only do one or two a year.
I can't answer these questions for you and frankly, many
accountants can't either. Seek
the best advice you can find and do what you feel is best for you.
Your IRA must be self-directed.
The
best company I've ever found to handle this is Mid Ohio
Securities. They'll
understand what you're looking for and they taught me how to do
this. Call them at
(440)323-5491 and ask for a Self Directed IRA package.
Mid Ohio will put your money in a money market account
until you tell them what to do with it. When you find a use for
the funds they'll write the check according to your directions and
mail it to the address you give them.
It takes less time to carry it out than it's taken me to
tell you about it.
Next,
you must learn and understand the meaning of
self-dealing/directing. It
can be deadly to your wealth.
You cannot sell your houses to your IRA.
You shouldn't get your IRA involved in any deal you or your
entity was previously involved in.
If your IRA buys a house, it should go directly from the
seller to the IRA and not pass through you.
Don't take back notes on houses and give or sell to your
IRA. Keep it clean.
Enough said about that.
Do your homework. Mid
Ohio has an entire book answering all of your questions.
I only have a newsletter article to get you started in the
right direction.
Now,
you may be thinking I'm advocating you using your IRA money to buy
houses. Not hardly.
The last thing I want you to do with your IRA cash is to
buy real estate. Why?:
Because
You Don't Need Money To Buy Real Estate . . . And Neither Does
Your IRA
Put
some deals in your IRA that don't require cash.
Next, take that cash when they sell and buy all kinds of
neat stuff to increase the yield on cash.
Stuff like discounted paper, defaulted paper, mutual funds,
hot stocks, etc. Here's
the point. As long as
your money is tied up in real estate it can't be getting a high
return on semi-passive investments. It
can only grow as fast as the real estate will allow.
So, let's get the best of both worlds.
Create cash by actively buying and selling houses with
little or none of your IRA's money.
Next,
let's take those profits and make them grow by at least 15% per
annum outside of real estate.
Tax
Deferred Or Tax Free If You Have A Roth IRA
Make
certain you ask about a Roth IRA and take time to learn its
potential. You're
never taxed, you can use it for a first time home or education for
your children and you never have to take it out.
Of course, there are exceptions and rules.
So, take the time to learn about the ROTH and use it.
If you qualify I promise you it will be a huge return on
your time investment.
I
know! About now
you're saying: "Well Ron, you just told me not to use my
IRA's money to buy a house and yet you did exactly that with your
own IRA." Guilty as charged!
In fact, I'm quite often guilty of actually doing the stuff
I tell you about. I
guess that makes me a bit weird, doesn't it?
I actually practice what I preach!
But you interrupted me before I finished.
I said don't use your IRA to invest in real estate but what
I meant was, not for long term.
If
my IRA writes a check for $13,000 to buy a house with the
expectation of getting back my $13,000 plus $32,500 within 60
days, is that OK? I
don't need a spreadsheet on this one.
That's
Exactly A 1500% Annual Return On Investment
I
bet that's better than any money market or CD you currently have.
I'll bet that's even better than your stock portfolio's
performance last year.
Is
It A Great Deal? YES!
Is
It The Best You Can Do? NO!
The
Best Return On Your Money
Is
Called: INFINITY
You
see, if you don't invest money you can't measure the return.
That's my kind of deal. But hey!
If you've got the cash you've got to do something with it.
So, can I be excused because I didn't get an infinity yield
this time? Try to
tell your accountant or banker you can get a 1500% yield on your
money. Watch their
eyes glaze over. Remember,
all it takes to get a tax deferred infinite yield on your IRA is
for it to control or buy real estate without using its money.
Can
you option a property without money?
Yes! Can you
wholesale a house without money?
Yes! Can you
take a house "subject to" without money?
Yes! Can you lease/option a house without money?
Yes! Can you
send Ron a check for all this priceless advice to make you rich?
Yes! (Whoops,
forget that one, I got a little carried away).
Wait,
here's more! Did you
know you could do 4 or 5 of these deals per year in your IRA
without it being called a business and paying taxes?
Did you know your child or grandchild can have an IRA you
can start without their knowledge, that can become their own when
they come of age? What
a way for you to provide for your child's educational future.
Without
Writing A Check!
Without
Borrowing A Dime!
Incidentally,
if you open up an IRA for your child or grandchild, if I were you,
I wouldn't tell them. Can
you guess why?
So,
let's play with some numbers.
Suppose you can set aside enough time away from your J.O.B.
to do 3 or 4 deals a year netting a total of $50,000.
You decided you were going to do the same thing for the
next five years and then quit.
You know you can get a 15% return in your sleep, which you
can. What was your
total contribution?: ZERO!
Your
IRA Made Money, You Didn't Contribute It.
What
is it worth in:
5
Years?
$387,548
10
Years?
$779,498
15
Years?
$1,567,849
OK,
let's now suppose you get a little ambitious and do better deals
making $100,000 each year in your IRA.
What's
it worth in:
5
Years?
$775,096
10
Years?
$1,558,996
15
Years?
$3,135,698
Remember,
I'll put $32,500 in my IRA on this little deal.
If you're an active real estate entrepreneur it's no big
thing to let your IRA have a few of your deals. Most people spend
more time buying a car, planning a vacation or taking in a
football game than planning for retirement.
So, what about you? Is
this going to be another scanned over article to be quickly cast
aside because your favorite TV show is about to air?
Or, could this be a valuable piece of information that will
have a major impact on your future because you decided to take
action? Hey!
I'm only the messenger boy.
My job is done. Yours
is next.
When
you check into the nursing home. . . may you own it, free and
clear.
Ron LeGrand
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