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The DOL's Attack On Retirement Plans Kick's Into High Gear!

The DOL’s Attack On Retirement Plans Kick’s Into High Gear!
 
A recent report appearing in “AdvisorOne” mentioned the Department of Labor’s Employee Benefits Security Administration (EBSA) went after retirement plans last year in a BIG way. Almost $1.4 BILLION in fines was issued in over 3,000 civil cases. The attack by DOL resulted in over 300 criminal cases. This resulted in more than 120 indictments of which 75 cases ended in convictions or guilty pleas.
 
More than 3,000 plans were audited in 2010, which resulted in over 70% of them being required to restore losses or take other corrective measures.
 
These figures don’t even take into consideration the economic cost to the companies and individuals who doubtless spent a tremendous amount of money on legal fees defending themselves. And if you think this was a one-time occurrence think again. The DOL is planning on ramping up their enforcement staff for this year.
 
The majority of these cases resulted from what the EBSA is calling Fiduciary

negligence and non-compliance with fiduciary responsibilities. Guess what, it is going to get worse and I mean a lot worse. I have been writing about new rules designed to broaden fiduciary responsibilities and to bring many financial advisors and brokers under the same umbrella. Wall Street has fought for years to prevent brokers and advisors from being labeled fiduciaries but now the battle

is over.
 

The DOL is set to reissue its new definition of fiduciary and fiduciary responsibilities in April. One of the more controversial aspects of the first round of proposed changes was to bring IRA’s under the same umbrella. That means brokers and other advisors will fall under the same rules that resulted in so many fines and criminal cases for the pension plan world. There are a heck of a lot of IRA’s giving the DOL a much bigger playing field. In the meantime they are working on a blanket exemption to the prohibited transactions rule that would

give IRA Advisors some relief but only if they dumb down their advice and carefully meet certain disclosure rules.
 

There is another arm to this attack and that is the new disclosure rules that kick in. Please refer to my previous articles for background information on this topic. Here it is in a nutshell. For years participants in company sponsored retirement plans have been getting ripped off and they have no idea! There have been hidden fees, kickbacks, revenue sharing and all kinds of sweetheart deals going

on in retirement plans with complete impunity. The fact of the matter is many plans sponsors and trustees really have no idea just how much their plan is costing them and their participants. That is all about to change with the new fee disclosure rules that kick in this year. [408(b)(2)].
 
I think fee disclosures and transparency are a great thing and I have been calling for it for years, but I can also see this leading to a lot more lawsuits and significant fines for the retirement plan world.
 
It doesn’t take a rocket scientist to see what these two attacks will lead to.
 
More attacks on retirement plans!
More criminal cases!
More fines collected by the DOL!
Brokers, and other advisors facing the threat of fines and indictments!
This will undoubtedly lead to some advisors leaving the market and no longer servicing IRA’s or retirement plans.
Some companies will no longer handle IRA’s or pension plans preferring not to

act as custodians.

Those that do will significantly limit YOUR investment choices.
 

Sovereign International Pension Services, SIPS, offers consulting services to qualified plans and acts as an IRA Administrator for IRA’s, SEP’s and the remainder of non-qualified retirement plans.

 
Now more than ever you need an independent review of your retirement plan. Our company can review your plan document, do an independent review of your fees, asses the advice you are getting from your advisor, review your fiduciary responsibilities and much more.
 

IRA’s account holders with non-traditional assets are required to submit their FMV, Fair Market Value on an annual basis. Custodians require an outside verification of the your FMV, which SIPS can provide. If you own non-traditional assets or want a more realistic valuation of your account value we can help.

 

Protect yourself and your retirement plan assets now before you become a statistic. As always feel free to contact our office for additional information.

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Class Action: Sue Your Retirement Provider for a Better 401(K) Plan

Today's comment is by Larry Grossman, a long-time member of our Council of Experts,

leading expert on retirement plan management, and Managing Director of Sovereign

International.
 
Dear A-Letter Reader,
 

A few months ago, I wrote here in the A-Letter about the coming wave of lawsuits in the

world of retirement planning. As predicted, you can now sue your plan administrator if

you don’t have the investment flexibility you deserve.
 

Let me explain. Recently a case went all the way to the Supreme Court to decide if you

could or couldn’t sue plan administrators for account mismanagement. And on February

20th, the Supreme Court told individual 401(k) account holders Yes, you can sue

plan administrators.” This is a huge breakthrough.

 

It means that roughly 50 million participants in 401(k) plans can sue not only for

excessive fees but also for mismanagement. In other words, you can sue for better

investment options. Or at least, that’s how I believe lawyers will take it.

In my 20+ years experience in the financial world, I’ve found that if you give lawyers the

slightest inch, they’ll stretch it to a mile. So how will your average attorney define

“mismanagement?” You can bet they’ll take it to mean investment options. And that

means they could be litigating indefinitely.
 

Why More Lawsuits Could Actually Be a Good Thing –

If They Get You a Better Retirement Plan
 

And you know what? I’m going to standup and take a very controversial position. I’ll say

being able to sue for a better retirement plan is a GOOD thing. In fact, if there are any

attorneys out there who need an expert witness when you sue a 401(k) plan

administrator, you can call me.
 

Why do I say that? For years, I’ve been ranting about 401(k) plans. I’ve been writing

and speaking about how these plans are ridiculously inflexible. I’ve said how your

average 401(k) plan has hidden fees, kickbacks and who knows what else.

My complaints have mostly fallen on deaf ears. During that time, I have received

countless emails and phone calls from individuals who are desperate for some help

with their plans.
 

Now, you finally have a way to fight back against these inflexible plans – and honestly,

you probably won’t have to go to court to do it. But more on that in a moment…


You Could Argue Any of These = “Mismanagement”
 

Most 401(k) plans really don’t help you plan for the future. The majority of these plans

only allow you to invest in an absolutely horrible arcane list of mutual funds. These

plans give you virtually no assistance or direction in how to manage your retirement

fund.
 

It’s no wonder Americans aren’t saving enough for retirement! They’re working with

horrible investments with bad performance and no assistance. What kind of a system is

that?
 

I have been contacted by a number of future retirees who sent me a copy of their plan

documents. Several of these plan documents actually said the participant could open

up a self-directed account and manage his or her own investments.

But when these participants contacted their plan administrators to take advantage of

this option, they were either flat out told “NO” or the plan administrator told them “you

can only open up such an account with our hand-picked advisor” (gee no back-end deal

there I’m sure). That could be considered mismanagement.
 

I’ve read some plans that only allow you to invest in large-cap funds. What happens

when large-cap growth is out of favor? Not to mention the dollar is sitting at 30-yearlows.

If you’re ONLY allowed to invest in dollar-backed funds or large caps, couldn’t you

consider that “mismanagement?”
 

Honestly, it’s up for debate. But with the new Supreme Court ruling, I’m guessing I

could make a pretty good argument for this being plan mismanagement. In fact, I

predict the right lawyer (and expert witness) could have a field day over these poor

investment choices in court. I predict that you’ll soon see more lawsuits doing just that –

calling these poor investment choices “mismanagement.”
 

You Don’t Necessarily Have to Go to

Court for a Better 401(k)
 

Honestly, just the threat of a possible lawsuit could inspire some companies to provide

better investment choices. In fact, I predict a number of plan providers will leave the

market now that the liability just went up by a factor of 50 million.

But I wouldn’t wait for that to happen. Instead:
 

1. If you own your own company or you can exert influence over the choices your

company 401(k) has, I strongly urge you to get some serious advice as to what you

should really offer your employees
 

2. If you are a participant: Politely, demand better investments and self-directed

accounts
 

3. Ask your plan administrator to find a fiduciary or other investment advisor you can

use to strengthen your retirement plan
 
Now that Pandora’s Box is Opened…
 

To all plan administrators: The Supreme Court has just opened Pandora’s Box and I

would suggest you get serious about updating your plan. You must:
 

1. Become transparent

2. Get your fees down

3. Find an outside retirement advisor

4. Modernize your investments

5. Offer self-directed accounts
 

Don’t you want the best for your employees? You have the opportunity to give your

employees back the American Retirement Dream. You can help your workers prepare

for retirement by offering them the best retirement plan available by giving them

investment choices from all over the world.
 

LARRY GROSSMAN, CFP®, CIMA®

Retirement Expert & Managing Director of

Sovereign International

 
P.S. This is really just the tip of the iceberg. There are plenty of investment choices you

can make from around the world – in some of the few remaining strong markets. You

can read about the top-performing currencies, commodities, bonds, funds and ETFs –

including many that are perfect for your retirement plan – in The Sovereign Society’s

monthly newsletter, The Sovereign Individual.

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Articles for the Sovereign Society

http://www.4escape.com/search.php?query=grossman&search=1

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Owing Property in Your IRA

Yes, you can use your IRA dollars to own international real estate.

By Larry C. Grossman

Larry C. Grossman, CFP™ CIMA™, is the managing director of Sovereign International

Pension Services, Inc. He has over 25 years experience in the investment business and

was one of, if not the first financial advisors in the country to develop a compliant

method for assisting clients interested in moving their qualified IRA and pension plans

offshore for asset protection and greater investment diversification. Larry’s methods for

accomplishing this transition have been reviewed and approved by some of the top

ERISA attorneys in the country.

Contrary to what you probably have been told by your broker or banker, you can own

real estate in your IRA, including non-U.S. real estate. Over the years, advisors have

wrongly convinced many people they cannot own real estate, as well as a number of other

alternative investments, inside their IRA’s or other retirement plans. Nothing could be

further from the truth. In actuality, the IRS allows a great deal of flexibility when it

comes to investing the assets of your retirement account.

The trouble comes if you don’t have a “self directed” IRA or if you work with a

custodian who imposes his own investment restrictions. Most of these restrictions have

nothing to do with the code governing retirement accounts but are instead employed to

make life easier for the custodian.

What’s allowed—the real skinny

The truth is, the rules governing the ownership of real estate are simple…and you can

own virtually any kind of real estate you could name in your IRA or other retirement

account, including:

• Raw land

• Condos

• Office buildings

• Single-family homes

• Multi-family homes

• Apartment buildings

• Improved land

Prohibited transactions and self-dealing

The IRS has some simple and straightforward rules that define what you cannot do. A

simple rule of thumb is your retirement plan is meant to benefit you at retirement and not

before. You may not, therefore, directly or indirectly, deal with yourself or a disqualified

person.

What does this mean? In short, that you cannot lend money, extend credit, or furnish

goods, services, or facilities to yourself or a disqualified individual. In other words, you

can invest in any type of real estate you want as long as it is an investment and not for

your own use currently.

“Currently” is an important part of this puzzle. Let’s assume you have found your dream

retirement home or the piece of property you would like to build it on. And, remember, as

I’ve explained, the property can be in the United States or it can be anywhere else in the

world that you’d like it to be. Someday, when you retire, you would like to own the

property personally or have it for your own use. No problem. You can take possession of

the property at that time, in effect taking it as a distribution of your plan.

You would be taxed on the value of the property at that time. Of course you could sell the

property outright at anytime as well.

Other requirements:

• You may not purchase the property from yourself.

• You may not purchase the property from family members, with the exception of

siblings.

• Neither you, your business, nor members of your family may lease or live in any

investment property owned by your plan.

• Only retirement funds may be used as the down payment or good-faith deposit.

• The title must be in the name of the retirement account.

• Fractional ownerships are allowed.

Who is “disqualified”?

The relevant IRS code disallows you to deal with yourself or a “disqualified person.”

Who is “disqualified”?

1) An owner, direct or indirect, of 50% or greater of:

• The capital interest of a partnership.

• The total value of all shares of stock of a corporation including all classes.

• The combined voting power of all classes eligible to vote.

2) A member of the family, again with the exception of siblings.

These are the basic definitions of a disqualified individual, but there are other details

related to this that you should understand depending on your personal circumstances.

How to own

As you know, there are many ways to purchase real estate. You can own the real estate

fully or you can own a fraction of it, with other entities or investors owning other

fractions. You can purchase an option on the real estate or you can buy outright using a

land trust, L.L.C., or similar entity.

All of these options are allowed for the kind of investment I’m describing. Furthermore,

you can pay for the property in full using retirement assets or you can finance it. If the

property is financed, you must take special care to structure the purchase correctly so as

to avoid adverse tax consequences down the road.

The down payment must be paid for by the plan, and all future payments must come from

the plan assets, new contributions, and/or income produced by the property.

If the property is fractionally owned by the plan, the down payment and an equivalent

amount of the on-going payments must come from the plan. There are detailed

instructions as to how to accomplish this from a custodian who allows these types of

investments.

Taking on debt

If you wish to use your retirement plan to invest in real estate but do not have sufficient

funds in your IRA, your IRA can incur debt. This debt/mortgage must be in the form of a

non-recourse loan where the only recourse for default of the loan is the underlying real

estate/property.

You can obtain your non-recourse loan from a lending institution, a private investor, or

the seller of the property. (The loan, however, cannot originate from you or any family

member of direct linear descent—for example, your grandfather/grandmother,

father/mother, husband/wife, son/daughter, etc.) You cannot personally sign for the loan.

Managing the property

As a result of a recent tax ruling, some custodians will now allow you to act as your own

property manager. You can collect a “reasonable fee” for this service from your

retirement plan, and you will receive a 1099 at the end of the year for these fees.

Any income from the property must be returned to the retirement plan as a profit of the

plan, less any expenses incurred. The plan assets can be used to pay administrative and

record-keeping expenses as well. Conversely, you can hire an outside property manager

to perform this service, provided they do not fall under the “disqualified person(s)”

definition.

How do I do this?

The good news is you can find the property of your dreams anywhere in the world,

purchase all or part of it with your retirement assets, and eventually take ownership of

it—all completely legally. But, yes, you should seek assistance to make sure you do not

violate any relevant codes or take any missteps that will cause tax problems for you later

on.

Fees for setting up the structure

It will cost you about $250 to establish an account with a qualified custodian, such as

ours. Thereafter, you’ll be charged an annual fee depending on the custodian and value of

the account.

For additional information, please contact me at:

Sovereign International Pension Services.

(Larry C. Grossman CFP™, CIMA), 1314 Alternate 19,

Palm Harbor, FL 34683; tel. (727)286-6237; fax

(727)286-6239; e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it. ; website:

www.offshoreira.com .

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Uncle Sam Wants Your Retirement Money

 
The guys in Washington are getting desperate.
 
For years, our government has relied on the major Asian players like China and Japan to finance our debt.

I’m
sure you’ve heard this story. We bought their stuff, and they bought our Treasuries and other U.S. paper.

This system worked out great for us.

Today, that’s no longer the case. We’re the biggest financial losers on Earth…

Our national debt is a staggering $14 trillion! Worse, foreign investors don’t trust us to pay it down – so they’ve cut off our

cash flow.
 
In short, the government needs Treasury buyers. So the guys in Washington are turning to you… and your cash-rich retirement

plan to buy up those unwanted Treasuries.
 
Another Social Security?
 
The Department of Labor and U.S. Treasury Department are looking into ways to promote the conversion of retirement plans

into an “annuity payment.”
 
But here’s what you need to know: An “annuity payment” is really government speak for forcing you (think: mandatory Social

Security contributions) to buy U.S. Treasuries with your retirement money.
 
And most likely, the government wants to lock you into those low-yielding 30-year Treasuries that foreign investors no longer

want. That way, they can finance a mountain of deficits for decades to come.

Imagine that 100% of your retirement is tied to the dollar, a declining asset and backed by a practically worthless government

IOU. It’s the last asset you’d want to own for your retirement.

What’s more, the timing coincides with the beginning of the retirement of the Baby Boomers. Think about it, beginning next

year the first wave of the 76 million Baby Boomers will begin turning 65 and there will be a
ton of money flowing into treasuries
each year for the foreseeable future.

Make no mistake about it, Uncle Sam wants your retirement plan – and there’s really only one thing you can do to protect

yourself – get your retirement money offshore while you still can. They are coming for it and you
are running out of time.
 
Uncle Sam Will Tell You When You Can Take Your Own Money
(And they won’t let you take it all at once)

A major step towards the forced purchase of treasuries will come through a fundamental change in the way you take the

money out of your retirement plan.
Federal lawmakers want to remove all of the flexible withdrawal options you have.

They want to force you to
withdraw money in equal payments over your remaining life span, known in the industry as a lifetime

annuity.
 
An annuity is a steady stream of income that will be paid to the retiree over the remainder of his life expectancy. A 67-year-old

male would receive his payments over a 15-year period. Contrast this with the
rules in place today that give you the ability to

withdraw all the funds as a lump sum or as needed after reach
age 59 ½. (The current rules require mandatory distributions

begin by age 70 ½.)
 
What is the Ultimate Game Plan?
 
I will guarantee that the government’s solution for funding an annuity is to have all of your retirement assets purchase treasuries

with maturities matched to the payment stream. They have been looking for a way to force your
retirement assets into

treasuries and this is the first step. My guess is rather than forcing everyone to buy
treasuries today, they’ll force you to do it

once you reach retirement age and your lifetime income stream starts. Once retirees
become accustomed to the new lifetime

income stream, it will be an easier transition for the government to eventually
require retirees to invest in treasuries as the only

allowable investment for retirement plans.
 
 
How to Protect Yourself (While You Still Can)
 
Option #1: Move Your Funds to a Non-U.S. Bank

You’ll get relief from the clutches of greedy bureaucrats, lawsuit-hungry lawyers and data-mining snoops.

Privately trade stocks, bonds, mutual funds, CDs, precious metals and currencies. Buy into elite mutual funds,

managed by analysts who have consistently outperformed their American counterparts.

Option #2: Purchase a Non-U.S. Annuity

Prevent creditors from gaining unwarranted access to your funds. Participate in investments that are normally

unavailable to U.S. citizens. Hold your assets in a safe offshore haven without violating IRS regulations.

Note: To buy an offshore annuity, you must work with an adviser who the insurance company approves.

Option #3: Form an International Business Company (IBC) or Foreign Corporation

This adds a significant layer of asset protection and privacy to your business (if established in the right

jurisdiction). You can also use it to open a foreign banking/trading account, purchase an annuity, make foreign investments

directly or purchase real estate. Physical possession of your funds rests with a non-U.S. company that may not recognize

judgments awarded by U.S. courts.

Note: Your IRA would be the owner or member of the corporation depending upon the structure and YOU

would be the manager with complete control over where the corporation does business. The custodian will, of

course, insist on an annual statement of the corporation’s activities and assets it owns.

Option #4: Direct Foreign Investment

In some instances you are able to make a direct foreign investment thereby moving your assets offshore. A

good example of this type of investment would be the purchase of real estate in a foreign country.

There are other direct foreign investments available to the holders of retirement plans. These types of options

continue to dwindle as our government pressures them to become, in effect, extensions of the IRS.
 
Defend Yourself Now!

There really is no downside to moving your retirement plan offshore. After all, even offshore you can still

invest in everything you own today.

If I’m right and the government does try to keep retirement plans in the U.S. and, as much as possible,

invested in U.S. government securities, you would still be better off moving your account offshore.

The logistics involved in trying to force offshore illiquid assets to come back probably won’t justify the

expense and time involved. The most likely course of action by the government will be some type of

grandfather clause on existing accounts.

Your time is limited. Don’t take any chances – there’s no time like the present to liberate your retirement from

the potential clutches of the U.S. government.

Best Regards,

Larry Grossman, CFP®, CIMA®

www.offshoreira.com

This email address is being protected from spambots. You need JavaScript enabled to view it.

727-286-6237

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Uncle Sam Wants Your Retirement Money Post Election Update

Uncle Sam Wants Your Retirement Plan

Post Election Update

Protect Yourself Before It’s Too Late With These 4 Smart Strategies

By Larry Grossman, CFP®, CIMA®

One of the big topics of discussion at the Offshore Academy conference in Cabo was, "How would the win by Republicans affect the attack on retirement plans". Many of the attendees seemed to feel if the republicans had an overwhelming victory the attacks might stop.

I am here to tell you not only have the attacks not stopped but also they have zeroed right in on your retirement plan. At the very least you had better be prepared for significant changes. A possible disruption of the entire system seems even more likely.

0BYou Retirement Plan WILL Own 100% Treasuries When You Retire

The November 15th issue of UUUPensions & InvestmentsU ran an article called "Pension plan tax breaks facing challenge" by Halonen, D. It started out with the following paragraph-

"Corporate pension industry lobbyists are bracing for an attack on the tax breaks for pension plans as the White House and federal lawmakers struggle to slash the federal budget deficit."

"The Debt Reduction Task Force" fired the first salvo of the attack in its final draft.

The Task Force plan will let most individuals retain the ability to contribute enough to qualified retirement plans to accumulate enough tax-free assets to purchase an annuity that replaces a substantial share of their earnings in retirement. Individuals and employers combined will be able to contribute up to 20 percent of annual earnings to qualified plans, up to a maximum of $20,000 per year, indexed to inflation. However, qualified plans will no longer be a vehicle for wealthy individuals to convert a substantial share of their assets into tax-free retirement assets. In addition, to spur saving by rank-and-file workers, the plan will introduce an expanded and refundable savings credit for taxpayers in the 15-percent bracket."

3BUncle Sam Holds Hearings On "Lifetime Income"

Translation- They are going to drastically cut contributions by more than 50% for many individuals. Some in the industry have predicted this will effectively kill the retirement plan industry. Even more concerting to me is the call for retirement plans to "purchase an annuity". This little sentence speaks to the heart of what is going on and is really frightening to me. It confirms everything I have predicted.

2BUncle Sam Will Tell You When You Can Take Your Own Money

(And they won’t let you take it all at once)

A major step towards the forced purchase of treasuries will come through a fundamental change in the way you take the money out of your retirement plan. The Debt Reduction Dudes want to change the way you do it today by removing all of the flexible withdrawal options you have. Instead they want to force you to withdraw money in equal payments over your remaining life span, known in the industry as a lifetime annuity.

Let me explain- An annuity is a steady stream of income that will be paid to the retiree over the remainder of his or her life expectancy. A 67-year-old male would receive his payments over a 15-year period. Contrast this with the rules in place today which give you the ability to withdraw all of the funds lump sum or as needed after reaching age 59 ½. (The current rules require mandatory distributions begin by age 70 ½.)

4BWhat is the Ultimate Game Plan?

I will guarantee you the government solution for funding an annuity is to have all of your retirement assets purchase treasuries with maturities matched to the payment stream. They have been looking for a way to force your retirement assets into treasuries and this is the first step. My guess is rather than forcing everyone to buy treasuries today, which would start a political firestorm, once you reach retirement age and the lifetime income stream starts they will firstly force you to buy treasuries. Once retirees become accustomed to the new lifetime income stream, it will be an easier transition for the government to eventually require retirees to invest in treasuries as the only allowable investment for retirement plans.

5BExit Strategy For The Boomers

(Capture Their Retirement Assets)

It is a brilliant plan! I admire the creativity while hating the outcome. Think about it, beginning next year the first wave of the 76 million Baby Boomers will begin turning 65 and there will be a ton of money flowing into treasuries each year for the foreseeable future.

Teresa Ghilarducci Wants You To Share The Wealth Through Mandatory Redistribution

They aren’t stopping there though. Our good friend Teresa Ghilarducci is back and she has a plan to help redistribute your wealth. I have been reporting on this part of her strategy as well as others that are equally frightening for several years.

In the November 15th issue of the UPensions & InvestmentsU article previously referenced, Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School, New York, said: "I would roll back the cap to about $5,000 and then redistribute the savings to workers without pensions in the form of a tax credit of $600, and that would be revenue neutral. It would be a lot fairer and would expand pensions to more than 60 million people who currently don't have pensions."

What can I expect if the Attack works?

Get your retirement plan offshore while you still can. They are coming for it and you are running out of time.

They will force you to buy treasures.

You won’t be able to control when you take the money out.

They will look for ways to "redistribute the wealth" which means take yours away.

They will substantially reduce the amount you can contribute to your retirement plan.

Make no mistake about it, Uncle Sam Wants Your Retirement Plan!!

How To Protect Your Retirement Wealth While You Still Can

How to Protect Yourself (While You Still Can)

And your three best offshore options — and the benefits to each — are as follows:

Option #1: Move Your Funds to a Non-U.S. Bank

You’ll get relief from the clutches of greedy bureaucrats, lawsuit-hungry lawyers and data-mining snoops.

Privately trade stocks, bonds, mutual funds, CDs, precious metals and currencies.

Buy into elite mutual funds, managed by analysts who have consistently outperformed their American counterparts.

Option #2: Purchase a Non-U.S. Annuity

Prevent creditors from gaining unwarranted access to your funds.

Participate in investments that are normally unavailable to U.S. citizens.

Hold your assets in a safe offshore haven without violating IRS regulations.

Note: To buy an offshore annuity, you must work with an adviser who has been approved by the insurance company. These investment vehicles are not self-directed — so it’s important to choose an adviser carefully.

Option #3: Form an International Business Company (IBC) or Foreign Corporation

Adds a significant layer of asset protection and privacy to your business (if established in the right jurisdiction).

Can be used to open a foreign banking/trading account, purchase an annuity, make foreign investments directly or purchase real estate.

Physical possession of your funds rests with a non-U.S. company that may not recognize judgments awarded by U.S. courts.

Note: Your IRA would be the owner or member of the corporation depending upon the structure and YOU would be the manager with complete control over where the corporation does business. The custodian will, of course, insist on an annual statement of the corporation’s activities and assets it owns.

6BOption #4: Direct Foreign Investment

In some instances you are able to make a direct foreign investment thereby moving your assets offshore. A good example of this type of investment would be the purchase of real estate in a foreign country. There are other direct foreign investments available to the holders of retirement plans. These types of options continue to dwindle as our government pressures them to become, in effect, extensions of the IRS.

1BDefend Yourself Now!

If I am completely wrong about government nationalization, there really is no downside to moving your retirement plan offshore. After all, even offshore you can still invest in everything you own today.

If I’m right and the government does try to keep retirement plans in the U.S. and, as much as possible, invested in U.S. government securities, you would still be better off moving your account offshore. The logistics involved in trying to force offshore illiquid assets to come back probably won’t justify the expense and time involved. The most likely course of action by the government will be some type of grandfather clause on existing accounts. Your time is limited. Don’t take any chances – there’s no time like the present to liberate your retirement from the potential clutches of the U.S. government.

. Email: lgrossman@

Larry C. Grossman, CFP®, CIMA®

email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Website: www.Offshoreira.com

Tel.: (727) 286-6237

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You Can Buy Real Estate in Your IRA, 401k or Other Qualified Retirement Plan

You Can Buy Real Estate in Your IRA, 401k or Other Qualified Retirement Plan

You Can Buy Real Estate in Your IRA, 401(k) or

Other Qualified Retirement Plan

When Congress created the Employee Retirement Income Security Act of 1974 (ERISA) in 1974, launching tax-sheltered individual retirement accounts (IRAs), they did not write the law to favor stocks. Wall Street, however, recognized a good thing when it saw one and it rushed to tell America that all their retirement money should be in mutual funds.

Baloney.

Your IRA can be a self-directed retirement plan. That means you can buy businesses with your retirement funds, lend money, and do many other things to provide for your retirement that have nothing to do with stocks.

Chief among these is the ability to buy real estate through your IRA. And that means you can get higher returns and lower risk than you get from stocks—as long as you follow the principles we've been hammering home in MSM.

How much higher?

Well, stocks have returned about 10% a year over the last 100 years. Not bad. But even if you're just a fair to middlin' investor—and even if you don't use a lot of leverage—you should be able to compound your investments over the long term in the 15% range easily.

For instance, a $100,000 property that appreciates at the long-term average of 6% a year doubles in value after 12 years. If you put $25,000 down to buy it and borrowed the rest at 7%, your $75,000 mortgage has amortized to about $60,000 in that time. So your equity has mushroomed from $25,000 to $140,000 ($200,000 market value minus $60,000 outstanding mortgage).

That's a little better than a 15% compounded average annual return—without a great deal of leverage and getting appreciation in the range of the long-term historical average.

But if you buy a little better, you'll do substantially better. If you buy under market and in an area that is rapidly appreciating, you might end up averaging 8% compounded returns per year. This would make the property worth double your purchase price in nine years.

At that time, your $75,000 mortgage would have amortized to approximately $66,000. Now your $25,000 down payment turns into $134,000 in equity in nine years. That's nearly a 21% compounded average annual return. Far better than the long-term average of the stock market.

And that doesn't even include steadily increasing net rents… which could push your compounded average annual returns up another few percent.

So why is your IRA, 401(k) or other qualified retirement plan stuffed to the gills only with stocks or mutual funds? And in many cases with stocks and mutual funds that are below their prices of five or six years ago when you first bought them?

It's because Wall Street wants you to believe that buying stocks is the
 
What Your Stockbroker Doesn't Want You to Know:
It's Perfectly Legal to Buy Real Estate in Your IRA
 
 
Thought you didn't have the down payment for your next investment property? Well, it may be
sitting right in your IRA, 401(k) or other retirement plan.
 
Contrary to what you may have assumed, you can legally purchase real estate in an IRA or
Qualified Pension Plan. And your IRA can borrow to help you make that purchase.
 
For years many investors have been told they were not allowed to make these kinds of
investments. In some cases they have been told it makes no sense. In the meantime those in the
know have been quietly taking advantage of this wonderful opportunity.
 
First let's dispel the myths. There is so much more flexibility to your IRA than you may have ever
thought possible.
 
The IRS Doesn't Forbid It…
So Why Should You Overlook the Opportunity?
 
Section 590 of the Internal Revenue Code is the bible when it comes to what you can and cannot
do as it relates to investing your IRA. IRC 590 specifically details what are called "prohibited
transactions" and "disqualified entities."
 
If you are like most people you have never read the Internal Revenue Code. That's a good thing
(unless you're an accountant). It is long, convoluted and often contradictory. Even most experts
have a hard time understanding all of the nuances of the code. It's why many people end up in
tax court.
 
The funny thing about most of the codeand specifically section 590is most of it is written to
tell you what you cannot do and not to tell you what you can do. Fortunately for us, it's very clear
from the code
and from precedentthat you can legally purchase real estate.

Wall Street's Misappropriation of the IRA

To hammer home the point that IRAs are not just for stocks, let's take a moment to look at the
history of IRAs.
 
Traditional IRAs were created in 1974. Congress wanted to encourage individuals to begin saving
and investing for their own future retirement. There have been many changes to these rules over
the years but the basic premise remains the same. An IRA is designed to be a Self-directed
retirement plan that provides tax-deferred growth andfor those who qualify-tax-deductible
contributions.

 
Somewhere along the way one of the most important components of owning an IRA has been at
best obscured and at worst lost. That is the whole concept of Self Direction.
 
Wall Street and the Financial Industry recognized the incredible opportunity to capture assets and
create commissions for themselves by providing IRA accounts for eligible investors. What they
did not tell those investors is they artificially imposed their own restrictions on IRAs to promote
products and services that line their own pockets and do not necessarily benefit the IRA
beneficiary.
 
IRAs were never created to force investors into owning stocks bonds and mutual funds. In fact,
when you look at the rules that govern what you can and cannot own (IRS 590) you will be
shocked to see just how liberal and un-constraining the rules actually are. Congress fully intended
for you to be able to invest your IRA in almost any asset that makes sense. This includes, real
estate, private investments, businesses, and almost anything else you can imagine.

Wall Street's Wall of Silence

Why have most investors never heard they are allowed to invest their retirement funds outside of
stocks and bonds? Very simply it's all about the money.

A significant number of investors have their IRA funds with custodians who also happen to be in the business of "providing" investments or investment advice. So even though most investors have a self directed IRA they end up with custodians who put restrictions on what they can and cannot invest in.

These custodians have chosen to do this for their own financial benefit and not the benefit of the underlying IRA participant. If you are using one of the major Wall Street firms, they are in the business of selling you investments on which they make commissions or fees, things like stocks, bonds, and mutual funds.

I am not saying you should not own these investments, But these shouldn't be the only investments you own in your IRAespecially if you're a knowledgeable real estate investor.

What's more, there are times when the market offers horrendous value and has lousy prospects (as from 2000 through 2002), so it's nice to have alternatives. And real estate is traditionally not correlated to the stock market.

The 1st Step to Freeing Your IRA
From Wall Street's Control:
Find the Right Custodian

There are a number of custodians out there who will allow you to purchase real estate. They are far and few between but they are out there. The good ones have been doing it for a long time, have this process down to a science and know exactly what it takes to make it happen in a legal and compliant fashion.

"An IRA is designed to be a Self-directed retirement plan that provides tax-deferred growth andfor those who
qualify-tax-deductible contributions. It doesn't say or imply in any way that you can only buy mutual funds."

Certainly, they charge their own fees for this service. But they do not tell you what you can and cannot do with your money; beyond ensuring what you are doing is permissible. (More about that later.) These types of custodians are not in the business of selling you investments. They make their money from the fees they charge to act as the custodian and/or administrator of your account.

Your IRA Can Buy Virtually Any
Kind of Real Estate
One of the more exciting aspects of purchasing real estate in your retirement plan is that you can buy virtually any type of property. That includes…
Raw Land
Single Family Home
Multiple-unit dwellings
Apartment Buildings
Condominiums
Office Buildings
Foreign Real Estate

That's right, you can even buy foreign real estate through your IRA! Maybe you have found a little piece of beachfront property in Mexico you would like to build on for your future retirement home. You can legally do this through your IRA.

In fact, your IRA can even purchase an option on any of these types of properties. It can also makeother real estate related investments. For instance,you can buy mortgages or other notes through your IRA. You can buy tax lien certificates and defaulted notes.

For the purposes of this lesson, however, we're going to stick with real property.

Know What You Can't Do
So You Can Make the Most Out of What You Can

There are some restrictions on any investment you make with your IRA. These restrictions apply to real estate investments as well. One of the primary restrictions is this regard is that any investments your IRA makes cannot be for your benefit today. They must be for the future benefit of you, your heirs or both. This means if you purchase real estate in your IRA, you cannot use it in any fashion until you retire… well almost any fashion.

What You Need Is a Good
Administrator
Most of the companies that can help you set up a self-directed IRA are IRAadministrators, not custodians. They are the front end of the process. Administrators take care of all of the paperwork and required reporting. They usually place your funds with qualified custodians, usually insurance companies or federally insured banks. These custodians typically are glad to give upthe paperwork aspect of the transaction and are glad simply to hold the funds. The original rules that established and still govern IRAs and other individual retirement plans (Treas Reg. 1.408- 2(e)(2)) automatically granted permission to Insurance Companies and Banks to act as a qualified custodians, should they choose to do so. Any other entities must apply for and receive from the IRS a determination letter stating they qualify to act as a custodian. There are significant capital requirements and other qualifications which make the entry barrier to achieve this status quite high. For this reason, there are really only a limited number of companies with the financial resources to act as custodians. But all you need is the right administrator who will help you with the necessary paperwork. They will work with a qualified custodian.

 
Most rules have an exception and this rule is, well, no exception.

Say you buy a beachfront property as an investment through your IRA. You rent it out most of the time and perhaps you're anticipating retiring to it one day. But you may also want to use it occasionally now. There are certain circumstances by which you can do just that.

The code is actually a little more flexible than you might think. It allows your friends and some of your relatives to use your property prior to retirement. So even though you are specifically prohibited from using your property, many of your relatives are allowed to use it. And anyone not related to you is allowed.

Who is a "related" party that would be prohibited from using the property? The IRS Publication

590 defines these "disqualified persons" as…
Your spouse
Lineal members of your family (ancestor, lineal descendant, and any spouse of a lineal descendant)
Your investment advisor or manager
Any entity in which you hold a 50% or higher ownership
 
What relatives are not prohibited from using the property? Your siblings and cousins.
 
So if you didn't alienate all of your brothers and sisters when you were growing up, it may be time to cash in. You can allow your siblings to use your beautiful beachfront property and they can invite you as their guest!

However, if your property is repeatedly and only used by friends and relatives who always invite

you as their guest and never pay any rent to use the property, the IRS would infer you really used it for your own benefit. So some common sense is warranted.

When it comes to the use of the property, it is an honor system. Your IRA administrator or custodian is not going to keep track of who uses your property. And the IRS certainly does not have the manpower to keep track. So it is very unlikely that anyone is going to be checking up on you. It is up to you to abide by the rules.

I suggest keeping a record of when the property is used and by whom in case you ever have to document the use of the property for the IRS.

 
You Can't Use Your IRA Real Estate Investments
For Current Business Use
But There Are Some Notable Exceptions
 
Besides personal use, it is also against the rules to use any property for your personal business either. Yet there are some useful exceptions to this rule too.
In my research of this topic I turned up some amazing examples of individuals who had seemingly broken all of the rules. Yet they were in compliance. It was as if the section on prohibited transactions and related parties had never been written.

"Your IRA can even purchase an

option on properties. It can also

make other, non-physical, real

estate related investments. For

instance, you can buy mortgages or

other notes through your IRA. You

can buy tax lien certificates and

defaulted notes."

One of my favorite examples is a group of doctors whose retirement plans own the land and the building out of which their medical clinic operates. In another case, an individual was able to purchase 176 acres of unimproved land from his own IRA and then use that land for himself, personally.

These fall squarely into the list of prohibited transactions. They cannot even be called a gray area. So how did they get away with it? It turns out the Department of Labor has granted a number of blanket exemptions to the prohibited transaction rules. And as long as you follow their exemption application procedures and meet their criteria, you can receive approval for a similar transaction under one of these blanket exemptions.

The subject of exemptions is highly complex and technical. So if you want more information on this subject, go directly to the DOL's web site, where they list these blanket exemptions and have all of the necessary information required to apply for your own exemption.

The general website is http://www.dol.gov/. A specific link for this section is http://www.efast.dol.gov/You can also contact Ekaterina A. Uzlyan of the Department of Labor at (202) 219-8883.

Turning Your IRA into a Real Estate Investment

In describing the different possibilities and flexible nature of your IRA, I've gotten a little ahead of myself. So let's get back to basics and talk about how this all works, step by step.

Chances are your IRA or retirement plan is not currently with a custodian who is going to allow you to buy real estate through it. So your first step is to find a custodian that allows for truly selfdirected IRAs. The simplest way to do this is to do an Internet search for "self-directed" IRAs and check out their websites or call them to find out if they handle real estate purchases for the IRAs they administer.

Ask about their level of experience with IRA-based real estate transactions and inquire about their fees. Request references.
Once you have picked your new custodian, you need to transfer your existing account to them. They will have all of the paperwork needed to do this. It can either be done by a wire transfer from your existing custodian or by check. If you own other securities you are going to keep, it can be done through a direct account transfer, frequently knows as an ACAT transfer.
The new custodian has all of the paperwork needed for you to buy real estate. So the next thing they are going to ask you for is a "buy direction letter". This simply tells the custodian what you plan on purchasing.
I suggest you also give them all of the contact information for any other parties involved in the transaction, such as the seller, any attorneys who might be involved and any title agents. This will speed up the process if any questions arise along the way.

Your custodian will take care of all closing documents and the property will actually be purchased in the name of your IRA or retirement plan.

The Nitty Gritty

"the Department of Labor has granted a number of blanket exemptions to the prohibited transaction rules."

Some of the common questions that arise concerning buying real estate through your IRA are…

How is the property titled?
Can my retirement plan borrow part of the money?
Can I own the property in any other entities (e.g., trusts, LLCs)?
What if I want to purchase it with a partner?

In normal real estate transactions, you can buy properties individually in personal name, with partners or as a business entity. This same flexibility applies to owning real estate in your retirement plan.

For instance, property owned by a retirement plan can be owned partially or fully by the plan. This opens up a universe of opportunities.

Let's say you have found a piece of property you are interested in purchasing but you do not have enough money to buy it outright with either personal or retirement assets. You can legally own it with both and in any fractional combination.

In fact you can own property with your IRA with as many other entities as you want. There are virtually no restrictions. However, if you own property fractionally with your retirement plan, all income and expenses must also be accounted for fractionally.

Let's look at a couple of simple examples.

You purchase a piece of property for $200,000. To keep it simple, let's ignore leverage for the moment and assume you purchase it for 100% cash. You pay for half of it with personal assets and half with assets from your IRA.

Your custodian will now ensure when the transaction closes that you own it 50% personally and 50% by your IRA. Going forward, you must pay for any expenses or improvements in the property in the same manner, 50% personally and 50% with your retirement plan. So if you need to put a new roof on your rental home for $15,000. $7,500 must come from your IRA and the other $7,500 from personal assets.

Similarly, if it is income-producing property, the same principle applies to the income it generates. Half would be earned by you, and hence half would be taxable. The other half would be earnedby your retirement plan and be tax-deferred (if in a traditional IRA) or tax-free (if in a Roth IRA).

There is virtually no limit on the numbers of partners with whom you can own the property. And your partners can use personal assets or retirement assets for their investment funds too.

You Can Own Property through Your IRA
And Title It in a Business Entity

For privacy or asset-protection purposes, you may prefer to own your properties in a corporate entity such as a Limited Liability Company. Your IRA or retirement plan can also own property in this manner, with some minor exceptions.

Once again the IRS wants to make sure you use your retirement plan as an investment for the future and not for today. So they make it clear you cannot enter into any transaction that might be considered self-dealing. And most custodians want to ensure you do not accidentally or purposefully enter into a transaction that might trigger any self-dealing. So most of them put some minor restrictions on the form of corporate ownership you can be involved in.

You can establish a new corporation that would be 100% owned by your IRA. However, if you want to own the corporation personally (rather than own the corporation through your IRA), mostcustodians will only allow you to own it with up to a 49% share. The remaining 51% must be owned by an unrelated party.

This is done to keep you from selling a corporation you already own personally to your IRA. This is considered self-dealing and is a prohibited transaction.
This may become particularly important when buying non-US property in certain jurisdictions. That's because some foreign jurisdictions may not allow you or your retirement plan to own the property directly. Instead, they may require you to own it in the name of a foreign corporation

You Can Use Leverage in Your IRA

One of the most common questions that arises is how do I pay for the property? More specifically, can my retirement plan take out a mortgage? The answer is yes!

Your IRA can borrow to make a real estate purchase. However there are several important things to point out. You may not pledge the assets of your IRA as the collateral for the loan.
 
A loan may only be in the form of a non-recourse promissory note and the IRA holder is not allowed to personally guarantee the non-recourse note. The underlying property itself must be the only collateral for the loan.

Many lending institutions simply will not loan money under these conditions. Others may only grant loans up to 70% or 75% of the purchase price, requiring a 25% or 30% down payment from your IRA. Other, non traditional lenders, however, may be willing to make a higher loan-to-purchase-price to your IRAif you've bought it at a good enough price that the loan to appraised value is low enough.

So let's say you've bought a property in preforeclosure for $100,000, and the property has a market value of $130,000. Even though you have all that extra equity in the property from buying below market, a traditional bank may only be willing to lend your IRA 70% or so of your purchase price… or $70,000 in this case. However, a non-traditional lender may be willing to lend you 70% of the appraised value ($130,000 in this example). That would mean you'd get a loan of $91,000 for this purchase, instead of the $70,000 offered by the bank.

"You can establish a new

corporation that would be

100% owned by your IRA.

And you can then own

investment property in that

corporate name."

The Key Steps of Buying Real Estate through Your Ira

Find a custodian for truly self-directed IRAs Arrange for transfer of funds Fill out "buy direction" letter Execute sales contract with help of administrator Apply for loan in the name of the IRA Close on transaction and reap taxsheltered benefits Option to pay yourself an asset management fee (not a direct property management fee)

It is also important to note when you have debt-financed real estate in a retirement plan the mortgage payments must come from either income from the property, existing plan assets, new contributions to the plan, or some combination of these. But you've already learned in MSM to make sure all your rental properties pay for themselves and that you always should have a margin of safety. So if you follow those guidelines, your carryingcosts should all be covered by the property itself. And this requirement won't be difficult to meet.

There Are Limitations on Tax-Sheltered Income
When Your IRA Borrows to Buy Real Estate
 
The use of borrowing in your IRA may trigger an event called UBTI, Unrelated Business Taxable Income. Let's say you purchase a piece of income-producing property with your IRA.
 
You pay $30,000 in cash from your IRA and you finance the other $70,000 for a total purchase of $100,000. During the year this property generates $10,000 in income.
 
Seventy percent, or $7,000 of this income, would not be sheltered since this relates to the amount that was financed by your IRA. Thirty percent, or $3,000 of this income, would be sheltered since this was the amount that was not financed You would be responsible for reporting this UBTI on IRS Form 990-T each and every year the property produced a taxable income stream.

The Pros and Cons of Using Your IRA to Buy Real Estate

Some commentators say it is not a good idea to buy real estate with your retirement plan while others have whole-heartedly embraced the idea. Like anything, there are pro's and con's. Among the key positives…

You get to access capital in your IRA for real estate purchases, and this can provide a very valuable alternative to stocks, especially when the stock market is overvalued and weak. You also get the tax-deferral benefits of IRAs while investing in real estate.
With a traditional IRA, capital gains from property sales and any income grow taxdeferred while remaining under the retirement plan umbrella. But they are taxed at ordinary income rates when withdrawn. (However most participants are in a lower tax bracket at this point in their lives.) With a Roth IRA, your contributions are with after-tax dollars. So capital gains and income grow tax-free.
 
Among the drawbacks is the fact that you lose some of the write-offs and depreciation you normally enjoy when owning real estate outside of a retirement plan. Yet, at the same time, you also avoid the depreciation recapture upon sale if the property is held under the plan umbrella.

More Info on Buying Real Estate
through Your IRA

For More Information on Self-directed IRAs,

go to the IRS website (http://www.irs.gov/)

and select publication 590.

You can also contact Larry Grossman

directly, at Sovereign International Asset

Management, Inc., 1314 Alt 19, Palm

Harbor, FL 34683.

Tel. 877-733-6815 or 727-286-6237

Fax: 727-286-6239

Website: www.offshoreira.com

Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

In my opinion, owning real estate in a retirement plan makes a great deal of sense. The investors I have assisted have been thrilled to be able to invest in a number of different types of projects and finally put their retirement assets to work in an investment they know and understand. And I believe many more investors would welcome the opportunity if they only knew the option exists.

Now, you are one of those in the know. So let's take a look at a few deals we have been able to put together for our clients… so you can get an idea of how using your IRA to buy real estate might help you.

Case Study # 1:
Doc Tim Buys His Future Retirement Haven
 
Doc Tim had been a client of mine for several years. One day I casually mentioned to him I had helped a client purchase real estate with his retirement plan. Tim visibly immediately sat up and took notice.
It wasn't long after that when I received a call from Tim. It turns out Tim had another IRA account at Schwab. Like most investors in so-called, self-directed IRAs, Tim had primarily owned mutual funds over the years and the occasional stock. None of these had performed very well.
 
Also, like a lot of Floridians, Tim was thinking about owning a piece of property in the mountains in North Carolina. He wanted to use it as an investment property today, with the possibility of using it as a second home (fully paid off) after he retires. (Remember, Tim or any other disqualified persons are prohibited from using the property today-except for the exceptions already noted.)
Tim is one of those guys who seem to know everyone and whom everyone likes. As it turns out, one of Tim's contacts had told him about some property he could get on the side of a mountain in NC as a real steal.
Tim contacted my office and inquired if this really was something he could do. He was more than ecstatic to find out not only was it possible, but we were one of the few firms who knew how to make this kind of transaction happen smoothly. We were able to help Tim get his IRA transferred from Schwab to a new IRA custodian, legally and as a non-taxable event. The transfer of assets took about two weeks. The new custodian then completed the purchase agreement and all other necessary documents to complete the transaction.

Tim is now the happy owner of 3 lots on the side of a beautiful mountain in NC. Currently, these lots are in the form of unimproved raw land. Tim is free to hold these purely for speculation or to build on these lots using other retirement assets.

Case Study # 2:
A Seasoned Real Estate Investor Taps into Her IRA Funds

Barbara A from Olympia WA has been speculating in real estate for years. She was tired of not earning the kinds of returns in her IRA she had become accustomed to earn as a real estate investor. Barbara contacted our office when she heard about our ability to purchase real estate in a retirement plan.

Turns out Barbara is either very lucky or is quite the visionary. She had a hunch that lumber prices (which had been depressed) were overdue for a cyclical rally. So she used our firm to turn her under-performing IRA into 23.7 acres of prime timber, which she bought for just $31,000. That property has now shot up in value. And Barbara has been able to shelter 100% of the gain in her tax-deferred retirement plan.

Case Study # 3:

Developing Caribbean Real Estate through an IRA

The experience of Dan T from Jacksonville is best captured by a letter he wrote to The Sovereign Individual, an investment letter to which I contribute from time to time. Forgive me if it reads a bit like a commercial, but this is a real letter… with actual details of the transaction… and a pretty good synopsis of the steps that were involved.

"I'm Developing Caribbean Real Estate with My IRA Funds. I read one of Larry Grossman's articles about using IRA funds to purchase real estate overseas and called his group for more information. Soon, I embarked on an adventure to purchase and develop some ocean front property on a Caribbean island.

"Larry and his group worked to get the funds consolidated from 20 individual accounts to fund the adventure. They helped establish new IRA and non-IRA accounts with a new custodian. They also set up a corporation, and transferred the funds on an accelerated schedule.

"We have now purchased the land; we have building permits and environmental impact statements approved. Our comprehensive Master Plan for single-family homes, condominiums, apartments, and commercial and office space is exciting. The survey is finished; the lots are staked out and go on sale in a week. We have Letters of Intent onsix lots. The promotional materials will be done within two weeks and the roads and  utilities will be in within 90 days."

Case 4 is a hypothetical case to show just how diverse a transaction like this can actually be.

Case Study # 4:

A Hypothetical Case: This Could Be You

Jim was tired of losing money in the market and knew there had to be a better way to do things. Jim lives in Boston, which has been a hot real estate market and he thought it was only going to get hotter. Jim had his eye on a new office complex he drove by everyday on his way to work. He had checked into the property and knew there was a shortage of good office buildings like that in the area.

The problem was the developer wanted $1,000,000 for the property. Jim has a million dollars; he has done well over the years. But he did not have a million in either his personal accounts or his retirement accounts. But he did have a million between them all combined.

Jim found out the rules are much more flexible than he had ever been told they were. So he bought a 34% interest in the property with all of his IRAs combined under one custodian. He bought 33% with his company's profit sharing plan and 33% with a Nevada LLC he had set up for asset protection planning.
Jim likes to be actively involved in real estate and has decided to manage the property himself. Interestingly, Jim found out the IRS allows you to pay yourself a fee from your retirement plan for managing the assets of the plan, but not for direct property management. Jim is now collecting a quarterly salary from his retirement plan for managing the plan assets. Jim, of course, pays taxes on this income but does not have to pay a penalty, as this is not considered a premature distribution of the plan.

The property is actually owned and titled in the name of all 3 entities. Jim therefore keeps track of all expenses and income and prorates this to all three entities in the same percentages as it is currently owned.

Types of Individual Retirement Plans
That Can Invest in Real Estate

Virtually any individual retirement plan is eligible to invest in

real estate. These include…
Traditional IRAs
Roth IRAs
SEP IRAs
SIMPLE IRAs
401(k)s

What's more, the rules governing these types of investments are basically identical for all types of plans. The key is to work with a knowledgeable team of advisors or a custodian who understands truly self-directed plans and will allow you to make these types of investments.

Until next time, invest well.

Larry Grossman, CFP® , CIMA®
For Main Street Millionaire
Some Key Documents
You'll Need

IRA Transfer-rollover PDF

file

Buy-Direction Letter PDF

file

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Uncle Sam Wants to Seize Your Retirement Plan

But These 3 Easy Steps Can Help You Protect Your Hard-Earned Money

 

Remember the old posters that read “Uncle Sam Wants You”?

Well, this time, he needs you — in particular, your money.
 
The Department of Labor and U.S. Treasury Department are looking into ways to promote the conversion of retirement plans into an “annuity payment.” That, at least, is the term cited by sources like BusinessWeek and Bloomberg.

But make no mistake about it. That’s “government-speak” for the mandated purchase of U.S. Treasuries.

And most likely, the government wants to lock you into a low-yielding 30-year Treasury in order to finance a mountain of deficits for decades to come.

And here’s where you — well, your retirement funds — come in.

This isn’t the only government move to force the purchase of Treasuries; it was also announced recently that money-market accounts are going to be forced to hold 10% of their assets in Treasuries or equivalents.

You can bet the bank it won’t stop there.

Some of those “equivalents” could include the bonds of cash-strapped municipalities, all offering a fixed return below inflation.

Requirements like these could seriously erode your purchasing power, at a time when you can’t replace it with employment income.
 
 
Is it Too Late to Invest Offshore? Not Yet, But it May Be Soon…
 
It is very clear to me that the current administration wants to stop offshore investing. So, if there were ever a time to get serious about moving your money, that time is now.

In battle, your best chance for successful defense comes from recognizing your enemy’s tactics. The tactics the government is using to capture your retirement plan is the “Pincer Attack,” a classic maneuver of double-envelopment.

Here are the two pincers as I see them today:

  • The first front is an attack on offshore investing. They would like to close the gates to offshore asset as much as possible and would do this through a variety of legal and tax measures to make it difficult, costly or simply illegal to use retirement funds to invest offshore.
  • The second objective is to effectively nationalize retirement plans, or control them enough so they can mandate a significant portion of those funds to U.S. government securities.

If you don’t defend yourself now, you could lose flexibility of investment and even control of your retirement plan.

48 American States Have Secretly Transformed Themselves into New Rogue-Trading ENRONs…

But if you retreat to these 6 Ponzi-Proof investments right now, your wealth could multiply 3-5 fold, even as millions of Americans watch their retirement accounts go up in smoke.

The Gates are Closing…

Currently, it is legal to take your retirement plan offshore and make non-U.S. investments.

It will be very tough to just flat-out change the rules regarding how you can invest, and the outright closure might take a while.

But, the threat is imminent.

So, how do they stop investors from going offshore? The FDIC announced an audit of all IRA Custodians in 2010. To the best of my knowledge, this has never been done before.

In advance of the audit, they sent out a letter to all custodians addressing areas of concern, including foreign real estate, foreign companies, foreign limited liability companies, and the “risks” of investing in other countries.

Custodians can and do exercise the right to disallow investments at their discretion.

Making offshore investments too costly for custodians is an attempt to force them into no longer allowing such investments.

An even-more-extreme result will be custodians who completely decide to leave the IRA business.

An IOU Where Your Retirement Money Once Was

Originally, the second attack looked to be the government takeover of retirement plans, as was done in Argentina.

The most important thing is clear: The government wants to force you to buy Treasuries and nothing else!

Imagine that — 100% of your retirement tied to the dollar, a declining asset, and backed by a government IOU that is already so big many question whether it can be sustained.

It’s the last asset you’d want to own for your retirement!

What’s more, the timing coincides with the beginning of the retirement of the Baby Boomers. This could create economic strains to an entire generation if they’re limited to such low-yielding investments.

How to Protect Yourself (While You Still Can)

And your three best offshore investing options — and the benefits to each — are as follows:

Option #1: Move Your Funds to a Non-U.S. Bank

  • You’ll get relief from the clutches of greedy bureaucrats, lawsuit-hungry lawyers and data-mining snoops.
  • Privately trade stocks, bonds, mutual funds, CDs, precious metals and currencies.
  • Buy into elite mutual funds, managed by analysts who have consistently outperformed their American counterparts.

Option #2: Purchase a Non-U.S. Annuity

  • Prevent creditors from gaining unwarranted access to your funds.
  • Participate in investments that are normally unavailable to U.S. citizens.
  • Hold your assets in a safe offshore haven without violating IRS regulations.

Note: To buy an offshore annuity, you must work with an adviser who has been approved by the insurance company. These investment vehicles are not self-directed — so it’s important to choose an adviser carefully.

Option #3: Form an International Business Company (IBC) or Foreign Corporation

  • Adds a significant layer of asset protection and privacy to your business (if established in the right jurisdiction).
  • Can be used to open a foreign banking/trading account, purchase an annuity, make foreign investments directly or purchase real estate.
  • Physical possession of your funds rests with a non-U.S. company that may not recognize judgments awarded by U.S. courts.

Note: Your IRA would be the owner or member of the corporation depending upon the structure and YOU would be the manager with complete control over where the corporation does business. The custodian will, of course, insist on an annual statement of the corporation’s activities and assets it owns.

Defend Yourself Now!

If I am completely wrong about government nationalization, there is really no downside to moving your retirement plan offshore. After all, even offshore you can still invest in everything you own today.

And if I’m right and government does try to keep retirement plans in the U.S. and, as much as possible, in U.S. government securities, you could still be better off.

The logistics involved in trying to force offshore illiquid assets to come back probably doesn’t justify the expense and time involved for the government.

So, the most likely course of action by the government would be some type of grandfather clause on existing accounts. Still, that makes your time limited.

Don’t take any chances – there’s no time like the present to liberate your retirement from the potential clutches of the U.S. government.

Sincerely,

Larry C. Grossman
 
Managing Director

Sovereign International Pension Services

SovereignPensionServices.com

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Get Your Retirement Plan Offshore Now!

Get Your Retirement Plan Offshore Now!

The End Of Offshore Retirement Plans May Be Imminent

By Larry Grossman

It has finally happened. The current administration has begun to take steps that could lead to the effective ban of offshore investments in your retirement account. You need to act now before the door is slammed shut for good!

Originally, investors wanted to go offshore for greater access to non-US investments and at the time the dollar had been on a major decline. Then, when the dollar strengthened, lawsuits became a major problem and clients continued to go offshore to seek greater asset protection.
Now, the government needs to stave off offshore investment as a precursor to prevent capital flight. And it’s looking to seize control of your retirement account, similar to what Argentina did with their citizen’s retirement accounts.
 
The Government Doesn’t Want You To
Invest Outside of the Us!

Now that the Obama administration is creating more Czars than Imperial Russia, the notion of a single government entity controlling your retirement plan is very much on the forefront.

Let’s get to the facts and why I suddenly see a change on the horizon.

Some companies in the IRA business have been sloppy. They don’t particularly like foreign investments of any kind. They prefer the ease and simplicity of having only a few mutual fund and asset allocation plans to choose from, none of which means sending money offshore.

The rub is it is perfectly legal to make offshore investments in your retirement plan, (for now). The best way the government can take the first step towards stopping offshore retirement plans is to make it expensive, man-power intensive and time consuming to the point where custodians just won’t allow it. That’s step one. Nationalization of your retirement plan to follow.

What will this nationalization entail? For starters, the government will explain that it offers the baby boomers—who have seen the last decade of wealth destroyed in last year’s market crash—a guarantee that their retirement plan will be free from risk.
 
The only asset that the government considers risk free, however, is government debt—treasuries. And with China concerned about the future of the dollar, mandating another market for treasury investment is exactly what the government needs.

And who knows, the government could mandate allocation as well, meaning that your retirement portfolio could include shares in companies such as GM and AIG whether you want to own it or not.

There’s just no telling how much the government will push using the pretext of the financial crisis.
 
It makes perfect sense in a weird sort of way. First the government stops you from taking your retirement plan offshore without actually changing the rules and raising a lot of eyebrows and then they step in and take over all plans still onshore—and decide what you can invest in. After all, liberty is always eroded, never directly assaulted.

Clients have been asking me how the government will bring existing plans offshore back. In all likelihood, plans already offshore will be grand-fathered and can remain there. It would take too much effort on behalf of the United States to cajole offshore retirement money back when the lion’s share is still stateside and easy to grab.

Plan your Legal Move Offshore

IRAs, SEPs and Keoghs require the use of an IRA Custodian and there are less than a handful of custodians who will let you do this.

Qualified plans such as 401(k)s, profit sharing plans, defined benefit plans and others have a plan administrator and trustee. These two entities must be willing to allow for the assets to go offshore and the plan document must be reviewed to ensure there are no “artificial constraints” written into the plan document, which would restrict your flexibility.

Once your plan has been transferred to an offshore-friendly custodian you have a number of options:

Option #1: Move Your Funds to a Non-U.S. Bank
Safely explore the most rewarding corners of the financial world – far from the clutches of greedy bureaucrats, litigation-hungry lawyers and datamining snoops.
Privately trade stocks, bonds, mutual funds, CDs, precious metals and currencies.
Buy into elite mutual funds, managed by awardwinning financial analysts who consistently outperform their American counterparts, year after year.

Option #2: Form an International Business Company (IBC) or Foreign CorporationAdds a significant layer of asset protection and privacy to your business (if established in the right jurisdiction)
Can be used to open a foreign banking/trading account, purchase an annuity, make foreign investments directly or purchase real estate.
Physical possession of your funds rests with a non-U.S. company in a jurisdiction that may not recognize judgments awarded by U.S. courts.

Option#3- Direct Foreign Investment
In many cases you may make a direct purchase of a non-US asset or investment such as foreign real estate or a private placement. Again, there can be significant advantages to using a non-US LLC to make the direct investment especially when it comes time to take a distribution from the asset. 
 
Larry C. Grossman, CFP®, CIMA®
Email: This email address is being protected from spambots. You need JavaScript enabled to view it. .
Website: http://www.offshoreira.com   
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The Safest and Most Cost Effective Ways to Add Physical Gold to Your Offshore IRA

Email: lgrossman@offshoreira.

 The Safest and Most Cost Effective Ways to Add Physical Gold to Your Offshore IRA

Many investors are stuck with 401(k)s or pension plans that offer little exposure to physical gold, silver and platinum. But what most people don’t know is, it’s perfectly legal to hold precious metals in your IRA. And you’re not limited to bullion bars. Some of the most popular gold and silver coins are also eligible. For added protection, you can even do it offshore. But before you buy a single ounce, keep these pointers in mind.

IRA Do's and Don’ts

Through the years, IRA rules and regulations have evolved. The most significant update was issued in 1998. It puts strict limits on the types of coins or bullion you can hold in a pre-tax account. Any metal held in your IRA must be 99% pure (or better).

Most collectible coins, including “proofs” and numismatics are NOT eligible.

Failure to follow these rules is a violation of federal tax law. To steer clear of fines and penalties, do your homework and only purchase pre-approved bullion products. One of the advantages of IRAs is that you can hold one form of gold - like coins - or a mix of physical and paper gold, from mining stocks to coins to bullion. Investors looking to hold large quantities of precious metals may lean toward bullion bars. Just keep in mind, any bars you buy must be produced by an accredited manufacturer that follows strict purity standards. To be safe, select gold that’s at least 99.5% pure and silver, platinum or palladium that’s 99.9% pure.

Affordable Ways to Hold Gold in Your IRA

Right now, several European banks are willing to hold American citizens’ IRAs. ey also offer an array of precious metal storage programs, which are tailored to your budget and storage requirements.  For example, if you’d like to hold gold in the financial fortress of Switzerland, you can get started quickly and easily. My colleague, Marc Sola of NMG recently launched MySwissGold.com, a website that can help you begin the process of holding gold offshore. Every ounce acquired through this program is certified, with a unique serial number. e minimum investment is $50,000. Another popular (and affordable) way to get bullion exposure is through the famed Perth Mint

The Safest and Most Cost Effective Ways to Add Physical Gold to Your Offshore IRA

These Government-Approved

Coins Can Be Held in Your IRA

Gold

1. American Eagle

2. Australian Kangaroo/Nugget

3. Austrian Philharmonic

4. Canadian Maple Leaf

5. Credit Suisse Pamp Suisse Bars .999

6. U.S. Buffalo Gold Uncirculated (no Proofs)

Silver

1. American Eagle

2. Australian Kookaburra

3. Canadian Maple Leaf

4. Mexican Libertad

Platinum

1. American Eagle

2. Australian Koala

3. Canadian Maple Leaf

4. Isle of Man Noble

 

Certificate program (PMCP). If you choose their pooled account option, they’ll waive any storage fees.  Or you can request a private (segregated) account and pay nominal insurance and storage fees, based on the purchase value of your metals. All precious metals held under the Perth Mint Certificate Program are covered by a Western Australian Government guarantee under Section 22(1) of the Gold Corporation Act 1987.

The minimum amount to open an account is $10,000. My company, Sovereign International Pension Services has made arrangements with several European Banks who are willing to hold IRA accounts, including precious metals held on deposit. You can even take it one step further by opening a Nevis LLC (owned by your IRA) to add an extra layer of protection, privacy and flexibility into the equation.

Should you need any assistance, feel free to contact me at the number below.

 

Hands-Off…Until You’re 59-1/2 Years Old

Perhaps the most powerful advantage of holding precious metals in an IRA is — buying gold with pre-tax money. Instead of coughing up thousands of dollars in sales tax, you can put that money toward your investment. But…like any pre-tax investment, you need to plan accordingly. Keep in mind, if you take any distributions before age 59-1/2, you’ll pay income taxes on the entire amount, plus a 10% early withdrawal fee. To be safe, don’t put all your gold into an IRA unless you are certain that you won’t need it until that magic age of 59-1/2. In the meantime, see that your holdings are under the control of your IRA custodian and on deposit with a reputable bank.

Is Your Gold Safe from Government Confiscation?

Lately, I’ve received many questions about gold confiscation. Investors are fearful that one day, the government will seize their gold - as President Roosevelt did in 1933. Look, I can’t predict the future. But I think we can both agree that the Federal Government will pretty much do whatever it wants. BUT if 90% of all gold is held domestically and they can “flip a switch” to take it, will they bother to go to the trouble of chasing down the remaining 10% offshore? I can’t say for certain, but common sense suggests that holding gold offshore could slow or halt any such effort. Of far greater concern to me is the shrinking window of opportunity to move retirement plans offshore. So if you believe this investment option is right for you, start planning your next move today. You’ll gain a tremendous amount of investment flexibility, privacy and peace of mind - in addition to massive upside potential from the movement of gold, silver and their precious metal siblings. TSI

Five Steps to IRA Success

Adding precious metals to your IRA is easy…

#1 Call your IRA custodian and ask if you can add

gold to your IRA. (Not all plans offer this capability.)

If the answer is “no,” then you will have to open an

IRA and consult a custodian that can assist you.

#2 Make sure your IRA’s custodian has plenty of

experience dealing with physical gold. You don’t

want to get ripped off by paying too high a premium

over the spot price.

#3 To open your IRA account, submit paperwork

to your IRA custodian - along with payment for any

storage fee.

#4 If you have an existing IRA, transfer money

over to fund the gold account. Ask a tax professional

for help with rolling over funds if needed.

#5 Decide whether to buy coins, bullion or paper

gold and instruct your IRA representative to make

the purchase for you.

Larry C. Grossman, CFP®, CIMA®

Website:www.sovereignpensionservices.com.

888-609-7425

727-784-4841

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Belize: Fire Sale Prices Offer Investors the Ultimate Opportunity

As investors many of us only care about the bottom line. Here it is. A resort in Belize has a debt service it can’t make. We are acquiring the company and are getting rid of just enough inventory to clear the debt. Some of the properties will be sold as low as forty cents on the dollar. These are phenomenal discounts for people with cash, who can be decisive, act quickly, and capitalize on this opportunity.

However, you may also want to consider the “Why” factor. Why Belize? Why would someone want to visit and own property there? We must understand what motivates the ultimate consumer why they will want to own and enjoy the product. Why will they be willing to pay us more than we invested for the use of that property. If we know this, we can make wise decisions.

The main factors that drive the economy of Belize are Tourism and Financial services. The country is right now moving onto the world stage as a major player in both arenas. You should consider this opportunity because there are real consumers for beachfront property there. Your advantage is that you are hearing about this distressed property fire sale first.

Belize was British Honduras until 1981 when it gained independence from England. It remains a British Commonwealth country with English as the official language. The last war in the country occurred in the 1700’s when the British defeated the Spanish Galleons off St. Georges Caye. This tiny Caribbean nation has known peace for more than 200 years.

Located less than 3 hours direct flight from Dallas, Atlanta, Houston, and only an hour and thirty minutes from Miami, scuba divers and fly fishermen have long known about the secret gem that lies along this hemispheres longest barrier reef, over 180 miles in length. Bird watchers and archeologists have flocked to see the rare tropical species, migratory birds, and the awe inspiring Mayan ruins that cover the country’s jungle topography.

Five to eight cruise ships per week now dock in Belize. Fox filmed the Reality TV show “Temptation Island” there and the number of movie stars buying property has skyrocketed. Leonardo DiCaprio owns an island, Francis Ford Coppola owns 2 resorts. Many other well known celebrities and professional athletes own property and visit frequently as well. But even more indicative, when Wheel of Fortune gives a week in Belize as a prize, you know that popular acceptance has arrived. This is one factor that drives the real estate market and property ownership in Belize.

The second factor, and perhaps an even larger one, is the Financial Services sector. Belize arrived recently to the game. Bermuda, the Bahamas, the Turks and Caicos Islands, and the Caymans have long held the top spots as Caribbean banking jurisdictions. As a newcomer to the industry, Belize received the fortune to be able to sort through the various legislations of the world and cherry pick the best parts of many laws. They have crafted some of the most sophisticated and customer friendly legislation for banking, insurance, corporate structures, trusts, asset protection, and retirement residency programs.

Generally, people like to visit and own property where they have their trusts, IBC’s, and bank accounts. It doesn’t have to be that way, but experience shows this correlation. Property prices in the British Commonwealth islands mentioned above have all seen vast appreciation of land values over the past 2 decades. Belize is following fast, but a decade behind. Not often in life do we get a “time machine” opportunity and are able to purchase real estate with 20/20 hindsight.

The property being offered is from a company that is in trouble. By now, we all know the tough times affecting the real estate industry and these folks have been hit hard by the economic crisis. Stunning ocean front homes, villas, and building lots are on the market for as little as forty cents on the dollar. Some of the villas have been branded Cabelas Trophy Properties due to their exceptional quality and location along the reef system. Belize is one of the few places in the world you can achieve fly fishing’s “Grand Slam” and this resort sits in the heart of some exceptionally fine waters.

Our company, ECI Development, is acquiring the assets of the seller and we are liquidating a small part of their existing inventory to clear their current debt. It is a minimal amount, under $6M. As soon as we have sold the necessary properties to pay their debt, these discounts will be gone. You have the opportunity to see them first (after only our shareholders) and make property selections that you’ll be pleased with for years to come.

Use your IRA. Larry can assist you with this and he is familiar with our paperwork. To receive more information, see photos, and reserve your property, take a minute right now and contact me at This email address is being protected from spambots. You need JavaScript enabled to view it. . It’s a quick look to see if this is something that might make sense from an international diversification perspective into a country that is gaining popularity quickly. E-mail me. You’ll be glad you did.

 

Michael Cobb is Chairman and CEO of ECI Development, a Latin American real estate holding and development company. Current assets of the company include the Gran Pacifica Beach and Golf Resort, Grand Baymen Community, and 1100 acres along Costa Rica’s golden Caribbean coast line. The acquisition of this new property in Belize would push their holdings to over 7000 acres and 6 miles of beachfront land. More information on the company can be found at their website www.ecidevelopment.com

 

 

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Your Retirement Plan Is In Jeopardy Take Urgent Action Now

Your Banker Has Been Turned Into An Agent Of The Federal GovernmentWith Potentially Devastating Consequences!I urge you to pay close attention as this has the potential for affection your future retirement and investment assets more than anything I have encountered so far.

You MUST get your retirement assets out of the country while you can, (of course I believe you should move personal assets as well). The window of opportunity is now more than ¾’s of the way shut and could be closed at a moments notice by a simple decree of the government. The government now has the ability to turn your banker into a federal agent who could confiscate your funds in the blink of an eye. You have to know if you have read my articles over the years I am not a reactionary and not someone who try’s to scare you but this is worthy of serious attention.    

 I really don’t like to tout my record but something has just happened I need to tell you about. But first I am going to tell you about some of the “predictions” I have made over the last 2 years. In the fall of 2006 I spoke at the Investment University Conference in Vancouver where I said I was more concerned about the market than I had been in 20 years.  My decision at that time was based upon market valuations, a rising interest rate environment and a number of other factors all of which led me to believe we were in store for another major correction. Of course the markets continued to go up until the later part of 2007 but I was right on target.

In November of 2007 I was asked by the Sovereign Society to give them a brief description of my presentation scheduled for their conference in St. Kitts. I said the following- “I have been in the financial services business for over two decades and I have to tell you I am worried. I think this is potentially the biggest financial crisis the markets have ever faced! Some of us in the business think this could be the perfect storm of the financial world.” I went on to talk about what investments you should hold in the perfect storm and how you could protect yourself. I knew the storm was going to be bad…..

In May of this year I wrote another article for the Sovereign Society talking about something called the Basel II agreement and I wrote the following- “I bring this up not just for academics reasons, but because many of these institutions may not be ready for the 2009 implementation which means additional write-offs by the financial services sector, more disruption in the market while they try to unload bad securities, little or no lending while they try to create a cushion and further investments from Sovereign Wealth Funds (translation selling away America’s financial independence). 

All of this will likely depress the market further and could contribute to a continued slow down in the current economic cycle. It could also mean this cycle will be stretched out a little longer than some of the past economic/market cycles meaning a difficult stock market for the near term.”

Granted things had already started to look problematic but few analysts were talking about the real problem and its potential to seriously disrupt the system. I have to admit I didn’t know it would spiral out of control and almost cause a meltdown of the entire system but I knew it would be bad for you and I as investors.

The following language is buried in the new TARP bailout and as they say the devil is in the detail-

NECESSARY ACTIONS.—The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation, the following: Designating financial institutions as financial agents of the Federal Government, and such institutions shall perform all such reasonable duties related to this Act as financial agents of the Federal Government as may berequired.

Broad sweeping authority to do whatever they want to do! What does this mean to you and your retirement plan? Well here are a few potential scenario’s-  Let’s say foreigners stop buying treasury bonds because they become even more nervous about the future of the dollar or the uncertainty in our banking system. Face it, we can’t survive without their continual purchase of treasuries  and the government would have to do something to finance the debt.

Fear Factor 1- the government tells your banker to purchase U.S. Treasuries with 50% of your retirement plan, or worse how about 100%.

But that doesn’t work as well as they want so they have to figure something else out.

Fear Factor 2 your banker is told, stop any transfers outside of the U.S. No more offshore accounts!

Things continue to go downhill and they become even more and more desperate.

Fear Factor 3 your banker is told to confiscate all gold in retirement plans or the good of the country!

And finally the “Nuclear Option” we get a president who decides the right thing to do is redistribute the wealth.

Fear Factor 4 your banker is told to confiscate all retirement plans over $250,000 so we can redistribute the wealth! (But don’t worry we are goingto have universal health care and they will take care of us so you don’t need it anyway.)

Once again and maybe even for the last time I URGE YOU GET YOUR RETIREMENT ASSETS OUT OF THE COUNTRY WHILE YOU STILL CAN!!!!

The question is how can you get your retirement plan offshore?  There are basically two types of retirement plans, Qualified and Non-Qualified. Non-Qualified include IRA’s SEP’s and Keogh’s. Qualified plans cover all of the rest and are handled in a slightly different manner.

IRA’s require a U.S. Custodian and this is the biggest challenge. There are very few custodian’s who allow you to totally self-direct your account including using non-U.S. investments and taking it offshore. If you want to take your IRA or pension plan offshore you must use a totally flexible self directed custodian who will allow you to take your account offshore. Just ask them- “Can I take my plan offshore?”

How do you do this? Transfer your plan The following methods are allowed: a direct purchase of non-US real estate, a foreign bank account, a non-US annuity, a foreign corporation or in some cases direct investment into a non-US investment. There are a couple of other custodians who will allow one or more of these to be used but I am only aware of one company who allows all of them.  This my be important if you want to use several different methods of transfer or  want to make multiple kinds of investments and you want to do it all through one custodian to keep things simple.

Qualified Plans require a U.S. based administrator and “the indicia of ownership” remain within the U.S.. They are in some cases simpler and in others more complex to deal with than an IRA. I have reviewed hundreds of plans and the language within the plan is critical as well as who is your plan administrator. I recently discussed a case I was involved in where the plan document allowed for the purchase of real estate and for non-US investments but when the plan trustees tried to make such an investment the plan record keeper refused. After a good deal of back and forth on my part with the trustee and record keeper I wasfinally able to convince them to allow the investment.

Let me be a little more specific-In both cases if you want to have a foreign bank account in your retirement plan it is allowed. I am currently aware of 3 banks that will allow a retirement plan to open an account with them. You would work with your banker in developing an investment strategy using their expertise and services.  A retirement plan is also allowed to be the owner and beneficiary of an annuity and in this case we would suggest a foreign annuity. Currently I am only aware of 4 companies who will allow a US retirement plan to establish a non-US annuity although there may be others. I should point out annuities also offer an extra level of asset protection.

I recently wrote a lengthy article on the use of foreign annuities and retirement plans for the Sovereign Society, which should be available in their archive section.  LLC’s and corporations are allowable investments within a retirement plan and the ultimate in asset protection can be gained by using a Nevis LLC as the primary asset in your retirement plan. It can in turn bank and invest anywhere in the world just as say a Delaware or Nevada Corporation would but with a much higher level of privacy and protection.  Real estate on the other hand is an easy proposition; you simply take title to the property in the name of the plan. Some jurisdictions may require the use of acorporation but this is also a simple process.

The bottom line is you need someone qualified to review your plan document and to assist you in structuring the investment in a compliant manner.  Timing doesn’t allow me to discuss in much greater detail the specifics of taking your plan offshore. For now you need to be aware you can do this regardless of what you have been told and I am more than ever convinced there isn’t much time left to take advantage of this incredible opportunity.

My firm, Sovereign International Pension Services is a totally flexible self-directed IRA Administrator who provides all of the services and flexibility mentioned above. If we can help you get your plan offshore please let us know.  As always I am prepared to answer questions or assist you in the process. Feel free to contact our office for additional information.

Regards,                                                                                                                           Larry C. Grossman, CFP®, CIMA®                                                                                                    Managing Director                                                                                                 Sovereign International Pension Services                             www.sovereignpensionservices.com                                             This email address is being protected from spambots. You need JavaScript enabled to view it.                                                                                             727-784-4841                                                                                                               727-784-6181 fax                                                                                                        888-609-7425

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Domestic Retirement Funds Are Under Attack- Take Action Now to Safeguard Your Portfolio and Boost Your Returns Offshore

For many investors plummeting stock markets are just half their worries. All around the world traditional retirement programs are coming under attack.

Get ready for the Great Pension Purge...

Here in the United States, corporate pension plans just recorded their worst performance since the 1987

stock market crash. (As we went to press, funding ratios had plunged 20%.) And that’s not the worst of it... Now, the U.S. Pension Benefit Guaranty Corporation is implementing a controversial policy that will shift many pension assets from safe, fixed-income assets like U.S. Treasuries into riskier securities, from emerging market debt to junk bonds. Across the pond it’s even worse. In the U.K. 86% of all pension schemes are now in deficit. With every passing month it’s becoming clear that employers will not be able to make their required payments, potentially stiffing millions of current and future retirees. Then there’s the case of Argentina where 10 million citizens have watched President Cristina Fernandez’s government take over the entire private pension system. Just weeks ago the law became final, transferring $23 billion in private pension funds to the state! All future contributions will flow to the government, which has not ruled out spending that money on economic stimulus projects. Somehow this trend doesn’t make me feel all warm and fuzzy inside.

 

Don’t Let Them Get Away With It! Could outright “retirement plan confiscation” happen in the United States? It may might sound extreme but remember so did the idea of “Federal Agents” at banks and “government-owned automakers” just a few months ago. We’re living in an environment where rules can change from day to day. And these changes pose a serious threat to your wealth. The next sweeping reform be it allocation or confiscation could strike swiftly, with little to no warning. That’s why you need to get your house in order today.

 

Defend Your Assets...

Before the Next Administration

Is Sworn in on January 20th

This could be your last chance to free your retirement plan from the clutches of big government. The

best way to break free is to transfer your retirement account to a custodian who will allow you to selfdirect your finances. Once you are working with a retirement custodian, there are three primary options to consider...

 

Option #1: Move Your Funds

to a Non-U.S. Bank

Benefits:

Safely explore the most rewarding corners of the financial world far from the clutches of greedy bureaucrats, sue-hungry lawyers and data-mining snoops.

Privately trade stocks, bonds, mutual funds, CDs, precious metals and currencies.

Buy into elite mutual funds, managed by award-winning financial analysts who have consistently

proven to outperform their American counterparts, year after year.

Wh Preservatiochniques

Option #2: Purchase a

Non-U.S. Annuity

Benefits:

Prevent creditors from

gaining unwarranted access to your funds.

Participate in investments that are normally unavailable to U.S. citizens.

Hold your assets in a safe offshore haven without violating IRS regulations.

Note: To buy an offshore annuity, you must work with an advisor who has been approved by the insurance company. These investment vehicles are not self-directed, so it’s important to choose an advisor carefully.

 

Option #3: Form an International

Business Company (IBC)

or Foreign Corporation

Benefits:

Adds a significant layer of asset protection and privacy to your business (if established in the

right jurisdiction).

Can be used to open a foreign banking/trading account, purchase an annuity, make foreign

investments directly or purchase real estate.

Physical possession of your funds rests with a non-U.S. company that may not recognize

judgments awarded by U.S. Courts.

Note: Your IRA would be the owner or member of the corporation depending upon the structure and

YOU would be the manager with complete control over where the corporation does business. The custodian will of course insist on an annual statement of the corporation’s activities and assets owned by the corporation.

Your Offshore New Year’s Resolution

Most people don’t trouble themselves with thoughts of financial privacy until it’s too late. Sadly,

they’re content to let government “pick pockets” fish around in their wallets as long as they don’t take “too much.”

Section 408 of the Internal Revenue Code permits individuals to purchase land, commercial property, condominiums or residential property with funds held in an IRA. Eyeing a piece of investment property? Here’s what to do...

• Set up a non-US LLC — owned by your IRA. (This gives you complete control over the LLC.)

• The LLC can open a bank account onshore or offshore, depending on where you are purchasing the property. You can pay all expenses, improvements or building costs directly out of your IRA checking account.

• Any income the property generates goes back into your account and is sheltered from any taxes.

• The LLC is the investment of your IRA as far as the custodian is concerned and can do whatever it pleases as long as it doesn’t break IRS rules. Note: Neither the IRA nor the custodian employ real estate police and it really is an honor system as to how property is used. I always suggest investors

keep their own journal to document the property was rented, vacant or used by a non-relative friend.

When it comes time to take a distribution, you simply move part of the LLC membership to yourself personally, rather than having to take title to the entire property at once. This allows you to control the amount of the distribution. Remember to seek professional counsel for any and all tax advice related to your retirement planning. Buy Bombed-Out Real Estate Through Your IRA! Don’t make that same mistake. To be sure your retirement funds remain intact, make an Offshore New Year’s Resolution today. Secure your financial privacy in 2009 and guarantee yourself a steady cash flow for years to come. I’ll be speaking on this subject at the next Total Wealth Symposium held in Bermuda this April. For more information contact

Opportunity Travel:

1-800-926-6575.

To take action immediately, please feel free to

contact me at 1-727-784-4841.

Larry C. Grossman, CFP®

Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Website: www.sovereignpensionservices.com.Pension Purge...

Here in the United States, corporate pension plans

just recorded their worst performance since the 1987

stock market crash. (As we went to press, funding

ratios had plunged 20%.)

And that’s not the worst of it... Now, the U.S. Pension

Benefit Guaranty Corporation is implementing

a controversial policy that will shift many pension

assets from safe, fixed-income assets like U.S. Treasuries

into riskier securities, from emerging market debt

to junk bonds.

Across the pond — it’s even worse. In the U.K.

86% of all pension schemes are now in deficit. With

every passing month — it’s becoming clear that

employers will not be able to make their required

payments — potentially stiffing millions of current

and future retirees.

Then there’s the case of Argentina — where

10 million citizens have watched President Cristina

Fernandez’s government take over the entire

private pension system. Just weeks ago — the law

became final, transferring $23 billion in private

pension funds to the state! All future contributions

will flow to the government — which has

not ruled out spending that money on economic

stimulus projects.

Somehow this trend doesn’t make me feel all warm

and fuzzy inside.

Don’t Let Them Get Away With It!

Could outright “retirement plan confiscation”

happen in the United States? It may might sound

extreme — but remember — so did the idea of “Federal

Agents” at banks — and “government-owned

automakers” just a few months ago.

We’re living in an environment where rules can

change from day to day. And these changes pose a

serious threat to your wealth.

The next sweeping reform — be it allocation or

confiscation — could strike swiftly, with little to no

warning.

That’s why you need to get your house in order —

today.

Defend Your Assets...

Before the Next Administration

Is Sworn in on January 20th

This could be your last chance to free your retirement

plan from the clutches of big government. The

best way to break free is to transfer your retirement

account to a custodian who will allow you to selfdirect

your finances.

Once you are working with a retirement custodian,

there are three primary options to consider...

Option #1: Move Your Funds

to a Non-U.S. Bank

Benefits:

Safely explore the most rewarding corners of

the financial world — far from the clutches of

greedy bureaucrats, sue-hungry lawyers and

data-mining snoops.

Privately trade stocks, bonds, mutual funds,

CDs, precious metals and currencies.

Buy into elite mutual funds, managed by

award-winning financial analysts who have consistently

proven to outperform their American

counterparts, year after year.

Wealth Preservation Techniques

17

Option #2: Purchase a

Non-U.S. Annuity

Benefits:

Prevent creditors from • gaining unwarranted

access to your funds.

Participate in investments that are normally

unavailable to U.S. citizens.

Hold your assets in a safe offshore haven without

violating IRS regulations.

Note: To buy an offshore annuity, you must work

with an advisor who has been approved by the insurance

company. These investment vehicles are not

self-directed — so it’s important to choose an advisor

carefully.

Option #3: Form an International

Business Company (IBC)

or Foreign Corporation

Benefits:

Adds a significant layer of asset protection and

privacy to your business (if established in the

right jurisdiction).

Can be used to open a foreign banking/trading

account, purchase an annuity, make foreign

investments directly or purchase real estate.

Physical possession of your funds rests with

a non-U.S. company that may not recognize

judgments awarded by U.S. courts.

Note: Your IRA would be the owner or member

of the corporation depending upon the structure and

YOU would be the manager with complete control

over where the corporation does business. The custodian

will of course insist on an annual statement of

the corporation’s activities and assets owned by the

corporation.

Your Offshore New Year’s Resolution

Most people don’t trouble themselves with

thoughts of financial privacy until it’s too late. Sadly,

they’re content to let government “pick pockets” fish

around in their wallets — as long as they don’t take

too much.”

Larry C. Grossman, CFP®, CIMA®

specializes in creating customized

retirement plans for high net worth

individuals

sovereignpensionservices.com.Website:

www.sovereignpensionservices.com.

Section 408 of the Internal Revenue Code permits individuals

to purchase land, commercial property, condominiums or

residential property with funds held in an IRA.

Eyeing a piece of investment property? Here’s what to do...

Set up a

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Let’s Do The Hokie Pokie!

I had a really interesting meeting with a potential client this week. He is an attorney from the heartland of America and is very representative of the people I am speaking to daily. Most of them are just like you and me, normal, educated, successful, folks who you would hardly classify as wacko or conspiracy theorists.

What made this appointment really stand out is they were able to tell me in a very succinct manner not only why they were in my office but what their motivation for flying half way across the country was. I am going to paraphrase but the story went something like this:

Larry we aren’t being sued and we aren’t looking to avoid taxes. We are worried, we’re worried about the path our country seems to be taking and we are worried about what it will mean for us. Specifically we are worried about our retirement plan. We set up our own retirement plan years ago that we have been faithfully contributing too and investing in average investments probably like most everyone else.

But lately we have been reading a lot of articles that lead us to believe the government might take over our retirement plans in one way or another. We have read the articles that some would call a trial balloon. Some say the government should nationalize our retirement plan, or the government should take over our plans and tell us how to invest, or they should have a mandatory plan we all contribute to that they would guarantee with a small rate of return. And we are really worried the government might force us to invest in U.S. Treasury bonds as a way to finance the huge deficit, especially now we are hearing the Chinese are nervous about treasuries.

Larry years ago we met with some private Swiss bankers at the suggestion of a fellow attorney and friend who specializes is offshore asset protection. They made us really nervous when they started talking about all of the ways we could cheat on our taxes, wink wink, nod nod. Larry we aren’t looking to cheat on our taxes or do anything wrong, we just want to make sure we put our retirement plan in a position where no one can get it, where no one can tell us what we have to invest in and where we can invest it in anything we are allowed to, “that’s what this is all about”.

That’s when it hit me. It really is what it’s all about. Our clients are normal people who for the most part are educated and successful. They aren’t weird and certainly don’t want to cheat on their taxes or do anything wrong. They just want to protect themselves from the fiscal craziness that’s going on.

The next day I received an email from Bob Bauman with the note “Hey Larry have you seen this?” I have learned if its from Bob I better take a look. I hope you are sitting down when you read this:

From Retirement USA- “Working for a Universal, Secure, and Adequate Retirement System” This group just released a new working paper of particular note.

I must say I 100% agree with their conclusion-

“As the first decade of the new century winds down, one thing is clear. America’s retirement system is increasingly failing to provide retirement security for the vast majority of workers and retirees. It is time to think about an entirely new approach to retirement security, one that, together with Social Security, would provide adequate and secure retirement income for all workers. Let the discussion begin.”

Unfortunately the rest of the paper scares the heck out of me.

 

Principles for a New Retirement System

We offer the following set of principles as guideposts against which all proposals should be evaluated.

Universal Coverage. Every worker should be covered by a retirement plan in addition to Social Security. A new retirement system should include all workers unless they are in plans that provide equally secure and adequate benefits.

Secure Retirement. Retirement shouldn’t be a gamble. Workers should be able to count on a steady lifetime stream of retirement income to supplement Social Security.

Adequate Income. Everyone should be able to have an adequate retirement income after a lifetime of work. The average worker should have sufficient income, together with Social Security, to maintain a reasonable standard of living in retirement. ***

Shared Responsibility. Retirement should be the shared responsibility of employers,

employees and the government.

Required Contributions. Employers and employees should be required to contribute a

specified percentage of pay, and the government should subsidize the contributions of

lower-income workers.

Pooled Assets. Contributions to the system should be pooled and professionally managed

to minimize costs and financial risks.

Payouts Only at Retirement. No withdrawals or loans should be permitted before

retirement, except for permanent disability.

Lifetime Payouts. Benefits should be paid out over the lifetime of retirees, and any

surviving spouses, former spouses, or domestic partners.

Portable Benefits. Benefits should be portable when workers change jobs.

Voluntary Savings. Additional voluntary contributions should be permitted, with

reasonable limits for tax-favored contributions.

Efficient and Transparent Administration. The system should be administered by a

governmental agency or by private, non-profit institutions that are efficient, transparent, and governed by boards of trustees that include employer, employee, and retiree representatives.

Effective Oversight. Oversight of the new system should be by a single government

regulator dedicated solely to promoting retirement security. Xxxvii

Quite simply you are talking about a mandatory government controlled retirement plan where your money will be commingled and managed by the government for your own good. Of course I have said all along it means nothing but US Treasuries in your retirement plan because they know better what is good for you, and oh gee it just so happens it also happens to help finance the debt.

Politician’s are playing the hokie pokie. They put their left foot in- there have been quite a few articles over the last 6 months talking about government takeover of your retirement plan in one form or another. They have come out of government think tanks, congressional hearings etc. It’s like sticking your left foot in and you see what kind of reaction you get, then you take your left foot out and tell everyone we really aren’t going to tell you you can’t own gold in your retirement plan anymore or you have to purchase only treasuries. It was just an academic exercise in trying to figure out what is best for you. It’s kind of like a fun party game for kids, the hokie pokie with your retirement plan and your future. No one gets hurt, just play along and we’ll all have a good time…….

Liberate your IRA or retirement plan! Take it offshore for privacy, asset protection and greater investment diversification while you still can.

Larry C. Grossman, CFP®, CIMA®
Managing Director
Sovereign International Pension Services                                                                   
www.sovereignpensionservices.com                                                                         This email address is being protected from spambots. You need JavaScript enabled to view it.
727-784-4841                                                                                                                727-784-6181 Fax
888-609-7425

 

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Retirement Plan Lawsuits Swamp Small Business Owners. Is Your Company Safe?

Plummeting stock markets have exposed fraud and error at every level of the financial system leaving a trail of angry investors in their wake. The latest boondoggle is a wave of lawsuits launched against small business owners. An increasing number of businessmen are being sued by their employees who are seeking payback for shrinking 401(k) balances. Lawsuits against plan trustees are cropping up for several reasons:

Poor investment selection — i.e. your plan

• doesn't offer enough choices or diversification

Not allowing participants access to self-

• directed accounts

Failure to disclose plan-related documents to

• participants and their beneficiaries

Failure to comply with employees' investment

• instructions

Supreme Court Rules in Favor of Disgruntled Employees. How serious is it? The U.S. Supreme Court recently ruled on a case that is widely thought to be a watershed development. In LaRue v. DeWolff, Boberg & Associates, Inc. an employee claimed that his 401(k) trustee neglected to follow his investment instructions, resulting in a lower account balance in his 401(k) account. The Court held that Mr. LaRue, if indeed harmed

by the inaction of the plan's fiduciaries, could sue for relief under the Employee Retirement Income Security Act of 1974 (ERISA). If that doesn't send shivers down your spine then you might want to check your pulse, better yet, check in with a qualified tax attorney to make sure your business's retirement plan is totally compliant. Even if you rely on an outside administrator to file and archive plan-related documents, you can be held accountable for their mistakes.

Is Your Inherited Retirement Plan Safe? Another major problem is rearing its head as Baby Boomers begin to retire. It has to do with Inherited IRAs, which can be a tremendous source of family wealth or family heartache. Think yours is safe? Think again. The Supreme Court has ruled that IRAs are only protected in the context of bankruptcy proceedings and even then, only under certain provisions of the law. This little-known fact makes them a tempting target for financial predators and those who seek a claim on your wealth. Let's say you inherit an IRA from your father and you take just a small amount of that inheritance and buy a sports car. One night, you're on your way home and get into an accident. The car you hit was being driven by a heart surgeon. He claims you injured his hand and he will never operate again. If he sues you and wins and your insurance company doesn't cover the claim that leaves your IRA completely exposed. This could happen to anyone. But luckily there's a way to make sure it doesn't happen to you. Structure your retirement plan the right way. Don't take any shortcuts. For maximum protection, take it offshore. In addition to peace of mind, you'll gain greater investment flexibility, diversify out of the dollar and keep it away from those who want to grab it.

Larry C. Grossman, CFP®, CIMA®                                                                                                    Managing Director                                                                                                 Sovereign International Pension Services                             www.sovereignpensionservices.com                                             This email address is being protected from spambots. You need JavaScript enabled to view it.                                                                                             727-784-4841                                                                                                               727-784-6181 fax                                                                                                        888-609-7425

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How Do I Know Which Foreign Annuity Is Right For Me?

I am asked this question frequently in my practice. For the sake of this article I am going to take a slightly different approach. There are many many articles that have been written on the benefits of a foreign annuity covering asset protection, privacy and greater investment diversification but I haven’t really found any that talk about how do you know which one is right for you.
 
This is actually a very important question, far more important than many investors realize because the wrong decision can lead to disastrous consequences.
 
The first question is:
 
Is it really an annuity?
 
This is the MOST important question yet it is the one I see overlooked 99% of the time, and it has the most potential for disaster.
 
The Internal Revenue Code contains certain requirements an annuity or life insurance contract must contain to actually be treated as an annuity or life insurance contract. They are spelled out in detail in sections 817 and 7702 of the IRC for the technically minded
 
The first question you must always ask is; Do you have a legal opinion from a substantial U.S. Law Firm detailing your policy is “compliant” and therefore would receive the appropriate treatment by the IRS?
 
Now you might be saying to yourself does this really matter, isn’t this the reason I am going offshore and an annuity is tax-deferred anyway so who cares. This is where you step on a landmine. Just because a company says it sells an annuity or insurance policy doesn’t mean the IRS treats it the same way and if they don’t recognize it as a compliant policy it is treated as a “PFIC”, or passive foreign investment company. There is a lot of information available regarding just how big of a problem PFIC’s are but suffice to say it is a tax nightmare you may never recover from. If you are lucky enough to dig your way out it is going to cost you a lot of time and money. (For a great explanation of this problem visit Mark Nestmann’s site, http://nestmannblog.sovereignsociety.com/2008/02/us-taxpayers-be.html)
 
An important example of this is many legal advisors feel fixed rate Swiss Annuities are NOT compliant and are treated as a PFIC.
 
Reminder: Insurance laws vary from country to country and a policy that is compliant in one jurisdiction may not be compliant in the U.S.
 
 
The second question is:
 
What are the fees?
 
Obviously keeping your fees to a minimum is very important for many reasons. Lower fees put more of your money in your pocket where it belongs and ultimately it affects the performance of your policy.
 
Is there a subscription fee, placement fee or commission? Is it taken in advance or does the insurance company try to spread it out over a number of years.
 
Is there a surrender penalty to get out of the annuity if you haven’t held it for a certain number of years? This is frequently a method employed by insurance companies to recover a commission that has already been paid or to provide an extra layer of profit.
 
What is the annual fee charged by the insurance company to maintain the policy and what is the annual fee charged by your investment advisor? These two fees are what I call the “drag” on your policy. Keeping them to a fair level is critically important, as it will affect your annual performance.
 
Are you dealing with the insurance company or its representative directly or are you going through a broker? Remember if you are going through a broker then he is obviously making a fee or commission to establish the policy. You should request a full and fair written disclosure of all fees including the broker compensation. If you are using an advisor rather than a broker they should also provide you with a written disclosure detailing the same. In some cases an advisor may not be compensated for the transaction, would only be acting as your investment advisor and would be compensated in an advisory capacity only.
 
Reminder: Buy wholesale not retail and keep your fees down to a fair level.
 
The third question is:
 
How much investment flexibility do I have?
 
Section 817 of the IRC basically says you must maintain a certain amount of investment diversification in your policy and it clearly states that you May Not self direct the policy. This is a big one that can really trip you up. If you self-direct the policy as far as the IRS is concerned you have disqualified the policy and we are back to the PFIC nightmare.
 
You can hire and fire your investment advisor at will in a well-designed policy. This ensures you can be certain your advisor is acting in your best interests.
 
In my company, Sovereign International Asset Management, we like to take this a step further by preparing both you and the insurance company a written investment proposal in advance of adoption of the policy. Once we have an agreed upon strategy and proposed allocation we then solidify this with a Scope of Engagement Letter identifying what we will be investing in, the time horizon, and risk tolerance of the policy. The good news is an advisor who knows how to manage these types of policies can invest in virtually any investment on a global basis.
 
Reminder: Stay away from companies who tell you it really is possible to self-manage your policy or they tell you don’t worry and give you the wink wink nod.
 
Foreign annuities can be a great structure for asset protection and international diversification when done right. If you go to the trouble of establishing one, make sure it is compliant or instead of being a great investment vehicle it may become your own worst nightmare. There are probably few things more painful than paying a big commission or fee for a horrible investment……..
 
I should disclose not only can Sovereign International Asset Management manage foreign annuities but also Sovereign International Pension Services is one of the few IRA Administrators who can help you invest your retirement plan in a compliant foreign annuity.
 
As always feel free to contact my office for additional information or questions on foreign annuities or asset management.
 
Larry C. Grossman, CFP®, CIMA®
Managing Director

Sovereign International Asset Management

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The Muddle Through Economy

The Muddle Through Economy
A few weeks ago I asked for readers to send me questions and said I would try and answer them while I was in Switzerland. Some of them were quite good and have given me ideas for whole newsletters but will require a lot of research. But a lot of them fell into two basic camps. This week we look at a number of questions from readers about my thoughts on the Muddle Through Economy.
One group basically asked, "John, given all the bad news [insert your favorite bearish statistic on housing, the credit crisis, inflation, doom and gloom, etc.] how can you be so optimistic and think we will only see a modest recession and a Muddle Through Recovery? Don't you think we will actually have a serious recession and/or a soft depression?"
The second group asks the obverse of the coin: "John, how can you see a long, slow recovery? Look at all the good things like [insert your favorite bullish statistic: low interest rates, a rising stock market, the worst of the credit crisis behind us, the stimulus checks just now getting to consumers, etc.]. Don't you think that means we will get back to a full growth economy by the end of the year?"
I have given both questions some thought as to which I should answer first. I think it makes more sense to start with the bullish question first and then go into why things are not as bad as many analysts suggest.

Clowns to the Left of Me, Jokers to the Right of Me,
Here I am Stuck in the Muddle Through Middle With You!

I take some comfort in being in the middle. It is when you get on the edge that you are most often wrong, but that also means you have the most people who disagree with your position. And there are a lot of people who disagree with me. But then, a lot of people disagreed when I said the subprime crisis would be serious enough to cause a recession. As to whether I am right about Muddle Through this time, we will see. But it is where my thinking comes out.
So, let's make the case for a recession which will last at least for two if not three quarters and then a slow recovery of at least a year and half where GDP is in the range of 2% on average.
First, this recession is fundamentally a consumer recession, brought on by a bursting of the housing bubble and a credit crisis. Consumer spending is under pressure from several main areas.
First, as the housing market stalled and then began to drop, we saw a fall in housing related spending, in construction, furniture, mortgages, etc. Remember when most economists and analysts wrote last summer that there would not be a recession from the housing crisis because housing was only 5% of the economy? The rest of the economy was doing just fine, they opined. Don't worry. Be happy.
The problem is that the resulting fall in housing prices produces a negative wealth effect. I have used the following chart many times, but it is good to review it again quickly.
 
Notice that without mortgage equity withdrawals the US economy would have been in outright recession for two full years in 2001-2, and would have been quite sluggish for the next two years. That is what you should expect from the bursting of a major equity market bubble and 9/11. But because the value of the US housing stock was rising and doing so rapidly, people felt comfortable borrowing against the ever-rising value of their homes. We borrowed and spent our way out of that recession. Coupled with the Bush tax cuts (a very important element!) and low Fed rates, we bounced backed rather handily.
But now, home values are falling and will likely do so for another year at the least. As Woody Brock pointed out in this week's Outside the Box, we are at the beginning of a reversion to the mean on national wealth. We are getting a reverse wealth effect. People either can't or won't borrow as much and thus we get negative stimulus from housing prices. It is likely that people are going to start saving more, which while a good thing from an individual standpoint, it is a drag on overall consumer spending.
Second, even though core inflation is tame, real inflation that includes the things you and I actually buy is high and rising. I drove past a gas station in La Jolla where the price of gas was over $4 a gallon. Money that is spent on gas and rising energy bills is money that cannot be spent on discretionary items. Rising food bills means that there is less money left over to buy entertainment and other modest luxury items.
Third, rising unemployment clearly means that a small but growing segment of the population has less money to spend. Unemployment is at 5.1% and is likely to rise to over 6%. That is clearly bearish of consumer spending.
All of these factors suggest a recession of at least two quarters if not three. While lower Fed funds rates and the efforts by Congress to stimulate lower mortgage rates will eventually help, it will not be an immediate panacea.
As to a slow and prolonged recovery, the "Muddle Through Recovery," the reasons to me are clear. The cause for the current recession is the bursting of the twin bubbles of the housing markets and the credit crisis. These are problems that are going to take several years to solve, not matter that the Fed does to interest rates and opening the discount window to investment banks for all sorts of mortgage and other asset backed paper. While doing so is a good thing, we still have to work our way through 3.5 million excess homes, 2 million of which are vacant. That will take a few years.
Further, we have to develop new sources for the buying of debt. We vaporized 60% of the market for debt in the implosion of CDOs, SIVs, CLOs, etc. These buyers are never going to come back. It took 15 years to create that market. It will take a few years to create its replacement. (More thoughts on how we do that in a later letter.)
Let me offer one caveat. If the Bush tax cuts are not kept largely intact you will see the recovery that I think will be coming in late 2009 and 2010 evaporate quickly. If an Obama (probably) or a Clinton (small chance) gets their way, we will see the largest tax increase in history. That is not the medicine that the economy needs when it is weak already. It could easily push the economy back into recession, as it will make the consumer even weaker.

A Soft Depression? Not.

So, if things are all that bad, why won't we roll into the soft Depression that Bill Bonner and others predict? It is quite easy to make a very bearish case with a falling dollar, rising inflation, a seemingly never-ending rise in oil and commodity prices, a nasty housing market crash, a frozen credit market and more.
To establish a basis for my relative optimism, I have to re-visit what is for me a painful moment in my forecasting life. This is just between you and me, gentle reader, and I would appreciate you keeping this just between us.
Back in 1998, I thought the US and the world would drift into a recession caused by the failure of some large computer programs not being fixed on time for the Y2K rollover. I did not think it would be the disaster some thought, but I did see the potential for problems.
Why? Because of one statistic that was very clear. 50% of all major software projects for 40 years did not finish on time, and a large percentage of those missed their targets by years. That number had not changed for decades.
The Y2K software problem was very real. There were thousands of huge software projects under way by late 1998 to fix the problem. I went to many software conferences and talked with the software developers and management who were quite distressed. Their concern was real.
How, I asked them (and myself), could we expect all the projects to be done on time when the clear record said that software was difficult and managers very poor at getting things done on time. While I expected most things to be fixed, it seemed reasonable to think that there would be some problem areas. And I generally got agreement from very serious managers and consultants.
I remember talking about this with the late Harry Browne, a true friend and a very wise investment writer (and the nominee of the Libertarian Party for President for two elections). Harry was generally bearish on many things. But he told me there would be no Y2K problem. I confronted him with my evidence and research.
"John, you are missing the main point. A free market figures out how to solve problems. This is a problem that we know about well in advance. It is not slipping up on us. If it must get solved in order for a company to survive, it will get solved. End of story."
I just shook my head and took comfort in my research. And I was wrong, of course. Interestingly, all the investment advice in that book ended up being right as the stock market did drop, long term interest rates fell, and the economy did go into a recession and so on. I ended up being right for the wrong reason. And some of my very first and now long-term readers met me through that book, so all was not lost.
But in looking back on it, I realize what I had missed. Whenever I talked to managers at these conferences (and I talked to a lot of them), they all told me privately that they were going to meet their deadlines, but the real concern was other companies or projects. I missed the forest for the trees. Everyone was busy making sure they were going to be fine. I look back now and wonder how did I miss it?
As it turned out, Harry was absolutely right. Because there was a literal drop-dead date on each of the projects, management became very focused. It seems now that we know software projects can be finished on time if the motivation is survival of your company.
It is a lesson that has been burned into me.
Now, let me throw out a very important and interesting point. Today I am in Switzerland speaking on behalf of Bank Sarasin to their mainly institutional clients. (I should note my hosts at Sarasin were most thoughtful. It is a very impressive bank with very good people.) The conference was in German except for my speech and one by a Swedish Economics professor named Dr. Kjell Nordstrom. I attended that session and am glad I did. It was a fascinating presentation.
When I travel around the world, I am used to a certain amount of America and/or Bush bashing. It is just part of the background noise.
So, I was somewhat surprised to see the professor, in the middle of a talk on why some businesses succeed and others fail, put up a rather large flag of the United States and went on to say that the US would be the dominant developed country for his life, the life of his children and the life of their children's children. You could feel the surprise in the room. It is not what they were expecting to hear. I certainly did not.
He started out saying that someone could come to the US and within 3-5 years you could become a citizen. Making a long story short, in his native Finland it took 3-4 generations before you would be considered Finnish. He went on around the world. There are very few cultures where an immigrant can become a naturalized citizen and be accepted into the culture. China? No. Japan? No.
In Germany, the professor recently talked to the top 100 managers of Siemens. This is a company that employs 462,000 people doing business in 192 countries. In that room of the top management there were 99 Germans and one Austrian. Think of similar multi-national companies in the US. Such a room would be full of diversity.
A young lady Ph.D in physics in Lajore, Pakistan does not dream at night of immigrating to China or Germany, where opportunities would be very limited. No, she and millions more like her dream of coming to the US. He said that 85% of the people living in Silicon Valley were immigrants. The best and brightest in the world choose to go there.
Because for him, America is not a country, but an idea. It is the idea that any person can come and make a life for themselves as an equal. And it is that freedom to rise or fall that makes the US what it is.
So, what does this have to do with Muddle Through? Let's return to the original question.
First, things are not as bad as they seem. Most of the US economy is doing just fine. Businesses have not overbuilt capacity, have large cash positions and lower debt than is normal at the end of a business cycle. In the 70's and 80's, we were much more dependent upon manufacturing for employment, and thus were subject to large increases in unemployment when too much capacity met slack demand and businesses cut back as quickly as they could. Even if we rise to 6 or 7 percent unemployment, that does not rise to the level of a major recession. (And yes, I know if you lose your job it seems like a depression.)
Second, the Fed has responded, if a little late, to the credit crisis, buying time for banks to find capital. While there will be many more write-offs from bad debts and mortgage paper in the future, most banks will survive in some form. The key is that the Fed did buy us time. The banks and pension funds are still going to have to write off about twice what they already have, but not all at once. It will be several years before we are through this mess, but that is why we Muddle Through and not crash. I still contend that if the Fed had allowed Bear Stearns to crash that we would experience a soft depression. It would have been ugly. But they didn't and we won't.
And while the housing crisis is really bad if you are trying to sell a home, it is also an opportunity if you are a buyer. We will work through the excess homes that are in the market, as US population is growing and the natural demand that stems from that growth will help pick up the slack.
And the credit crisis? It will get solved, because like the Y2K problem, it must be solved if we are to survive. (I am working on a paper in which I will outline how I think this will work itself out.) And the creativity that infuses this country will rise to the occasion. Yes, I know that it was that creativity coupled with greed, which caused the problem in the first place. But hopefully we will get it right this time. Again, for reasons I will outline in later letters, I have reason to believe we will.
So, I think my position in the middle is the right one. We do have very real problems and will suffer a recession. The problems will not be solved quickly. But they are not fatal problems. Time is required for the markets to heal themselves. And during that time, things will be slower than has been the case in recoveries from "normal" recessions.
And let's close with a quick commercial. Investing in this environment is tricky. The speakers at my recent Strategic Investment Conference in La Jolla gave us some very good insights, and I intend to post their speeches over time. If you are an accredited investor (net worth over $1.5 million), and would like to see some of the specific recommendations and presentations of the hedge and commodity funds that presented, you can go to www.accreditedinvestor.ws, and my partners at Altegris Investments will be glad to show you the world of commodity and hedge funds. (In this regard, I am president and a registered representative of Millennium Wave Securities, LLC. Member FINRA.)
I spent part of this week in London with my partners there, Absolute Return Partners, and am quite excited about what we are doing in the area of alternative investments for those of you that are in Europe. You can also sign up at the same site mentioned above.
And now, for those who have a net worth of less than $1.5 million, as we announced a few weeks ago, I am now working with my friend Steve Blumenthal and his team at CMG to offer a variety of investment managers who can work directly with you. I am proud of the managers we have on the platform. To see the managers and their returns, and how they are doing lately in this turmoil, just click on the following link and fill out the simple form. The minimum account size is $100,000. http://cmgfunds.net/public/mauldin_questionnaire.asp

South Africa and Swiss Mountains

I am seriously struck by the beauty of Interlaken. The mountains are simply magnificent. The Eiger and the Jungfrau are awesome on their beauty. Tomorrow we will tour the area courtesy of a local guide who is a reader and return next Monday. And the Victoria Jungfrau Hotel deserves is reputation as one of the finest in the world. I highly recommend it if you are in the area.
I will leave in two weeks for South Africa. If you would like to come to the presentations I will be making there, you can go to www.investmentpostcards.com and click on the link to write Prieur du Plessis a note.
The mountains and local attractions are waiting, and I think I am going to hit the send button a little early and go be tourist for the weekend. They have had bad weather up until I arrived, and I hope that luck holds for a few more days. Have a great week.
Your glad to be stuck in the middle with you analyst,

John Mauldin
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Why You Should Want A Piece of Ancon Right Now

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''Outside The Box'' Pyramids Crumbling"






Monday, January 14, 2008



Pyramids Crumbling

Investors Insight Publishing
 
 
 
 
 
Introduction
This week look at a short but very important piece by Bill Gross. He has my same concern about credit default swaps, but he puts a number to it. He thinks the cost to the world economic system could be in the $250 billion dollar range. Add that to the $250 billion in losses due to the subprime markets, and you are starting to talk real money. The Shadow Banking System is at the center of the problem. I trust you will find this of interest.
Bill Gross was just named Fixed Income Manager of the Year by Morningstar. He sits on the largest pile of bonds in the world at PIMCO and is their Managing Director.
But before we get to Gross's piece, let's look at these few paragraphs which set the scene for the problem in the CDS market from good friend Michael Lewitt of HCM:
"This brings us to the second and, in our view, greater concern raised by Mr. Seides, which is the financial strength (or weakness) of counterparties and their ability to post additional collateral when their positions move against them. This is undoubtedly going to be a growing concern as mortgage and other credit losses swell in 2008. The dirty little secret in the leveraged finance market is that many participants, including many CDS counterparties, are "weak hands." A "weak hand" is an investor whose capital base is subject to erosion due to losses or investor redemptions, such as a hedge fund. "Weak hands" are usually significant employers of leverage as well.
"It is a widely acknowledged fact that many of the participants in the CDS market are hedge funds whose capital is subject to the whims of performance-chasing investors. As the disappointing performance of some previous top performing hedge funds demonstrated last year, investment banks and other financial institutions that are counting on these counterparties to fulfill their part of the bargain in CDS contracts could be left holding the bag if the current credit environment continues to deteriorate, as many of us expect.
"A case in point was the collapse of Dublin-based Structured Credit Company (SCC) in December 2007, which is seeing its 12 trading partners lose about 95 percent of what they are owed, according to the Financial Times. SCC was just a couple of years old and was one of a new brand of Credit Derivative Product Companies (observation: these companies should use a "skull and crossbones" as their corporate logo). It had no credit rating (although HCM would not have been surprised to see it obtain one since the rating agencies were handing out ratings left and right during this period) and $200 million of capital on top of which it wrote $5 billion of credit default swaps. We will save our readers from doing the math that is 25-to-1 leverage (significantly less than many Structured Investment Vehicles, just to place this insanity in some kind of context). Low and behold, when the credit markets collapsed last summer and SCC was required to post additional collateral on its trades, there was to quote Gertrude Stein  "no there there."
"Court documents show that collateral demands rose from $55 million to $438 million, but SCC ran out of funds after managing to post $175 million, and the game was up. Was such an outcome unforeseeable? Only for someone completely ignorant of the last 500 years of economic history, HCM supposes. SCC boasted, of course, that "we have stress-tested our capital to the nth' degree and believe that the platform we have is the most flexible and comprehensive you could have." Right. HCM would respectfully suggest that the only ones more misinformed than SCC itself were those who were lured into taking the other side of their trades and are now nursing $250 million of losses (and frankly it's shocking that the losses aren't much larger). Of course, these firms included some of the largest financial institutions in the world, so once again HCM finds itself scratching its head in amazement at the madness of crowds."
25 to 1 leverage and stress testing do not belong in the same sentence or marketing pitch. This type of ending for various funds is going to become all too common.
John Mauldin, Editor
Outside the Box
 


 
Pyramids Crumbling
Investment Outlook
Bill Gross | January 2008
My college experience dates so far back that it can only be labeled "ancient history." Still, there are a few seminal lessons I learned at Duke University unfortunately none of them having much to do with the classroom. "Ticket Scalping 101" and "Beginning Blackjack" probably head the list, but not far behind would be "Introduction to Pyramid Schemes." While the first two courses may be rather unique to my own experience, the latter I assume is standard fare, and has been since the first diploma was awarded at Harvard, Yale or whichever college claims to have been the "firstest" with the "mostest." A second semester senior who never signed up for a dorm-born chain letter cannot really claim to have received a college education at all. The chain's lesson was that you should be the originator of the letter, not the 500th recipient. You wanted your name at the apex of this upside down pyramid not at the broadened top, which signaled the exhaustion of additional fish, tuna or whatever derogatory noun one could employ to signify the university's last few suckers.
Wall Street and its global lookalikes, of course, are life's largest colleges where lessons can be mighty expensive and downright bankrupting. The last two decades alone have witnessed pyramid schemes involving savings and loans/junk bonds, the small investor/dot.coms, and now global bonds/subprimes. I could go on and you have your own candidates to be sure, but in each and every case the originator of a surefire "can't miss" concept collected huge premiums from a willing investment public, only to see the pyramid collapse either of its own merits or from the lack of additional gullible investors. There will be more to come, much like a regular university that welcomes a never-ending stream of new "students" who pay annual "tuition" to be "educated."
In addition to the pyramid shape of its securitized assets and the endless chain of its letters, finance and especially modern finance is centered around banking and now, unfortunately, around shadow banking. Both, The Economist magazine points out in its September 22nd issue, are built on a fundamental (and ever present) mismatch: they borrow short and lend longer and riskier. Recognizing this flaw, governments have for over a century mandated that banks have an ample percentage of reserves in order to bridge the liquidity and investment risks that periodically ensue. Like Jimmy Stewart in It's a Wonderful Life, the critical job of a traditional banker was to have enough reserves or cash on hand to prevent a run. Stewart's modern day counterpart must follow similar guidelines, although a 21st century banker now can always look skyward for a guardian angel in the form of the Fed, the ECB, or the Bank of England. Recent infusions of over a half a trillion dollars by this triumvirate point to the perennial need for reserve banking in either an earthly or a more heavenly sense.
But today's banking system as pointed out in recent Investment Outlooks, has morphed into something entirely different and inherently more risky. Our modern shadow banking system craftily dodges the reserve requirements of traditional institutions and promotes a chain letter, pyramid scheme of leverage, based in many cases on no reserve cushion whatsoever. Financial derivatives of all descriptions are involved but credit default swaps (CDS) are perhaps the most egregious offenders. While margin does flow periodically to balance both party's accounts, the conduits that hold CDS contracts are in effect non-regulated banks, much like their hedge fund brethren, with no requirements to hold reserves against a significant "black swan" run that might break them. Jimmy Stewart they hardly knew ye! According to the Bank for International Settlements (BIS), CDS totaling $43 trillion were outstanding at year end 2007, more than half the size of the entire asset base of the global banking system. Total derivatives amount to over $500 trillion, many of them finding their way onto the balance sheets of SIVs, CDOs and other conduits of their ilk comprising the Frankensteinian levered body of shadow banks.
Defenders might claim no harm, no foul. Theoretically, many of these trillions represent side bets between risk seeking or risk avoiding parties both adults at a table where the calming benefits of diversification work for the systemic good of all. Originators and existing supporters of these securitized WMDs might also point out that their reserves come in the form of equity and subordinated tranches comprising 10 or 20% of the repackaged loans. They do. But as this equity/subordination shrinks due to underlying defaults, the pyramid begins to unravel. Rating servicer downgrades can and do lead to the immediate liquidation of certain CDOs. The inability to rollover asset-backed commercial paper does and has led to the liquidation of SIVs or, pray tell, a misguided attempt to restructure them as super SIVs. CDOs and even levered municipal bond conduits known as "Tender Option Bonds" have been and will be similarly vulnerable to "Jimmy Stewart-like" runs as the monoline insurers that theoretically stand behind them are themselves downgraded to less than Aaa status.
The withdrawal of deposits from our new age shadow banking system has frightening potential consequences because a thinly capitalized banking system is always at risk relative to its more conservative counterpart. Visualize, as does Chart 1, in crude yet understandable form, today's shadow system versus that of two decades ago.
 
While the exact amount of reserves supporting the Bank of Shadows is undeterminable, let's go back to the $45 trillion BIS estimate of outstanding CDS for more insight. If total investment grade and junk bond defaults approach historical norms of 1¼% in 2008 (Moody's and S&P forecast something close) then $500 billion of these default contracts will be triggered resulting in losses of $250 billion or more to the "protection selling" party once recoveries are inserted into the equation. To put that number in perspective, many street estimates ascribe similar losses to subprime mortgages, a derivative category substantially distinct from CDS insurance. Of course, "buyers of protection" will be on the other "winning" side, but the point is that as capital gains and capital losses slosh from one side of the shadow system's boat to the other, casualties and shipwrecks are the inevitable consequence. Goldman Sachs wins? Fine, but the losers in many cases will not be back for a return match. Much like casinos depend upon a constant stream of willing gamblers believing that this is their day, so too does Wall Street. But a trillion dollars of SIVs with their asset-backed commercial paper may be a dinosaur relic of yesterday's shadow system. They will likely not be back. And the New Century mortgage originators? The Bear Stearns hedge funds? The chastened Freddie Macs and Fannie Maes, and all of the banks and investment banks requiring fresh capital through the sale of stock? They'll be back but not in risk taking, fighting form. Throw in an embarrassed regulatory network consisting of the Fed and Congressional watchdogs asleep at their post, but are now more than willing to display their prowess, and you have a recipe for credit contraction, a run on the shadow banking system that would give Mr. Stewart shivers aplenty. The unfairly "Ben Stein pilloried" Jan Hatzius of Goldman Sachs estimates that mortgage related losses of $200-400 billion alone might lead to a pullback of $2 trillion of aggregate lending. Even if this occurs gradually, he writes, "The drag on economic activity could be substantial." Add to that my $250 billion loss estimate from CDS, as well as prospective losses in commercial real estate and credit cards in 2008 and you have a recipe for a contraction in credit leading to a recession.
 
Pyramid schemes and chain letters collapse because there is no more credit to feed them. As the system of modern day levered shadow finance slows to a crawl, or even contracts at the edges, its ability to systemically fertilize economic growth must be called into question. And as the private shadow banks of the 21st century are found wanting, so then must public finance in the form of lower interest rates and increasing fiscal deficits fill the breach. The Fed will likely reduce Fed funds to 3% by midyear 2008. Congress and the Administration should, but likely won't, join hands in a tax relief program that benefits low income homeowners. Market based, regulation-lite American style capitalism, seemingly so ascendant after the dot.com madness nearly a decade ago, has met its match with the subprimes and the poorly structured and supervised derivative conduits of today's markets. Financial innovation will inevitably march forward, if not in distinctly new forms, then into new asset markets and even unexplored continents. For now, however, its current surge is spent. Investment survivors will have to learn to live in a different world, filled with new risks, lower leverage, and at some point, hopefully greater rewards.
 
 
Conclusion

Your very concerned abut the Credit Default Swap market analyst,
 
Disclaimer

Notice

John Mauldin is the President of Millennium Wave Advisors, LLC (MWA) which is an investment advisory firm registered with multiple states. John Mauldin is a registered representative of Millennium Wave Securities, LLC, (MWS) an FINRA registered broker-dealer. MWS is also a Commodity Pool Operator (CPO) and a Commodity Trading Advisor (CTA) registered with the CFTC, as well as an Introducing Broker (IB). Millennium Wave Investments is a dba of MWA LLC and MWS LLC. Millennium Wave Investments cooperates in the consulting on and marketing of private investment offerings with other independent firms such as Altegris Investments; Absolute Return Partners, LLP; Pro-Hedge Funds; EFG Capital International Corp; and Plexus Asset Management. Funds recommended by Mauldin may pay a portion of their fees to these independent firms, who will share 1/3 of those fees with MWS and thus with Mauldin. Any views expressed herein are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest with any CTA, fund, or program mentioned here or elsewhere. Before seeking any advisor's services or making an investment in a fund, investors must read and examine thoroughly the respective disclosure document or offering memorandum. Since these firms and Mauldin receive fees from the funds they recommend/market, they only recommend/market products with which they have been able to negotiate fee arrangements.

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Optimizing Simplicity

A hedge fund managers’ departure from the
unnecessarily sophisticated to the sophisticatedly simple.
 
Managing a successful hedge fund these last nine years has permitted me a rare insiders’ perspective to just why countless investors continue to lose more money in the stock market, than they ever make.  These common financial pitfalls were easy to pinpoint, as they affect not only a families 401(k), but also the $50 million dollars of inherited generational wealth being professionally managed. Investing in anything that is too Confusing, too Complicated, or Void any real risk management guarantees Financial Catastrophe. 
 
Identifying, “what the alternative is,” was a smidgen more involved requiring that I didn’t trade for years; personally lost more money than I wanted to admit at the time, and then ultimately surrendered my illusion that the stock market actually cared about your financial forecast, your stock predictions, or your trend lines.
 
“Success comes from making the Right decisions.  Right decisions are learned from experience.  Experience is gained thru making wrong decisions.”
 
Four years in the U.S. Navy followed by four years of staying afloat in college that I finally got around to asking myself the really important questions in life; such as, what do you really want to do with your life Kevin?  All I knew for sure was that I wanted to learn about investing and I wanted to learn how to make millions of dollars in the stock market; but I wasn’t sure where to start at.  The experts all told me that the best thing for me to do was put my money in mutual funds and forget about it; you know, “invest for the long term, rule of 72, diversify, etc.”  I thought that these experts had to know far more about investing than I did to understand all those complicated quarterly financial reports, graphs and charts.  I was obsessed with watching the financial channels and reading the Wall Street Journal, but embarrassingly enough, I still found it all very confusing if not overwhelming.  I wasn’t sure what was real; what was hype; and what was even essential at all, when it came to making money in the stock market.
“It's a mystery wrapped in a riddle inside an enigma!”
Winston Churchill
 
As part of my self prescribed self-help cocktail back in the early nineties, I found myself on the edge of my seat in a Landmark Forum seminar.  Three days of pure enlightenment followed by acute cerebral cramping.  Just when I actually thought that I was learning something, the Forum Leader told the group that, “You don’t know, what you don’t know, you don’t know.”  What the hell does that suppose to mean I thought to myself?  Well, it wasn’t till much later that, I Got It!
 
I read literally hundreds of trading books word for word, page by page, expert to acclaimed monarch expert; completed countless tape programs and video courses all promising to teach me the secrets of the professional traders.  My fifth grade math teacher, Mrs. Hayes, would have been so proud of my scholastic prowess, that she surely would have placed a Silver Star on my shirt; that she somehow neglected to do years back.
 
In due course as my understanding of trading and investing grew stronger, I went on to pay $4995.00 to attend an exclusive trader’s symposium, that’s right, a symposium this time and not one of those run of the mill seminars that the amateurs attended.  We were taught the in-depth, complex, and sophisticated analysis of what to buy, where to buy, and how to buy stocks, bonds, options, and spreads. These events included large binders filled with colored charts, confusing graphs, and expert trading tips.  This particular symposium included a limited time only, one on one coaching call to keep us motivated after the symposium.  I guess there must have been about three hundred of us attending this particular symposium; small, compared to the last one that I attended in Los Angeles, must of been a thousand in attendance there.
 
What was the end result of all this training?  Well, I had finally arrived. I was in-the-know.  I was college educated, well informed, and up to date with the most sophisticated trading techniques being taught anywhere, and I was ready to make my millions.  Detailed trading plan at my side, complete with my most desired objectives, deadlines for reaching those objectives and a daily to do list.  My confidence was at an all time high - I was ready to enter the stock market.
 
“Just as the U.S. Marine corp. separates the men from the boys; the stock market decapitates the overly confident, from the competent.”                - Kevin Teeple
 
I precisely followed each and every “how to,” taught in these seminars, books, and tape programs, I analyzed an ocean of fundamental data with a fine tooth comb just I was taught.  Considered price and demand, with all the associated underlying factors I could read about, just as they taught me to do.  I bought on triple tops, sold when it dropped below this or that converging moving average, shorted the dogs of the Dow, hedged with spiders, diversified with ETF’s, used Elliott Wave, MACD, Bollinger bands, P/E ratios, advanced statistical regression models, ratio filtering, economic logic projection; and,  after  all  this  can  you  imagine  the millions of dollars that I made?  Nada, zilch, zero.  I ended up with a net loss as the reality of the stock market collided with my market forecast - and it was unscathed. 
 
In fact, my first real trade after paper trading several months resulted in me losing about $5,000.00 in less than 10 minutes; that was 100% of what I had invested at that time; my second and third trades?  Well, Christ himself has not forgiven me for that, and therefore I am not at liberty to discuss it.
 
“Everybody’s got a great plan until the first punch.”
-         Mike Tyson
 
Now for you traders’ out there reading this article, that are feeling your heart rate increase; your blood pressure about to explode, and have veins popping out of your forehead like trend lines on a chart - please hear me out on this; I am not bashing any management style or any trading technique here.  As my good friend and professional investor Geoff has reminded me, there is more than one way to skin a cat.  Peter Lynch averaged over 20% per year for almost 15yrs using Mutual Funds; Warren Buffett who has averaged over 20%/yr for over 30 yrs using a buy and hold approach, then there's charismatic genius Jim Cramer who changes his mind at the blink of an eye that averaged over 20%/yr at his hedge fund.  All of these are Masters without exception or debate, yet they are more the exception, than they are the rule.  All I am suggesting here for the rest of us not in the 98th percentile of IQ scores; there might be an easier way, a quantitatively simplistic method to skin that same cat.
 
 “You set enough monkeys typing and one of them will produce the encyclopedia Britannica sooner or later.”                                                 - Fooled by Randomness.
 
After losing that $5,000.00 in less than ten minutes, I’d reached my vomiting threshold and Mrs. Hayes took my silver star back. I could no longer afford to indulge in the fantasy that the stock market actually cared about my trend lines, my market forecasts or stock predictions.  Survival dictated no more daydreaming that the stock market would value my technically sophisticated, remarkably ingenious and fundamentally sound trading techniques.  I knew what the problem was then, just as most traders and investors do in similar situations.  It is the common denominator in all trades and investments – the problem was me!  It was time for me to take a step back, reevaluate, reassess my life; it was time for me to Walk on Fire! 
 
Those of us whose life’s demanded a change, and we attended a Tony Robbins event already know that above and beyond experiencing the popular picnic skill of walking across a bed of burning coals; that Tony teaches us the vitally more important life strategies, designed to enhance, and accelerate, our personal or professional lives to the next level, no matter how great our lives are already. 
 
Well, after my first fire walking experience with Tony, I kept on walking all the way to San Diego, headquarters of Robbins Research.  I left my cubicle commando job and moved there o San Diego to spend three remarkable years working for him.  
 
There are countless great reasons to work with Tony, but one reason that I found to be beyond measure, was participating in the numerous meetings and get togethers’ with Tony. Instead of an audience of say 1000 people or more, he was in a small conference room talking to about twenty of us; and as you can imagine, these experiences ensured that, life would never be the same.   Which brings me to my point which is one of Tony’s most powerful organizing principles?
 
Know your outcome; Take massive intelligent action; Have sensory-acuity to notice if you are getting the results you desire and if not; change your approach; and then continue to change your approach *until* you get your end outcome.                     
–        Tony Robbins
 
Hmmm, I suppose in hindsight that Tony felt obligated to hire me due to the fact that I got stuck in his office elevator for over an hour on the way to my first interview.  All the same, and years later, I still consider that time at Robbins priceless and paramount to my success today. 
 
Like so many unfortunate traders and investors that I know now, I was so intoxicated with the dream of what might happen in the stock market that I was all but ignoring what was happening in the stock market, as I watched my net worth diminish, one – tick – at – a – time.  Do you know any one like this? Maybe intimately?
 
The time had come to subscribe to Tonys’ organizing principle, and change my approach immediately, and then continue changing it till I reached my goal of making millions in the stock market through identifying a profit pattern in the stock market.
 
Standing on the shoulders of greatness has made all the difference in my years of trading, especially in the discipline of avoiding that which is inessential and focusing exclusively on that which is essential to profiting in the stock market. “What is true vs. what I think.”  Thumb firmly pressed upon the pulse of Wall Street and finance matters everywhere, a lifetime of invaluable investment advice, commanding distinctions and acute market insight can be gained when the Masters share their wisdom with us. 
 
A clever person solves a problem.  A wise person avoids it.
– Albert Einstein
 
Kevin, let me share something with you that is common knowledge but for the most part is not truly appreciated.  The investment community has constructed a widespread and convoluted maze designed to lasso its listeners into its own brand of conventional market wisdom, mostly thru the media, print, and over the internet. Add to this the fact that change is accelerating daily, while increasingly more and more difficult to understand.  Even the smartest among us, with our best thinking, can’t figure out how these so-called experts actually arrived at their stock predictions, or market forecasts; not to mention how any of their forecasting translated into actually making money in the stock market?
 
Forecasting is not a respectable human activity, and not worthwhile beyond the shortest of periods.” – Peter Drucker
 
You have but two paths before you Kevin, before any trader or investor that wants to makes money in the market that is.  First, you can either join this
Herd-mentality that will eventually lose most, if not all, of their money trading blindly, preying that the market will turn in their favor.  Or, choose the second path and steer clear of this herd and become one of a niche-few that has actually identified a profit pattern in the stock market, and knows how to exploit it - for profit.
 

“It’s in this moment of your decision making that your financial destiny will be determined.”  Choosing the second path will all but guarantee that the next couple years of your life you will not trade a single penny, but instead, endeavor thru an exhaustive amount of time and energy in search of a profit pattern, a trading strategy that you may never find at all.  Choose wisely! 

 
Yes, these talks were initially quite curt and to the point, not to mention only minutes or so each month at best, in the beginning.  Nonetheless, it wasn’t till during those times with him, that I finally got what the Landmark Forum was trying to teach me.  He shifted my perception just enough, to teach me what I didn’t know, that I didn’t even know about trading successfully.  Then, it wasn’t too many years thereafter that these rolls were reversed on me, as a result of the most horrendous terrorists attack ever on U.S. soil; and I was the one sharing this same wisdom with others who needed to hear it. 
 
“We are all drowning in information but starving for wisdom.”
                                                            - Anthony Robbins
 
It was just days after our country was attacked by terrorists that I was honored to be an invited guest on CNN financial network, Bloomberg, and the Fox network to answer questions from callers around the U.S...  Unlike other appearances in the past where an informal, yet politically correct sound byte answer was strongly advised; this time I knew that the “politically correct,” gloves needed to come off, as this was unquestionably a time for straight talk.
 
But first and foremost we had to pay our respects; we had to see with our own eyes where the twin towers had fallen to their final resting place, somber sight.  Afterwards, I could not sleep a wink for the thirty plus hours leading up to my appearance on CNN.  I paced back and forth in my hotel room up until just minutes before going on the air; before countless Americans would be meticulously dissecting every word I said. 
 
Like so many of us then, I didn’t have a clue what the markets were going to do in the following days or weeks; and I certainly wasn’t going to insult the listeners’ intelligence by pretending that I did and giving them some pseudoscience prediction or market forecast.  I did however have an edge, I knew exactly how I was going to trade the market and therefore precisely what I was going to say on CNN and this is what I said:  “This is Not the time to invest in the stock market; this is the time to protect your money!” 
 
If you are going to error, error on the side of protecting your investments regardless of what the markets did moving forward. 
 
Everything that I’d had learned to be true up to that moment in our history, told me this was a time to set it out.  You never see a professional bull rider trying to mount a bucking bronco in the ring, so why would anyone enter the market then – the risks were far too great.  This may not have been technically sophisticated, remarkably ingenious or bold enough for some of my counterparts being interviewed that day, but the partners in my hedge fund and listeners didn’t protest at all.  After all, that month of September, as well as for the year, we finished with a very respectable ROI - and that’s all that matters.
 
“Track Record is everything.”
– Warren Buffet
 
If you find yourself nodding your head yes right now, then we probably have a lot in common when it comes to investing our money.By leaving our emotions, opinions, and the news outside our trading office during that terrifying time in our Nation’s history, it made all the difference in our hedge fund’s success.  Avoid obsessing over the confusing and complicated, and rely solely on what you’ve identified earlier, as being true, your strategy. 
 
Today, we can thank God above for our men and woman in the armed services whose brave and selfless service to our nation has prevented another terrorist attack.  Yet, how many of us find ourselves again overwhelmed with how to proceed with our investments?  We find that the only decision we make, is not to make a decision at all - which can be very costly. 
 
There is the mortgage meltdown to consider and analyze. Rising inflation, the slowing economy, the presidential debates and who can overlook the increasingly uncertain future of our U.S. currency.  Anyone of these alone can be a smidgen too confusing, too complicated and to risky for even the smartest of us, with our best thinking, to base our investment decisions off. So, how to proceed?
 
 “The definition of insanity is trying the same approach over and over hoping for a different result.”                                                                         – Benjamin Franklin
 
 
First, Never ever never “play the market.”  When you enter the stock market today, it’s only slightly different than you entering the coliseum in ancient Rome in 80 AD; as you watch in terror as a gladiator rushes you.  Just as the gladiators back then had one intention when they entered the arena – too kill; professional traders are not too much different in that regards.  Professional traders have one objective, and that is to make money – they never play the market.  Fortunately for the losers in this modern day coliseum, they are seldom killed, but to a certain extent, they are financially decapitated or crippled.
 
Second, abandon any preconceived opinions you might have about where you think the market will or will not go – Trying to convince the stock market that you are right can be very expensive.
 
Third, realize that the markets are in fact a zero sum game, in order for you to make money - someone else will have to lose it so prepare yourself thoroughly.
 
Fourth and most importantly, know that every word discussed here is absolutely useless, without the proper money management supporting it. 
 
Bulls make money, bears make money but pigs always get slaughtered!
-         Wall Street truism.
 
So, what did I learn from all of this?  What alternatives were identified that allowed us to profit in the most difficult of times?  How specifically does an investor/trader today, depart from the unnecessarily sophisticated, and engage, the sophisticatedly simple? 
 
Kevin’s Rules of Engagement for the stock market.
 
I.                 First and foremost, identify causality.
 
An investor or traders’ ability to objectively and precisely identify causality in the stock market; to recognize sequential profit-patterns is in fact the most important skill-set that ultimately separates the profitable investors/trader from the herd.
 
Causality defined as the directional relationship between one event (cause) and another event, (effect) which is the consequence of the first.  Just as we have all observed this cause and effect in motion, as we’ve watched billiard balls sequentially striking each other as; A causes B, causes C, and so on; there is a parallel causality in the markets, where one event, such as the NASDAQ trending in a certain direction, causes an event which sequentially causes another that can be exploited for exceptional gains.
 
How do we as investors and traders objectively and precisely sift thru the incomprehensible ocean of data, to construct a quantitative trading strategy, to make the incomprehensible, comprehensible?
 
II.    You optimize:
 
Science explains how our brains are designed to filter, generalize and seek meaning from our sensory input. The result of this is often that our perceptions are distorted and or emotionally biased causing us to make decisions that are less than productive, less than profitable. 
 
Computers on the other hand are a series of binary tools that are designed for absolute objectivity and preciseness. Computer technology can distill a lifetime of market experience into mere moments of processing time, enabling us to search for profit-patterns that have occurred over the last 30(+) years; across an unlimited number of global markets.  Profit patterns that have occurred hundreds if not thousands of times during a time period (large sample size); and which correlates to a predefined “what is true,” marker, that allows for high probability entry and exit points.
 
“What can be done with fewer assumptions is done in vain with more.”                                                                                                             - Occam’s Razor
 
III.        Simplify by finding what is true
 
Defining “what is true” in an ocean of incomprehensible data to analyze is an exercise in stubbornness and persistence, as you will surely identify what is not true, infinitum, before ever arriving at – what is true.  Nevertheless, one significant example of what is true is, “the traded price;” that pivotal “aha” moment in an ocean of incomprehensible analysis.
 
What can be simpler to analyze than the traded price?  What is truer, than the mirror reflection and decisive finale of when sellers meet buyers in the stock market? 
 
“Things should be made as simple as possible, not simpler.”        
- Albert Einstein
 
IV.        Quantify, Systemize, before a penny is invested
 
Once you’ve identified what is true, then technology allows us to mathematically isolate the market conditions that correlate and lead up to highly profitable trades by quantifying the highest probability entry and exit signals. (The historical tendency of one thing to move in tandem with another.)  
 
These Profit Patterns are identified when, and only when, you know the following:
 

·        What to buy.

·        When to buy.

·        When to sell.

·        Amount of profit made historically.

·        Amount of losses incurred, historically.

·        And, your market weightings and exposure. 

 

This is vitally important to any investor because by being so selective in entry points, you accomplish three things.  First, you filter out the confusing, complicated, or undefined risk. Second, you save your money for the trades that have the best chance of winning.  And third, you never irrationally place trades when you don’t know if the odds are in your favor. 
 
These predefined surgical-strikes are quantitative and systematic with no discretionary overrides eliminating the discretionary or emotional investments and trades.
 
“Whether you’re playing blackjack or trading, your profitability depends on your edge and how many times you get to apply that edge.”  - Blain Hull
 
V.   For your adult consideration:
 
“The United States sneezes and whole world catches a cold.” – Author unknown
 
Can we really deny the fact that we are in an international economy? Some even suggest that we are moving towards an international state - while commenting on the latter is beyond my pay grade; commenting on the first is not.  Just as the same level of thinking that got us to where we are now, isn’t the level of thinking we need to get us where we want to go; conventional market wisdom appears lacking in a global perspective where market traction, trumps, market theory.  Where (d)iversification in the amateurese translation means diworsification; and (D)iversification, for those of us whose sensory acuity is  responsive enough to change, can mean, diversification into different countries not simply different mutual funds.  Different currencies, and not just different banks, and different approaches, not just what worked last year.
 
“It’s not the strongest of the species that survives, nor the most intelligent, but the ones most responsive to change.”            - Charles Darwin
 
Generational wealth can only be maintained thru the constant monitoring and management of short term capital preservation.  Getting lazy once, or experiencing the “deer in the headlights,” syndrome in a bad trade, bad investment, or from bad advice, is all it takes to undo the efforts and profits of the last 50 years or more; as confirmed by one infamous rogue trader named Nick Leeson, as he overextended his trades in the Nikkei 225 causing the collapse of the Barings Bank.
 
Investors may be willing to take risks in order to achieve their wealth; but once it is achieved, experience has taught us all that our risk tolerances decrease exponentially.  And for that reason, the primary objective of any trader, investor, or money manager must be to minimize risk, first and foremost, before looking to maximizing profit
 
Avoid the confusing, the complicated, the void of any real risk management and focus solely on what you’ve identified as true, and your strategy to exploit the profits from it.
 
 - Carpe Diem,
 
Kevin Teeple
President and Chief Investment Officer
KTM Funds, Inc.
This email address is being protected from spambots. You need JavaScript enabled to view it.
 
DISCLAIMAIRNeither Kevin Teeple nor KTM Funds are licensed stock brokers; registered investment advisors, or certified financial planners and therefore do not render any financial advice whatsoever. The sole purpose of this article is for informational and educational purposes only. The opinions, statements, and experience expressed in this article are meant to be educational only for your adult consideration, and not to be considered financial advice whatsoever.  None of this is meant to substitute for your own counsel with certified financial professionals as we adamantly suggest you always seek counsel before undertaking any investment or trade.
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Accumulating More Frequent Flier Miles

These days, you don't have to be a frequent flier to earn frequent flier miles. Most miles, in fact, are earned on credit card purchases rather than through airline flights. But there are many kinds of cards, from those issued by banks and credit card companies to those affiliated with airlines or hotels, and choosing the right one can be tricky. "If the choices were clear-cut, there wouldn't be as many cards as there are," says Tim Winship, co-author of Mileage Pro: The Insider's Guide to Frequent Flyer Programs.

Winship favors concentrating your miles in a single program, and he suggests choosing a card affiliated with the airline you use most often. If you decide to participate in several programs, you may be best served by an American Express or Diners Club card, Winship says, because both allow you to transfer earned points to a variety of airline programs. If you tend to rack up a lot of credit card purchases, a bank card could help you accrue points redeemable for free tickets, and bank card fees are among the lowest fees, Winship says.

Last year, the Freddie Awards, the frequent traveler's Oscar®, named Alaska Airlines' Mileage Pal as program of the year for the third time in a row, with Southwest Airlines' Rapid Rewards in second place. Winship also likes American's AAdvantage program and United's Mileage Plus. Among affinity credit cards, the Starwood Preferred Guest card issued by American Express, the Citibank AAdvantage MasterCard, and the American Express Blue Key card are his favorites. See www.frequentflier.com for more detailed comparisons among card programs.

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Smarter Spam Abounds, But Don't Fall For It

Even with anti-spam software on your computer and your e-mail server, spam still gets through. And there's more of it. Spam volume climbed 30% in 2006 and was estimated to account for more than 50% of all e-mails being sent, according to Symantec Corp, a Cupertino, California company that makes anti-spam software.

Spammers now outsmart anti-spam systems with new tricks. Instead of sending emails with text, which can be filtered out automatically by email server-based systems, they send emails containing pictures with words embedded in the images. This clever new form of spam now runs rampant across the Internet and floods email systems.

The proliferation of new spam techniques has been accompanied by solicitations for many new products. Most disturbing perhaps is the proliferation of stock-related spam, offering investors "the chance of a lifetime."

An Oxford University professor, Jonathan Zittrain, and a Purdue University assistant professor, Laura Frieder, recently studied spam stock schemes and reached a surprising conclusion: they work. Spammers often make a 5% to 6% return in just days. Meanwhile suckers who buy the stock-and some inevitably do-lose 7% of their investment.

A bit of advice: While you probably can't avoid receiving some spam, don't make matters worse by responding to these offers. If you get spam email that you think is deceptive, forward it to This email address is being protected from spambots. You need JavaScript enabled to view it. , and investment scam spam can be reported to This email address is being protected from spambots. You need JavaScript enabled to view it.

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A Corporate Trustee Has Drawbacks But Can Give You Piece Of Mind

Does the idea of putting control over trust assets in the hands of a virtual stranger give you the shivers? Or maybe you've heard that corporate trustees are pricey, take longer to make decisions, and-due to personnel changes-may mean your beneficiaries will have to deal with a series of point people rather than one individual.

All are potential drawbacks. But before you opt for a friend or family member as trustee, consider the pros of choosing a corporate trustee.

  • Staying power. The role of trustee can be demanding, and may span a long period. An individual could find that responsibility overwhelming, and if that person dies or becomes mentally incapacitated, it could create problems for the trust and its beneficiaries. A corporate trustee, however, can administer the trust for as long as it endures.
  • Objectivity. Friends and family members are likely to have emotional connections to beneficiaries, could cave in to unreasonable requests, and may not be able to balance the needs of current and future beneficiaries. A corporate trustee will follow the grantor's wishes to the letter.
  • Expertise and commitment. The role of a trustee is complicated and time consuming. Trustees must not only collect, value, and safeguard assets, but also invest and distribute them, as well as keep accurate records and follow com-plex accounting, legal, and tax regulations. And flubbing a filing or omitting a tax payment can have serious ramifications, and could leave the trustee liable to charges of fiduciary malpractice.
  • Conflict resolution. An independent corporate trustee can serve as a buffer when conflicts arise and may be better equipped to resolve disagreements or make unbiased decisions.

Of course, it's essential to choose corporate trustees with care. Plan to talk to several candidates. Consider factors such as how long the trust department has been in business, the number and the average size of the trusts it manages, and the experience level of its employees. Because you're looking for someone you'll be comfortable talking to about your personal relationships, you'll probably want to meet with your top choices in person.

Delve into the financials by comparing investment returns, fees-including when the last increase took place and how much of a bump it was-and services. Ask for samples of trust statements or reports to see whether they're written in language a lay-person could understand. Find out what restrictions, if any, limit the corporate trustee's investment options; some conservative firms provide only internal investment options, which significantly reduces a trust's investment opportunities.

When you've settled on a corporate trustee, consider when to introduce the trust officer to your family. Often, trustees are designated to take charge after the grantor's death-a time of great stress and instability for the family. A better bet may be to bring in a corporate trustee now and hold regular family meetings, giving the trustee and beneficiaries the chance to build a working relationship. And designate one or more persons to have the power to remove and appoint a corporate trustee if it becomes necessary.

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Avoiding Mistakes On IRA Rollovers

When you change jobs, you can make a tax-free rollover of your 401(k) to an IRA. Often, that's a good idea. IRAs generally offer broader investment choices than you get in a 401(k). Moreover, if you switch jobs several times during your career, your retirement savings will be easier to manage if you consolidate the money in one place.

Yet while a rollover often makes sense, rules governing such transfers are complicated and unyielding. Make a mistake and you could pay penalties and taxes and negate the benefits of moving to the IRA in the first place. Consider these pitfalls:

Failing to do a direct rollover. It's your last week at work, and when your personnel department asks what to do with your 401(k) balance, you request a check. As long as you redeposit the account's full value in an IRA within 60 days, you won't owe income tax or a 10% penalty for withdrawing retirement money before age 59½. (If you're at least 55 when you leave your job, you can keep the money without penalty.) However, your employer must withhold 20% on the amount of your check-and if you have, say, $500,000 in your 401(k), that means your check will be for just $400,000. Yet to avoid taxes and penalties, you'll have to deposit the full $500,000 in your rollover IRA. Where will the extra money come from? Unless you have that much sitting in a bank account, you may have to sell investments in a taxable account to raise the cash, and that could generate capital gains taxes. Assuming you do meet the 60-day deadline, you'll eventually get back much of the $100,000 your employer withheld, but not until the following year, after you've filed your federal taxes. (Whether you get the full amount depends on your overall tax situation for the year.) A better way: You could direct your company plan to roll over the money directly to your IRA and avoid this problem.

Rolling over company stock. Stock in your company that's held in your retirement plan is often eligible for special treatment when you leave a job. So moving the shares to a taxable account may be better than cashing out and rolling over the proceeds to an IRA. If you take the shares, you'll owe regular income tax on what you paid for them. And if you are under 59½ , you will also owe a 10% IRS early-withdrawal penalty. Assuming you are over 59½, in the 35% tax bracket, and that your original cost for the stock was $100,000, you'll owe $35,000 if you withdraw the shares and place them in a taxable account. But suppose the shares are now worth $200,000. That, as well as any further appreciation, could be taxed at the more favorable long-term capital gains rate of 15%-and only after you sell the stock. So your tax on the appreciation would be just $15,000. And if you never sell, your heirs get a step-up in basis on any appreciation in the stock that occurred after the transfer to the taxable account. If you roll over your shares to an IRA, however, their full value will eventually be taxed as income. So your total bill on the IRA withdrawal, again assuming a 35% rate, would be $70,000 instead of $50,000.

Borrowing from the wrong account. Sometimes people with a temporary cash crunch use the 60-day rollover window to withdraw cash from a former employer's plan, returning it to a rollover IRA. Yet because of the 20% withholding requirement, this strategy may only exacerbate problems. A better idea is to take the money from a rollover IRA you've already established (rather than a 401(k)). Here, too, you have 60 days to return the money without penalty, but there's no withholding. You're allowed to make such a transaction once a year.

In these and many other rollover-related transactions-including, for example, the nightmare scenario of splitting a rollover in a divorce settlement-it's all too easy to get it wrong. If you're considering a rollover, we can help you avoid mistakes and chart a course that fits your financial situation.

    

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401(k) Diversification Is Now Easier

401(k) Diversification Is Now Easier
 
Today, many 401(k) retirement plans offer two distinctly different investment approaches. The first is the traditional method, by which you build a portfolio from a menu of relatively narrow mutual funds--specializing, say, in large-cap growth stocks, foreign stocks or government bonds. With the second, newer approach, you direct your 401(k) money into just one very broad fund whose managers handle all of the investment choices.
 
Which works better? According to a recent study conducted by Burgess Associates for John Hancock Retirement Plan Service, the all-in-one fund--often known as a lifecycle fund--is worth considering. From 2000 through 2004, Hancock retirement fund participants in lifecycle funds came out ahead of those with do-it-yourself portfolios by 3 to 4 percentage points. On average, the survey found, participants who didn't use the lifecycle funds would have had 17% more in their nest eggs at the end of the period if they'd adopted the single-fund approach.
 
Past performance is no guarantee of your results, but this new approach to 401(k) investing appears promising not only because it is easier but it also eliminates a major threat to your investment success: you.
 

A chief virtue of lifecycle funds is that they shift the burden of creating a well-diversified portfolio from you to the funds' professional managers. Professionals--not you--make asset allocation decisions based on your time horizon.

If you're 30 years from retirement, for example, you could invest in a fund designed for someone your age. At first, the fund's manager may invest a large proportion of assets in stocks, with just enough bonds and cash to keep volatility at a manageable level. But as you and the fund's other shareholders age and near retirement, the manager will adjust the investment mix, increasing the fixed-income allocations to lower volatility.

 
Leaving asset allocation decisions to the manager of such a fund can save you from your own worst investing instincts--the tendency to load up on stocks at the height of a market surge, say, or to move everything into bonds when equities are slumping. These portfolio managers can also make tough rebalancing decisions for you, moving a portfolio back to its target allocations when, again, that means selling hot assets or buying cold ones.
 
In another study, of participants in Vanguard retirement plans, the mutual fund giant found that while about 70% of plan assets were invested in stocks--a reasonable allocation, given retirement savers' long-term goals--some plan participants had less than optimum investment mixes. Some 13% had all of their money in bonds and other fixed-income securities, while 21% had all-stock portfolios.
 
Keep in mind, though, that lifecycle funds are intended to serve as all-in-one portfolios. The Vanguard study found that fewer than one in three investors had a lifecycle fund as the sole holding in a 401(k), which is the way these funds are meant to be used. Mixing the broadly diversified lifecycle fund with traditional funds that are more narrowly focused could lead to too big a bet in a particular area of the market, thus defeating one of the main reasons for holding lifecycle funds in the first place.
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Retirement Is No Longer What It Used To Be

Retirement Is No Longer What It Used To Be, So Plan For That
 
Four years from now, one in seven Americans will be old enough to retire. For members of the Baby Boom generation who are approaching the traditional retirement age of 65, retirement is unlikely to follow the pattern of our parents and grandparents.
 
For one thing, advances in medicine mean tomorrow's retirees will live longer. A 65-year-old today has a better-than-even chance of living another 20 years; one in three will live to age 90. As the length of the typical retirement stretches out, retirement assets will have to stretch with it to ensure that you don't outlive your money just when you might need it the most.
 
Meanwhile, the very definition of retirement is changing. Today's seniors are enjoying lifestyles that break the sedentary mold of previous generations. Instead of sitting at home- not that there's anything wrong with that!--reflecting on memories of past exploits, they're making new memories through travel, active hobbies, and philanthropic work. Naturally, all these pursuits cost money, but many members of the 65-plus crowd are staying in the job market as well, some to earn the extra income, but plenty simply find the work rewarding in itself.
 
Retirement planning isn't about retirement anymore. It means planning to keep busy with leisure activities and maybe even planning to work through your 60s and 70s. We're here to help you plan that kind of retirement.
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Don't Put Your Nest Egg in One Basket Sovereign Society A Letter

 
Tuesday, October 24, 2006
Vol. 8 No. 212
In Today's Letter:
Comment: Don't Keep Your Nest Egg in One Basket  
Offshore: Offshore Trivia Challenge 
Currencies: Asian Consumer Still Strong
Privacy: Can Police Really Claim Your Property?
Don't Keep Your Nest Egg in One Basket

Today's comment is by Larry Grossman, Certified Financial Planner, managing director of Sovereign International Asset Management Inc., and member of The Sovereign Society Council of Experts.

Dear A-Letter Reader:

I just returned from The Sovereign Society's Wealth Protection Summit in Ireland, where I was asked to consult with every participant to help point him or her "in the right direction," for their wealth protection plan. Part of that process was getting to know the attendees, so I could understand their wealth concerns and goals.

Amazingly, every participant voiced the same concerns: the deteriorating U.S. economy and the future of the U.S. dollar. They were all looking for an individualized plan which would help them not only protect their assets, but also allow them the flexibility to invest their assets on a global basis.

My personal role at the conference was to address IRA and pension plans. Most of the participants had some type of retirement plan and were pleasantly surprised to learn they could move that retirement plan offshore. I explained that there are countless reasons to do this, but the main reasons are:
 
1. Nearly Impenetrable Asset Protection
2. Greater Investment Flexibility

It's Not Just Creditors You Need to Worry About

When people think about asset protection, they typically think about protecting themselves from frivolous lawsuits or creditor attacks. And while these are legitimate concerns, you also need to protect your retirement plan from even scarier prospects - namely, a weakening U.S. dollar and poor investment options.

If the U.S. dollar suddenly plummeted (which is a very real possibility), every dollar-based investment (including your retirement plan) would decrease in value. Plus, you would face a significant drop in your purchasing power. But you can protect your assets, including your retirement plan, from this nightmare scenario by holding your retirement plan offshore in a basket of different currencies. (The old saying about "not keeping all your eggs in one basket" definitely applies here.)

You also need to protect your assets from poor investments. But it's difficult to protect your portfolio from bad investments and bad investment advice if you are only dealing with traditional U.S. based stockbrokers. They tend to recommend investments that help their firms, not necessarily your portfolio.

Going offshore solves this problem. How? Non-U.S. banks (who can manage the investments in your retirement plan) are far more secure and have long histories of safety and security.  U.S. banks are also far more leveraged then European Banks. European banks are much more conservative, with asset managers that protect your portfolio against poor investments.

The Unlimited Investment Potential of Millionaires

Most of you have probably heard this story by now. You should have part of your portfolio invested outside of the United States. The U.S. markets are not always the best places to invest and a properly diversified global portfolio can actually reduce your risk from the volatility in the domestic markets.

Well that's true but it's only part of the story. The truth is most of the best investment managers on the planet are located outside of the U.S. and can only be accessed by non-U.S. accounts (like your offshore retirement fund). Frequently these managers just don't want to deal with the incredibly complex regulatory system in the United States.

Don't get me wrong - these managers don't operate their businesses in a vacuum. Many operate from highly regulated jurisdictions and just don't want to deal with yet another list of regulations just to operate from the United States.

And many of the best investments with superior consistent performance are only available outside of the United States. The Hedge Fund industry recently announced they are now managing over 1.3 trillion dollars. Individual investors can only invest in these hedge funds through an offshore entity, like a retirement account.

The "bursting real estate bubble" seems to be the buzzword of the press these days. But did you know you can invest in real estate anywhere in the world with your retirement plan? Imagine owning your own tropical waterfront paradise with pre-tax dollars. It can be done if you work with the right custodian.

To Wrap Up

I urge you to take action. Move at least part of your retirement plan offshore while you still can. Protect it from frivolous lawsuits and greedy creditors. Diversify outside of the dollar to protect your purchasing power and invest in the best investments available around the world that aren't dependent upon a climbing U.S. stock market. Stop having unnatural and unnecessary investment restrictions put upon you by a custodian who puts their interests before yours!

LARRY GROSSMAN, our "Retirement Guy"
and President of Sovereign Asset Management Inc.
This email address is being protected from spambots. You need JavaScript enabled to view it.
http://www.worldwideplanning.com/

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News Of Interest

Trust Administration Services Exits The Offshore Investment Business

 
Trust Administration Services Corporation, an IRA Administrator located in Carlsbad CA, recently announced they will no longer accept “Offshore Investments”, as well as certain other privately held corporations and unsecured promissory notes.
 
TASC states in their letter the decision is due to ongoing administrative issues they have experience with certain asset types. In a separate letter to our firm TASC has stated it is their “intention to resign on accounts that hold offshore assets”. This will require clients of TASC who hold these investments to either liquidate them or transfer their accounts to another custodian who will hold these assets.
 
TASC also has indicated they will waive their normal termination fees related to the transfer of these accounts.
 
SIPS welcomes any clients of TASC who find themselves in this position. We would be more than happy to assist you in the process of transferring your accounts and any of these investments.
 
To start the transfer process please contact our office and request the appropriate paperwork.
 
 
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Big Money Knows

 

 
Thursday, March 30, 2006 - Vol. 8 No. 64
In Today's Letter:
Comment: Big Money Knows.
Offshore: Channel Islands War?
Wealth: China Stock Market Overhaul.
Big Money Knows

Guest Comment by Larry Grossman, Certified Financial Planner, managing director of Sovereign International Asset Management Inc. and a member of the Sovereign Society Council of Experts.

Dear A-Letter Reader:

What do America's big money boys know that you don't know? Watching what the experts who manage billions in US pension funds are doing can teach us a lot. For more than a decade the trend of pension funds has been towards more and greater foreign investment. In 1980 less than 1% of US pension fund assets were invested abroad. By 2000 that figure had risen to 20% and it's higher today. These guys know where the profits are to be made, increasingly in emerging and other foreign markets.

So if offshore investment is so great for these major pension funds, why not for you too? (And keep in mind that taking your retirement plan offshore is fully legal under US law).

For many years I've extolled the virtues of taking your IRA/Retirement Plan offshore. But to do so usually means fighting your current US plan custodian or broker. These guys don't want you to know what those big pension fund managers know --  that many of the world's best investments are only available outside of the US. And that broker opposition comes because going offshore with your IRA doesn't put any money in their pockets. Instead, it puts more money in your pocket.

Some of this broker opposition to offshore and the tactics they use to discourage it is astounding. One of my clients, TK, had experience as an international investor having dealt with a Swiss money manager for years. With this background TK thought it was a simple request when she asked her broker at a major US brokerage firm to transfer her IRA to her Swiss investment advisor. What happened next will shock you!

And I quote a letter from her broker: "Dear Ms. TK: Due to laws, regulations and monitoring requirements of the Patriot Act and offshore activity, we have concluded that we must require you to transfer all of you (sic) accounts out of our company". This, from a major US financial firm!

Granted there may be more to the story than I was told, but I have copies of all the documents and I see only an innocent request to have a well known Swiss advisor, with whom TK already had experience, manage more of her assets in the form of her IRA. The response from her US broker was to tell her to close all of her accounts! Since when did it become illegal to invest offshore?

Another prospective client of mine suffered a similar rebuff, then sent me this note: "After a last call today to my local trust company, wherein I learned that they're not interested in doing business with me if I'm investing in anything having to do with 'that country', I am requesting forms for conversion of both my retirement plans." This clients crime: she wanted to buy real estate in Nicaragua using her IRA. The rules governing US retirement plans specifically allow funds to be invested in foreign real estate, but this trust company would not allow it.

Recently a small business owner I know had his retirement plan audited by the IRS. They looked at all his investments over the years and all his paperwork. The IRS said in effect: "Congratulations. Your investments have been perfectly in line with the rules." But the IRS agent demanded a plan amendment required by a 1981 law, about which the plan owner knew nothing. Because of a missing piece of paper, the IRS ruled the plan would be disqualified and was now fully taxable. The plan totaled $145,000 and the IRS wanted to assess a $60,000 penalty! The owner was forced to settle with the IRS for $10,000 and got stuck with $13,000 in legal fees.

There always has been a lot of bad advice about what you can and can't do with your US retirement plan. But there seems to be a clear attempt to bully people into investing in the same bland US investments Wall Street always tries to sell you -- but now they label you as a possible money laundering criminal if you want to go offshore!

There is another reason to move your retirement plan investments offshore. That's the government's continuing attack on wealth, including laws that have all but abolished US domestic financial privacy and allowed property confiscation by police fiat -- all this wrapped in the US flag held high in the phony wars against drugs, money laundering and, the latest ruse to gain government power, anti-terrorism.

These cases prove that the attack on honest wealth continues and grows worse by the day. If you have a pension or retirement plan, you should consider moving your plan outside of the US, not just for greater investment diversification and better profits, but to give you the sort of iron clad asset protection only available offshore. But do it now -- while you still can.

Larry Grossman, CFP
E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
Web site: http://www.worldwideplanning.com/default.asp

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Tap Into Your Retirement Plan Early

TSI September 2006 Part II
August 24, 2006
 
WEALTH PRESERVATION
Tap Into Your Retirement Plan Early and Don’t Pay the IRS a Dime in Penalties
By Larry Grossman
Yes, it’s possible to retire early and skip the penalties. In fact, you can retire anytime before you turn 59 1/2 and never pay the IRS the 10% fee for early distributions.
If you’ve built up your assets to the point that you can afford to retire, I’ll show you how you can do it starting tomorrow…including tapping the assets in your tax-sheltered retirement plan…and not pay the IRS a single dollar in penalties. And you can do it whether you’re 35, 45 or 55, or any age in between.
In fact, I’ll show you where to get the IRS form to file for early retirement—and skip the 10% early-retirement penalty.
Sadly, even most financial planners don’t have a clue the IRS will allow you to take your retirement distributions early without any penalty. But I have been helping a small number of clients quietly do this for years. And now I’m going to let you in on the secret.
But first a little background...
IRS: Pain in the ARS*
The IRS says that if you want to pull money out of your retirement plan before the age of 59 1/2, then you’re responsible for the income taxes on the amount and a 10% penalty. Now this may not sound like a lot. But those lucky individuals ready to retire early are already likely to be in or near the highest tax bracket of 35%. That means the 10% penalty could easily push their total government bill to as high as 45%. That’s usually enough to keep any sensible individual from taking early retirement. But that’s where the relatively unknown “72(t) distribution” comes into play. This obscure provision in the tax code is an “election” and allows you to partially or entirely skip this onerous penalty. I like to call it the “Hey, I have done a good job and now I am going to retire early” election.
The Logistics of Retiring Early
Basically, all you need to do is tell the IRS you want to retire early, and you want to start taking funds out of your retirement plan. And to use this “get out of penalty free card,” you need to tell them you want to take early retirement under section 72(t).
It’s important to structure a 72(t) distribution the right way or it ends up triggering the 10% penalty anyway. But the good news is its not that complicated. Basically, 72(t) says that you must take substantially equal periodic payments throughout the course of your retirement and gives you three separate methods for calculating these payments.
These three methods of payment are just complicated enough to reinforce the idea that the IRS thought them up. But these different pay-out options are just that—options. They give you different ways to calculate your retirement distributions. And you choose the distribution method that matches your financial situation, depending on whether you want to maximize or minimize your distributions.
Three Ways to Calculate Your Distributions
1.        Required Minimum Distribution (RMD) Method: This is the easiest method to understand because it’s similar to calculating normal IRA distributions. This method uses your life expectancy as the basis for your distributions. Your life expectancy becomes the dividing factor for your distributions. For example, say you’re 40 years old, and according to the IRS life expectancy table, you’re supposed to live another 45 years. So you would take 1/45th of your retirement fund as a distribution the first year, then 1/44th the second year, 1/43rd the third year…and so on. With this method, your distributions increase a little each year. But, depending on the size of your retirement plan, the distributions are relatively small. And if you’re married, you have added flexibility to increase or decrease your distributions. You can take a distribution based on your life alone if you want to maximize your distributions, or you can take a distribution based on the joint life expectancy of you and your spouse. Assuming your spouse is younger than you, this will minimize your distributions.
2.        Fixed Annuitization Method: This is an annuity program. The amount of annual payments you receive is based on the size of your retirement plan. You can find out your annuity factor by visiting the mortality table in Appendix B of Rev. Rul. 2002-62 on the IRS website. Once you have your annuity factor, you divide the entire worth of your retirement plan by the annuity factor that would provide one dollar for every year over your life. The final calculation is your annual distributions over your lifetime. These never change. The annuitization method allows a much larger payout each year than the required minimum distribution method (almost double in some cases).
3.        Fixed Amortization Method. This distribution method is based on both your life expectancy and an assumed interest rate. (This interest rate can’t be more than 120% of the IRS’ interest rate assumption or “federal mid-term rate.”) After the initial distribution, you get to take equal distributions for the rest of your life. And they are more than double the required minimum distributions. And, if for some reason, you need to start taking less out of your retirement fund every year (for example if your stock picks tank), you can make a one-time switch to a smaller distribution plan, like the RMD method.
Feel free to visit http://www.irs.gov for an example of each calculation method.
You Only Have to Take Out Retirement Funds Until You Turn 59 1/2
If you decide to retire early, you only have to take distributions out of your IRA until you turn 59 1/2. Once you hit the magic age of 59 1/2, you can stop taking distributions and start taking them again anytime in the future (up to age 70 1/2). Then once you hit 70 1/2, you have to start taking distributions again, but this still leaves you an entire decade where you can opt out of your retirement plan assets if you wish. Or you can continue taking your normal distributions once you hit 59 1/2—it’s up to you. This gives you the flexibility to retire early and exercise some control over your distributions.
So what does this mean for you? Plain and simple: if you’re fortunate enough to have the necessary assets and you’re ready to “chuck it all” and retire, then this fairly unknown IRS tax form could be your solution.
And as always: retirement and tax planning are complex areas and you should always seek professional tax and legal advice.
EDITOR’S NOTE: Interested in using a 72(t) to retire early, but want more information before you make your final decision? You can calculate your personal distributions on the special 72(t) calculator on Sovereign International Pension Services’ brand new website at http://www.sovereign pensionservices.com.

Larry C. Grossman, CFP™, CIMA™, is one of only approximately 1,500 financial professionals nationwide to hold the coveted designation of Certified Investment Management Analyst. He is also Managing Director of Sovereign International Asset Management in Palm Harbor, FL. In 2006, he established Sovereign International Pension Services to further help clients achieve greater flexibility, asset protection and investment opportunities for their retirement plans. He can be contacted at 727-784-4841. Email: lgrossman@worldwide planning.com. Website: http://www.worldwideplanning.com.
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Beat the US Retirement Plan System - Go Offshore


 

Comment
 
Monday, January 2, 2006 - Vol. 8 No. 1
In Today's Letter:

Comment:Beat the US Retirement Plan System - Go Offshore. 
Wealth:Markets Emerging. 
Offshore:Panama GDP Boom Goes On. 
Privacy & Rights:British Auto Tracking. 

Beat the US Retirement Plan System - Go Offshore
 

Guest Comment by Larry Grossman, Certified Financial Planner, managing director of Sovereign International Asset Management Inc. and a member of the Sovereign Society Council of Experts.

Dear A-Letter Reader: 

Who needs non-US investments in their retirement plan? You do! If you're a US citizen or US resident, you're the victim of a vast campaign of misinformation concerning how you can invest your retirement plan. 

Your broker or custodian doesn't want you to know that many of the world's best investments are only available outside of the US. And that's because it doesn't put any money in their pockets when you invest offshore. Instead, it puts more money in your pocket. 

The financial scandals that rocked Wall Street made it clear the US investment system is set up to benefit brokers and their employees -- not you. But you can break that trend by finding the truth -- and acting accordingly. 

Imagine owning an exotic beachfront retirement home on a lush tropical island, purchased with the tax deferred dollars you've saved. Add to that the salary your retirement plan will pay you to manage the property. The icing on the cake is the freedom from worries that plague most Americans who worry about their dwindling retirement plan assets. 

Your IRA or pension plan can own raw or improved land, condos, office buildings, single or multi-family homes and apartment buildings in any country, so long as the real estate is not for your current personal use. The only investment a retirement plan can't make, domestically or offshore, is in collectibles and some types of insurance. Indeed, most investment restrictions are imposed not by US law, but by domestic American custodians or retirement plan administrators. 

Another "off limits" investment to most US investors are offshore funds. Of 80,000 funds trading worldwide, only about 10,000 are registered in the US. Offshore funds are much more profitable, due to the falling dollar, the superior performance of emerging markets and the ability of offshore fund managers to use risk hedging techniques that are impossible to use in domestic US funds. 

Unfortunately, due to US securities laws, most offshore funds won't sell directly to US investors. Even if they did, the US tax consequences of direct ownership of most offshore funds can be punitive; unless you purchase them through your IRA or pension plan. And now some US brokerage firms are so paranoid about offshore investing, thanks to the PATRIOT Act, the mere mention of offshore investing has caused some of them to tell their clients to close their accounts and seek advice elsewhere! 

Placing a portion of your retirement offshore can also offer protection against the long-term decline of the US dollar. 

Asset protection is another reason for placing your retirement plan offshore. In the US, pension assets are at risk. Some retirement plans are protected, but many others are not. If a US creditor gets a judgment against your unprotected plan, forget all hopes of a comfortable retirement. But if your retirement plan is invested in a suitable foreign nation, Switzerland for instance, it can be made essentially judgment proof against almost all claims. 

Many reasonable people want a shield against the prying eyes of business partners, estranged family members or identity thieves. Financial privacy can be the best protection against frivolous lawsuits. If you don't appear to have assets to justify a lawsuit's time and expense, you won't be a target. Assets you invest offshore are far more private, because they are off the domestic US asset tracking radar screen. 

For many investors a retirement plan is their only major asset. And now thanks to some recent changes in the US tax code your plan has the potential to become the biggest asset an investor may hold. Did you know the new sections of the US tax code allow some retirement plan beneficiaries to contribute up to 70% of their income pre-tax ! Think about how quickly you could accumulate a substantial nest egg that you could protect and invest offshore, all done legally. 

Clearly, it is vitally important to you to have your assets placed for access to the most profitable global markets, the world's best investments, while enjoying the strongest asset protection. You can find all that and more -- when you move your retirement plan offshore. 

Larry Grossman, CFP 
E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
Web site: http://www.worldwideplanning.com/default.asp

    

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New and Improved 401(k)

 

 
Wednesday June 28, 2006 Vol. 8 No. 127
In Today's Letter: Comment: The New and Improved 401(k)
Offshore: Dubai Looks Even More Attractive
Wealth: If the NYSE and Euronext Merge...
Privacy & Rights: Protect Your Wealth from Prying Eyes
Tax-Deferred Gains & Nearly Unlimited Investments with the New 401(k)

Today's comment is by Larry Grossman, Certified Financial Planner, managing director of Sovereign International Asset Management Inc. and a member of The Sovereign Society Council of Experts.

Dear A-Letter Reader:

Now there's a retirement plan you can use to invest in virtually any investment, which will grow completely tax-free (on gains and income). You can even pass this retirement plan on to your kids tax free.

If you guessed I'm talking about a Roth IRA - you're partially right. But there's a twist.
This plan is called a Roth 401(k) (or Roth 403b). As the name suggests, it combines features of the traditional 401(k) with those of the Roth IRA. This new "hybrid" retirement plan will be offered by employers like a regular 401(k) plan.

The Roth 401(k) concept was introduced with the Economic Growth and Tax Relief Reconciliation Act of 2001 , which stipulated that employers could start offering these plans on Jan. 1, 2006.

But first, let me give you a little background on traditional Roth retirement accounts. A Roth account is different from a traditional retirement account, but it does have a number of similarities.

Traditional IRAs and Retirement Plans are funded with pre-tax contributions, reduce your reportable income for the year, grow tax-deferred and are fully taxable when withdrawn.
Just as with Roth IRAs, Roth 401(k)s and Roth 403bs, are funded with after-tax contributions and have no effect on your reportable income. While you won't get an upfront tax-deduction, the account will grow tax-free, and withdrawals taken during retirement are completely free of income taxes, provided you're at least 59 1/2 and you've held the account for five years or more.
Unfortunately, not everyone qualifies for a Roth contribution. If your filing status falls within the table below you won't qualify for a Roth contribution.

150,000 - $160,000  If your filing status is Married Filing Joint
$95,000 - $110,000 If your filing status is Single, Head of Household, or Married Filing Separate and you lived with your spouse at any time during the year.

Today, if you qualify for a Roth contribution the limit for 2006 is a total of $15,000, (with an additional $5,000 catch up for those over age 50) in aggregate between your Roth and your traditional pre-tax contributions.

For those of you who have wanted to convert your existing accounts to a Roth IRA but were unable to because you make too much money there is good news. Beginning in 2010 the income limitations to convert an account to a Roth account are being removed. (Currently the magic numbers are $110,000 single filer and $160,000 joint) And they are giving you a one time opportunity to do so on an even more tax favored basis as you can make the tax payments do from a conversion over a two year period, 2011 and 2012 for conversions made in 2010.

But high-income individuals, who can't to contribute to a Roth IRA because of the income restrictions until now, can still apply for a Roth 401(k). There are no income stipulations for Roth 401(k)s.

In addition, Roth 401(k) accounts will be subject to the contribution limits of regular 401(k)s - $15,000 for 2006, or $20,000 for those 50 or older by the end of the year - allowing individuals to save thousands of dollars more in tax-free retirement income than they would through a Roth IRA.

But, let's move on to the really interesting things you can do with these accounts.

The good news is you can invest in almost any investment imaginable in your Roth account and let them grow tax-free. This includes precious metals, real estate (both U.S. and non-U.S.), offshore mutual funds and hedge funds, privately held stock and or corporations and much, much more. Remember, as I have said before, there are very few prohibitions and they are covered in IRS publication 590.

Collectables are one of the few items you can't invest in. However, the exception is U.S. gold or silver coins or other types of platinum coins and certain gold, silver, palladium, and platinum bullion.

And it has to be an investment for your future, not current use.

So as you can see there is very little you can't do. This means you can take advantage of all of the wonderful investments you have seen mentioned over the years in The Sovereign Individual and earn profits without taxes.

But wait there's more. You are NOT required to begin taking distributions by age 70 1/2 like a traditional retirement account. This means you may pass these wonderful benefits and your account on to your heirs income tax-free.

Remember as always the rules governing retirement plans are complex and expert advice should always be sought.

LARRY GROSSMAN, CFP, CIMA
E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
Web site: http://www.worldwideplanning.com

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5 Things You Wish You Knew About Your IRA

 

 
Tuesday August 1, 2006 - Vol. 8 No. 152
In Today's Letter: Comment: Five Things You Wish You Knew About Your IRA
Offshore: Destinations for an Offshore Trust
Wealth: Turmoil for Oil
Privacy & Rights: Yet Another Tracking Device
Five Things You Wish You Knew About Your IRA

Today's comment is by Larry Grossman, Certified Financial Planner, managing director of Sovereign International Asset Management Inc. and a member of The Sovereign Society Council of Experts. This commentary was originally published last May, but we received such a large response that we’re running it again for anyone who missed out on this advice last spring.

Dear A-Letter Reader:

Judging from the number of questions I received about the below article when it was first published in May, I know individuals, particularly Baby Boomers, are extremely nervous about their retirement. They want to be happy, safe and financially secure for the rest of their natural lives. And this blissful existence hangs on structuring their retirement plan correctly. That’s where I come in.

I've discovered - no matter how many articles I've written or presentations I've given on retirement plans - the same questions keep coming up.

1. "You can't really take an IRA or Pension Plan offshore can you?" (Sometimes they add, "My broker, CPA or advisor told me you can't do this.")

For over 15 years now I've assisted individuals like you in liberating their retirement plans. The ERISA code, which governs Qualified Plans, and the IRC, which governs SEPs and IRAs clearly mentions several of the methods I have used over the years. Additionally the codes clearly tell you what you can't do more than they tell you what you can. None of the techniques I recommend are listed as "Prohibited or Disqualifying Transactions." I've worked with a number of custodians over the years who allow their clients to take their retirement plans offshore using the methods I have developed. So believe me, it's definitely legal.

2. "Aren't IRAs and Retirement Plans protected from the attacks of creditors?"

Not really. In my updated report I just wrote for The Sovereign Society, The Ultimate Retirement Protection Program, I specifically addressed this subject. And I talked about some of these frightening attacks on retirement plans in a commentary I wrote for The A-Letter on March 30. Suffice to say, the rules are written with just enough wiggle room that some very smart attorneys have figured out how to really attack those assets. Don't let part of your hard earned retirement plan assets disappear through a frivolous lawsuit.

3. "Don't I lose a lot of investment flexibility if I take my plan offshore?"

No, actually just the opposite. Once you take your retirement plan offshore, you can take advantage of an entire global spectrum of investments that most U.S. citizens can't even imagine. Why wouldn't you want to invest in the world's best investments no matter where they are? We live in a global village where information is available 24 hours a day from anywhere in the world. Yet our market remains closed to most global investments. Why? Money! And they want yours to stay here! The rules don't restrict you this way. Only your rigid inflexible custodian (who is rife with their own conflicts of interest) keeps you tied down.

4. "How can I reduce my taxes?"

To which I always reply, "Do you have a retirement plan?" I'm always amazed by the number of investors who take elaborate measures to try to reduce their income taxes but miss the best one out there - contributing to a retirement fund. And by the way, this is already approved by the IRS.

And the rules have changed! You can now contribute more to your retirement plan. You can target key employees and you can even exclude others. There are plans where you can contribute up to 100% of your income pre-tax. (Of course there are limitations and each investor's situation is unique.)

5. "Is there one custodian I can use who will let me do all of these wonderful things you're talking about?" (Sometimes they ask me: "I want to invest part of my retirement plan in Real Estate in Panama and I want to use the rest to buy some of the funds Eric Rosemann talks about. Which custodian would be the best to use?")

Until recently, this question was hard to answer. Why? Some custodians will let you invest in foreign real estate but not funds. Others will let you invest in funds but not real estate. That's why for the last year and a half, I've been working to establish my own IRA Custodian. One where investors can liberate their Retirement Plans in one convenient location and take advantage of all global investments in one place without the pain and expense of multiple custodians.

I'm pleased to announce my new service just started earlier this summer. The name of the company is Sovereign Pension Services. For now, the contact information remains the same as my existing firm. If you would like more information on anything I've discussed, please feel free to contact my firm or me.

LARRY GROSSMAN, CFP, CIMA
E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
www.worldwideplanning.com

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The Baby Boomer Emergency Retirement Repair Plan

TSI - July 2006 Part I
June 21, 2006

WEALTH PRESERVATION

The Baby Boomer Emergency Retirement Repair Plan
By Larry Grossman

The first of the Baby Boomers turned 60 this year. I happen to fall right into the middle of this group (those born between 1946 and 1964), so I’m pretty familiar with the financial challenges facing many of my peers. For many, right at the top of the list IS the fact they’re grossly unprepared for retirement.

Survey after survey shows that many graying boomers still have no idea how much money they’ll need to retire comfortably. Worse, in a country with a negative personal savings rate, millions are far behind on their wealth accumulation goals.

If you or someone you know is headed for a severely under-funded retirement, fear not. I’ll show you how you can create the retirement you want—even if you’ve fallen far behind on building your nest egg.

What Do You Mean I’m Broke?

The standard rule is you need 60% to 90% of your pre-retirement income to maintain a similar standard of living post-retirement. Now that is a pretty wide spread, and it depends on whether you include things like radically increasing health care costs, energy prices and other necessary items.

For the sake of argument, we’ll use a number somewhere in between, say 75%. And we’ll run though some examples.

Let’s assume you are 50 years old earning US$150,000. You want to retire at age 65 with 75% of your current income. Now without too many mental calculations, we are also going to assume you’re making a 10% rate of return and you’re putting away 10% of your income into a retirement plan. And, finally, we are going to actually assume Uncle Sam will still be around to take care of you so you can draw Social Security. Oh and one last thing, let’s assume you have already accumulated US$100,000 in a retirement plan along the way.

With this plan, you will run out of money when you hit age 72. That’s right. You lasted a whopping 7 years before you exhausted your savings! To meet your goal you have a couple of options. You can increase your rate of return from 10% to 18.5%. We know that’s not going to happen! You can reduce your required income at retirement to 40% of your final year’s income. Hmmm, reducing your income by 40% probably doesn’t sound like an appealing retirement after you worked your whole life. Or you can always delay retirement until age 76. Ouch! I don’t think any of us want to work that long. And lastly, you can increase contributions to 31% of your income.

So clearly, most of us do not contribute enough for retirement. Please, max out on your IRA, SEP and or 401k contributions if at all possible. But now let’s talk about the greatest savings plan available called a Defined Benefit Plan.

I mentioned Defined Benefit Plans recently and was surprised to learn how few people know about them. I was even more shocked how little these life saving plans are actually discussed.

A DB plan is a plan designed to pay a target level of benefits at retirement age. These benefits can be based upon a fixed percentage of your average salary, a flat monthly dollar amount or a formula based on years of service in a business.

Most DB plans I have seen simply state the maximum allowable contribution limit based upon the participant’s age. Going back to the example we were using, a 50-year-old who wants to retire at age 60 can contribute approximately US$168,000 per year.

Compare this US$168,000 to the garden variety retirement plans’ contributions. With a 401k, you can only contribute up to US$15,000 (and if you’re over 50, you can add an extra US$5,000 a year to catch-up). SEP retirement plans are far more generous. You can contribute US$44,000 or 25% of your income up to US$220,000 to your SEP. But that still only leaves you with a maximum of only US$55,000 a year.

Let’s take a look at some real life examples.

Contribute Even More Than US$168,000 a Year with a DB Plan

Recently, I met S.W. at a Sovereign Society conference. S.W. is a retirement planner’s dream client. He’s a 51-year-old, self-employed physician with no other employees. S.W. makes a nice living with just over US$350,000 per year. And S.W. was shocked when I told him he could be contributing approximately US$177,000 into a DB plan.

Most of us won’t be quite as lucky as S.W. We’ll either have other employees to deal with or we won’t make his high income. But, amazingly, a DB plan can work nearly as well for most business owners.

Here is another example:

Example: Owner Grabs 90% of the Business’s Retirement Funds
EmployeeAgeComp.Contributions% of Total
Owner 60 $205,000 $144,034 90.1%
Emp 1 40 $40,000 $7,074 4.4%
Emp 2 .35 $35,000 $4,371 2.7%
Emp 3 30 $30,000 $2,707 1.7%
Emp 4 25 $25,000 $1,656 1.1%
Total     $159,842 100.0%

Yes, the owner still has to pay out-of-pocket to cover his employees, but the owner still ends up with over 90% of the total contributions.

And these are very simple examples. Far more complex plans allow you to target highly compensated employees while excluding others. These plans, called Tiered Defined Benefit Plans, let you assume different benefit levels for each participant. That means you can make greater contributions for some employees while minimizing contributions for others. This factor alone was once one of the biggest deterrents to DB plans.

What does this mean to you? This means if you own your own business or can influence your retirement plan in any way, then it may not be too late to save for retirement with a defined benefit plan. Now that I have scared the heck out of you, let’s talk about a DB plan’s other benefits.

Tax Savings & Global Investments

A DB plan is the number one legal way to reduce your taxes. That’s right I said the number one way to reduce your taxes. Just like any other retirement plan, the contributions you make to a DB plan are all pre-tax. So if the 50-year-old doctor S.W. contributes the full US$177,000 to his defined benefit plan, he only pays taxes on his remaining income. That means out of a US$350,000 income, he only pays tax on US$173,000.

These defined benefit assets can also be invested virtually anywhere in almost any kind of investment. We’re not just talking about the traditional mutual funds you see in a 401k —we’re talking about a world of investments available at your finger tips. You can invest in real estate, both domestic and foreign, precious metals, foreign bank accounts, non-U.S. currencies and many, many other investments you have read about here in The Sovereign Individual. If properly structured, it’s actually quite easy to allocate and invest your retirement plan assets anywhere in the world.

Plus, these assets grow on a tax-deferred basis until you start to withdraw them at retirement. That means the law of compounding work is working in your favor as you continue to save assets you would normally have to pay taxes on.

A Defined Benefit plan allows you to maximize your retirement savings in a way no other retirement plan does. This plan reduces your income tax and gives you the freedom to invest your retirement plan anywhere in the world. If you are one of the fortunate ones who are in a position to implement a DB plan, I would urge you to consider it today. For more information on DB plans, including a custom designed plan for you, please contact my office for additional information.

Author’s Note: The development and implementation of a custom designed retirement plan can be a complex task, as it is with all areas of financial planning, requiring a high degree of technical expertise. For the sake of simplicity in trying to explain a highly complex subject, I have made certain assumptions and have rounded numbers. A full explanation of this topic or any assumptions made are available upon request.

 

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The Estate Retirement Plan

TSI - August 2006 Part II
July 26, 2006

Retirement Strategies
The Estate Retirement Plan
By Larry Grossman
Stretch IRAs have been all over the news lately from USA Today to MSN Money. And with all this nice publicity, it might seem like some brilliant financial planner invented a brand new kind of retirement plan. But actually, there is no such thing as a “stretch IRA.” But there is a way to make your IRA last for generations and grow tax deferred for many, many years.
You see the term “stretch IRA” really refers to a wealth generation transfer strategy instead of a kind of retirement plan. But with IRAs, Roth IRAs, 401k’s, Roth 401k’s, 403b’s, Roth 403b’s, Defined Benefit Plans, and Defined Contribution Plans, who needs a new kind of retirement plan anyway? That’s one of the best aspects about “stretching” your IRA. You can defer taxes, invest globally and make your IRA last for generations—and you don’t even have to switch retirement plans.
Tax Deferral Can Continue Long After Your Death

Most people name their spouse, or partner, as the beneficiary for their retirement plans. And normally that’s as far as the planning for IRA transfer ever goes. Now in most, (but not all) cases, the spouse or partner is relatively close in age to the deceased IRA holder. If we assume both individuals live to their normal life expectancy and start taking minimum distributions when they are required, then the IRA won’t last more than a few years beyond the first IRA holder’s death. And then usually the rest of the IRA funds go to the estate or the children. But then the entire IRA is full taxable upon distribution.
Remember, one of the advantages of an IRA is it continues to grow tax deferred. That means a smart investor can get an IRA to last as long as possible while letting their nest egg grow tax deferred. That’s really the idea behind a so-called “stretch IRA.”
Over the last 20 years, I’ve learned in that most people initially plan on taking the money out of their retirement plan as soon as they can, but then change their minds later. Once they get to retirement age they discover they don’t really need the money and don’t want to pay the taxes until they have to. They would rather let their retirement fund continue to compound assets as long as they can. Most of the clients I’ve handled don’t touch their retirement plan until they absolutely must start taking distributions (usually at age 70).
Here is the idea of how this particular wealth transfer would work. And I need to put a little disclaimer in here: there are many different ways to illustrate this type of wealth transfer strategy. This is just one realistic example.
The US$300,000 IRA that Kept Giving for Three Generations  
 
JJ is 70. He has a US$300,000 IRA and names his wife Betty as his sole beneficiary. JJ starts taking his Required Minimum Distribution (RMD) and over the next 2 years withdraws US$22,649.
JJ dies at 71. Betty, who is 66, elects to treat JJ’s IRA as her own and names their son Reginald as the beneficiary. Betty doesn’t take her RMD until she turns 70 and is lucky enough to live another eight years. She withdraws US$156,123 during her remaining lifetime.
Betty dies at 77. Reginald is 53 and “takes over” the account. He names his daughter Wilma as the ultimate beneficiary. Reginald MUST begin to take distributions. (Once the IRA passes beyond the spouses, distributions must continue or start based upon the beneficiaries age and RMD.)
Reginald lives to age 75 and withdraws US$933,576 during his lifetime. At his death the IRA now passes to his daughter Wilma who MUST continue to take the distributions based upon her Dad’s original RMD table. She takes distributions for another nine years and is fortunate enough to receive a total of US$1,026,841 during that time frame. The IRA has now been depleted.
Over three generations a US$300,000 IRA was able to pass on over US$2 million in income. Not bad, and all it took was a little proper planning.
The rules governing distributions are not as complex as they sound. Distributions can’t extend beyond the first non-spouse beneficiaries’ life expectancy. In our example above, Reginald is the first non-spouse beneficiary. His life expectancy at age 53 when he inherited the IRA from his mother, Betty, was 31.4 years. When Reginald died at age 75, his 45 year old daughter, Wilma, was able to “stretch” her IRA distributions for another nine years, which equaled Reginald’s original life expectancy.
You should consider “stretching” your IRA to keep it from being included in the estate of someone who passes away. If a beneficiary was not named, any remaining assets would be treated as a lump-sum distribution subject to both estate and income taxes. This is by far the least favorable way to distribute your IRA assets and should be avoided at all cost.
How Do You Stretch Your IRA?

All you have to do to utilize this “stretch” IRA technique is fill out the beneficiary election form that comes with ALL IRA applications. And you can change your beneficiary election as often as you want.

For example, when JJ sets up his IRA, he names his wife Betty as the “spousal” beneficiary by using the beneficiary election form. When Betty inherits the IRA, she names her son Reginald as the beneficiary, and Reginald in turn names his daughter Wilma.

In some cases, an IRA beneficiary form may allow for the original IRA holder to name successor beneficiaries to his or her primary beneficiary in advance. I should point out this is not an “all or none” proposition. There are no prohibitions against splitting your IRA into multiple accounts and naming a different beneficiary for each one. However, if you name a beneficiary other than your spouse, he or she has to sign a document acknowledging and allowing someone else be named as the beneficiary.

Once again I want to mention that a properly structured IRA or retirement plan can not only invest in the U.S. but can invest overseas in virtually any kind of investment, including non-U.S. real estate. My motto is “Liberate Your IRA”—and that often means taking your IRA or “stretch” IRA offshore.

Financial planning and tax planning are complicated subjects. As always you should consult your own advisor for tax or legal advice.
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How to Use Your IRA Overseas Real Estate

 How to Use Your IRA to Purchase Overseas Real Estate

By Larry Grossman, CFP®, CIMA®, Managing Director, Sovereign International Pension Services

Contents

What Your Stockbroker Doesn't Want You to Know: It's Perfectly Legal to Buy Real Estate in Your IRA

...............................................................................................................................................................3

The IRS Doesn't Forbid It... So Why Should You Overlook the Opportunity?.....................................3

Wall Street's Misappropriation of the IRA..........................................................................................3

Wall Street's Wall of Silence ...............................................................................................................4

The First Step to Freeing Your IRA from Wall Street's Control: Find the Right Custodian .................4

What You Need Is a Good Administrator............................................................................................4

Your IRA Can Buy Virtually Any Kind of Real Estate............................................................................5

Know What You Can't Do…So You Can Make the Most Out of What You Can ..................................5

You Can't Use Your IRA Real Estate Investments for Current Business Use...But There Are Some

Notable Exceptions .............................................................................................................................6

Turning Your IRA into a Real Estate Investment .................................................................................7

You Can Own Property through Your IRA and Title it in a Business Entity .........................................8

You Can Use Leverage in Your IRA ......................................................................................................8

The Key Steps of Buying Real Estate through Your IRA ......................................................................9

There Are Limitations on TaxSheltered Income when your IRA Borrows to Buy Real Estate ...........9

The Pros and Cons of Using Your IRA to Buy Real Estate..................................................................10

Case Study # 1: Doc Tim Buys His Future Retirement Haven ...........................................................10

Case Study # 2: A Seasoned Real Estate Investor Taps into Her IRA Funds......................................11

Case Study # 3: Developing Caribbean Real Estate through an IRA .................................................11

Case Study # 4: A Hypothetical Case (This Could Be You).................................................................11

Types of Individual Retirement Plans That Can Invest in Real Estate...............................................12

About the Author ..............................................................................................................................12

More Info on Buying Real Estate through Your IRA..........................................................................13

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What Your Stockbroker Doesn't Want You to Know: It's Perfectly Legal

to Buy Real Estate in Your IRA

Thought you didn't have the down payment for your next investment property? Well, it may be

sitting right in your IRA, 401(k) or other retirement plan.

Contrary to what you may have assumed, you can legally purchase real estate in an IRA or

Qualified Pension Plan. Moreover, your IRA can borrow to help you make that purchase.

For years, many investors were told that they were not allowed to make these kinds of

investments. In some cases, they were told it makes no sense. In the meantime, those in the

know have been quietly taking advantage of this wonderful opportunity.

First, let's dispel the myths. There is so much more flexibility to your IRA than you may have ever

thought possible.

The IRS Doesn't Forbid It... So Why Should You Overlook the Opportunity?

Section 590 of the Internal Revenue Code is the bible for what you can and cannot do as it relates

to investing your IRA. IRC 590 specifically details what are called "prohibited transactions" and

"disqualified entities."

If you are like most people, you have never read the Internal Revenue Code. That's a good thing

(unless you're an accountant).

It is long, convoluted and often contradictory. Even most experts have a hard time understanding

all of the nuances of the code. It's why many people end up in tax court.

The funny thing about most of the code —and specifically section 590 —is most of it is written to

tell you what you cannot do…not to tell you what you can do. Fortunately for us, it's very clear

from the code —and from precedent —that you can legally purchase real estate.

Wall Street's Misappropriation of the IRA

To hammer home the point that IRAs are not just for stocks, let's take a moment to look at the

history of IRAs.

Traditional IRAs were created in 1974. Congress wanted to encourage individuals to begin saving

and investing for their own future retirement. There have been many changes to these rules over

the years but the basic premise remains the same. An IRA is designed to be a Self-directed

retirement plan that provides tax-deferred growth and —for those who qualify-tax-deductible

contributions.

Somewhere along the way one of the most important components of owning an IRA has been at

best obscured and at worst lost. This is the whole concept of Self-Direction.

Wall Street and the financial industry recognized the incredible opportunity to capture assets and

create commissions for themselves by providing IRA accounts for eligible investors. What they did

not tell those investors is they artificially imposed their own restrictions on IRAs to promote

products and services that line their own pockets, and do not necessarily benefit the IRA

beneficiary.

IRAs were never created to force investors into owning stocks bonds and mutual funds. In fact,

when you look at the rules that govern what you can and cannot own (IRS 590) you will be

shocked to see just how liberal and un-constraining the rules actually are. Congress fully intended

for you to be able to invest your IRA in almost any asset that makes sense. This includes real

estate, private investments, businesses, and almost anything else you can imagine.

Page | 4

Wall Street's Wall of Silence

Why have most investors never heard they are allowed to invest their retirement funds outside of

stocks and bonds? Very simply, it's all about the money.

A significant number of investors have their IRA funds with custodians who also happen to be in

the business of "providing" investments or investment advice. So, even though most investors

have a self-directed IRA they end up with custodians who put restrictions on what they can and

cannot invest in.

These custodians have chosen to do this for their own financial benefit and not the benefit of the

underlying IRA participant. If you are using one of the major Wall Street firms, they are in the

business of selling you investments on which they make commissions or fees…things like stocks,

bonds, and mutual funds.

"An IRA is designed to be a Self-directed retirement plan that provides tax-deferred growth and —

for those who qualify-tax-deductible contributions. It doesn't say or imply in any way that you can

only buy mutual funds."

I am not saying you should not own these investments, But these shouldn't be the only

investments you own in your IRA —especially if you're a knowledgeable real estate investor.

What's more, there are times when the market offers horrendous value and has lousy prospects

(as from 2000 through 2002), so it's nice to have alternatives. And real estate is traditionally not

correlated to the stock market.

The First Step to Freeing Your IRA from Wall Street's Control: Find the Right

Custodian

There are a number of custodians out there who will allow you to purchase real estate. They are

few and far between-- but they are out there. The good ones have been doing it for a long time,

have this process down to a science, and know exactly what it takes to make it happen in a legal

and compliant fashion.

Certainly, they charge their own fees for this service. But they do not tell you what you can and

cannot do with your money, beyond ensuring what you are doing is permissible. (More about that

later.)

These types of custodians are not in the business of selling you investments. They make their

money from the fees they charge to act as the custodian and/or administrator of your account.

What You Need Is a Good Administrator

Most of the companies that can help you set up a self-directed IRA are IRA administrators, not

custodians. They are the front end of the process.

Administrators take care of all of the paperwork and required reporting. They usually place your

funds with qualified custodians, such as insurance companies or federally insured banks. These

custodians typically are happy to give up the paperwork aspect of the transaction and are glad

simply to hold the funds.

The original rules that established and still govern IRAs and other individual retirement plans

(Treas Reg. 1.408- 2(e)(2)) automatically granted permission to insurance companies and banks

to act as qualified custodians, should they choose to do so. Any other entities must apply for, and

receive from, the IRS a determination letter stating they qualify to act as a custodian.

Page | 5

There are significant capital requirements and other qualifications that make the entry barrier to

achieve this status quite high. For this reason, there are really only a limited number of companies

with the financial resources to act as custodians.

But all you need is the right administrator who will help you with the necessary paperwork. They

will work with a qualified custodian. Sovereign International Pension Services is an IRA

administrator that can offer custodial services through an arrangement with an FDIC insured bank.

Your IRA Can Buy Virtually Any Kind of Real Estate

One of the more exciting aspects of purchasing real estate in your retirement plan is that you can

buy virtually any type of property. That includes...

�� Raw Land

�� Single Family Home

�� Multiple-unit dwellings

�� Apartment Buildings

�� Condominiums

�� Office Buildings

�� Foreign Real Estate

That's right, you can even buy foreign real estate through your IRA! Maybe you have found a little

piece of beachfront property in Mexico you would like to build on for your future retirement home.

You can legally do this through your IRA.

In fact, your IRA can even purchase an option on any of these types of properties. It can also

make other real estate related investments. For instance, you can buy mortgages or other notes

through your IRA. You can buy tax lien certificates and defaulted notes.

For the purposes of this report, however, we're going to stick with real property.

Know What You Can't Do…So You Can Make the Most Out of What You Can

There are some restrictions on any investment you make with your IRA. These restrictions apply to

real estate investments as well.

One of the primary restrictions is this regard is that any investments your IRA makes cannot be for

your benefit today. They must be for the future benefit of you, your heirs or both. This means if

you purchase real estate in your IRA, you cannot use it in any fashion until you retire... well,

almost any fashion.

Most rules have an exception and this rule is, well, no exception.

Say you buy a beachfront property as an investment through your IRA. You rent it out most of the

time and perhaps you're anticipating retiring to it one day. But you may also want to use it

occasionally now. There are certain circumstances by which you can do just that.

The code is actually a little more flexible than you might think. It allows your friends and some of

your relatives to use your property prior to retirement. So even though you are specifically

prohibited from using your property, many of your relatives are allowed to use it. And anyone not

related to you can use it, too.

Page | 6

"Your IRA can even purchase an option on properties. It can also make other, non-physical, real

estate related investments. For instance, you can buy mortgages or other notes through your IRA.

You can buy tax lien certificates and defaulted notes."

Who is a "related" party that would be prohibited from using the property? The IRS Publication 590

defines these "disqualified persons" as...

�� Your spouse

�� Lineal members of your family (ancestor, lineal descendant, and any spouse of a lineal

descendant)

�� Your investment advisor or manager

�� Any entity in which you hold a 50% or higher ownership

What relatives are not prohibited from using the property? Your siblings and cousins. So if you

didn't alienate all of your brothers and sisters when you were growing up, it may be time to cash

in. You can allow your siblings to use your beautiful beachfront property and they can invite you as

their guest!

However, if your property is repeatedly and only used by friends and relatives who always invite

you as their guest and never pay any rent to use the property, the IRS would infer you really used

it for your own benefit. So some common sense is warranted.

When it comes to the use of the property, it is an honor system. Your IRA administrator or

custodian is not going to keep track of who uses your property. And the IRS certainly does not

have the manpower to keep track. So it is very unlikely that anyone is going to be checking up on

you. It is up to you to abide by the rules.

I suggest keeping a record of when the property is used and by whom in case you ever have to

document the use of the property for the IRS.

You Can't Use Your IRA Real Estate Investments for Current Business Use...But

There Are Some Notable Exceptions

Besides personal use, it is also against the rules to use any property for your personal business

either. Yet there are some useful exceptions to this rule too.

In my research of this topic I turned up some amazing examples of individuals who had seemingly

broken all of the rules. Yet they were in compliance. It was as if the section on prohibited

transactions and related parties had never been written.

One of my favorite examples is a group of doctors whose retirement plans own the land and the

building out of which their medical clinic operates. In another case, an individual was able to

purchase 176 acres of unimproved land from his own IRA and then use that land for himself,

personally.

"the Department of Labor has granted a number of blanket exemptions to the prohibited

transaction rules."

These fall squarely into the list of prohibited transactions. They cannot even be called a gray area.

So how did they get away with it?

It turns out the Department of Labor has granted a number of blanket exemptions to the

prohibited transaction rules. And as long as you follow their exemption application procedures and

Page | 7

meet their criteria, you can receive approval for a similar transaction under one of these blanket

exemptions.

The subject of exemptions is highly complex and technical. So if you want more information on

this subject, go directly to the DOL's web site, where they list these blanket exemptions and have

all of the necessary information required to apply for your own exemption.

The general website is http://www.dol.gov/. A specific link for this section is

http://www.efast.dol.gov/.

You can also contact Ekaterina A. Uzlyan of the Department of Labor at (202) 219-8883.

Turning Your IRA into a Real Estate Investment

In describing the different possibilities and flexible nature of your IRA, I've gotten a little ahead of

myself. So let's get back to basics and talk about how this all works, step by step.

Chances are your IRA or retirement plan is not currently with a custodian who is going to allow

you to buy real estate through it. So your first step is to find a custodian that allows for truly selfdirected

IRAs. The simplest way to do this is to do an Internet search for "self-directed" IRAs and

check out their websites or call them to find out if they handle real estate purchases for the IRAs

they administer.

Ask about their level of experience with IRA-based real estate transactions and inquire about their

fees. Request references.

Once you have picked your new custodian, you need to transfer your existing account to them.

They will have all of the paperwork needed to do this. It can be done by a wire transfer from your

existing custodian or by check. If you own other securities you are going to keep, it can be done

through a direct account transfer, frequently knows as an ACAT transfer.

The new custodian has all of the paperwork needed for you to buy real estate. So the next thing

they are going to ask you for is a "buy direction letter". This simply tells the custodian what you

plan on purchasing.

I suggest you also give them all of the contact information for any other parties involved in the

transaction, such as the seller, any attorneys who might be involved and any title agents. This will

speed up the process if any questions arise along the way.

Your custodian will take care of all closing documents and the property will actually be purchased

in the name of your IRA or retirement plan.

Some of the common questions that arise concerning buying real estate through your IRA are...

�� How is the property titled?

�� Can my retirement plan borrow part of the money?

�� Can I own the property in any other entities (e.g., trusts, LLCs)?

�� What if I want to purchase it with a partner?

In normal real estate transactions, you can buy properties individually in personal name, with

partners or as a business entity. This same flexibility applies to owning real estate in your

retirement plan.

For instance, property owned by a retirement plan can be owned partially or fully by the plan. This

opens up a universe of opportunities.

Page | 8

Let's say you have found a piece of property you are interested in purchasing but you do not have

enough money to buy it outright with either personal or retirement assets. You can legally own it

with both and in any fractional combination.

In fact, you can own property with your IRA with as many other entities as you want. There are

virtually no restrictions. However, if you own property fractionally with your retirement plan, all

income and expenses must also be accounted for fractionally.

Let's look at a couple of simple examples.

You purchase a piece of property for $200,000. To keep it simple, let's ignore leverage for the

moment and assume you purchase it for 100% cash.

You pay for half of it with personal assets and half with assets from your IRA. Your custodian will

now ensure when the transaction closes that you own it 50% personally and 50% by your IRA.

Going forward, you must pay for any expenses or improvements in the property in the same

manner, 50% personally and 50% with your retirement plan. So if you need to put a new roof on

your rental home for $15,000. $7,500 must come from your IRA and the other $7,500 from

personal assets.

Similarly, if it is income-producing property, the same principle applies to the income it generates.

Half would be earned by you, and hence half would be taxable. The other half would be earned by

your retirement plan and be tax-deferred (if in a traditional IRA) or tax-free (if in a Roth IRA).

There is virtually no limit on the numbers of partners with whom you can own the property. And

your partners can use personal assets or retirement assets for their investment funds too.

You Can Own Property through Your IRA and Title it in a Business Entity

For privacy or asset-protection purposes, you may prefer to own your properties in a corporate

entity such as a Limited Liability Company. Your IRA or retirement plan can also own property in

this manner, with some minor exceptions.

Once again the IRS wants to make sure you use your retirement plan as an investment for the

future and not for today. So they make it clear you cannot enter into any transaction that might be

considered self-dealing. And most custodians want to ensure you do not accidentally or

purposefully enter into a transaction that might trigger any self-dealing. So most of them put

some minor restrictions on the form of corporate ownership you can be involved in.

"You can establish a new corporation that would be 100% owned by your IRA. And you can then

own investment property in that corporate name."

You can establish a new corporation that would be 100% owned by your IRA. However, if you want

to own the corporation personally (rather than own the corporation through your IRA), most

custodians will only allow you to own it with up to a 49% share. The remaining 51% must be

owned by an unrelated party.

This is done to keep you from selling a corporation you already own personally to your IRA. This is

considered self-dealing and is a prohibited transaction.

This may become particularly important when buying non-US property in certain jurisdictions.

That's because some foreign jurisdictions may not allow you or your retirement plan to own the

property directly. Instead, they may require you to own it in the name of a foreign corporation.

You Can Use Leverage in Your IRA

One of the most common questions that arises is how do I pay for the property? More specifically,

can my retirement plan take out a mortgage? The answer is yes!

Page | 9

Your IRA can borrow to make a real estate purchase. However there are several important things

to point out. You may not pledge the assets of your IRA as the collateral for the loan.

A loan may only be in the form of a non-recourse promissory note and the IRA holder is not

allowed to personally guarantee the non-recourse note. The underlying property itself must be the

only collateral for the loan.

Many lending institutions simply will not loan money under these conditions. Others may only

grant loans up to 70% or 75% of the purchase price, requiring a 25% or 30% down payment from

your IRA. Other, non-traditional lenders, however, may be willing to make a higher loan-topurchase-

price to your IRA —if you've bought it at a good enough price that the loan to appraised

value is low enough.

So let's say you've bought a property in pre-foreclosure for $100,000, and the property has a

market value of $130,000. Even though you have all that extra equity in the property from buying

below market, a traditional bank may only be willing to lend your IRA 70% or so of your purchase

price... or $70,000 in this case. However, a non-traditional lender may be willing to lend you 70%

of the appraised value ($130,000 in this example). That would mean you'd get a loan of $91,000

for this purchase, instead of the $70,000 offered by the bank.

The Key Steps to Buying Real Estate through Your IRA

�� Find a custodian for truly self-directed IRAs

�� Arrange for transfer of funds

�� Fill out "buy direction" letter

�� Execute sales contract with help of administrator

�� Apply for loan in the name of the IRA

�� Close on transaction and reap tax-sheltered benefits

�� Option to pay yourself an asset management fee (not a direct property management fee)

It is also important to note when you have debt-financed real estate in a retirement plan the

mortgage payments must come from either income from the property, existing plan assets, new

contributions to the plan, or some combination of these.

But you've already learned in MSM to make sure all your rental properties pay for themselves and

that you always should have a margin of safety. So if you follow those guidelines, your carrying

costs should all be covered by the property itself. And this requirement won't be difficult to meet.

There Are Limitations on Tax-Sheltered Income when your IRA Borrows to Buy

Real Estate

The use of borrowing in your IRA may trigger an event called UBTI, Unrelated Business Taxable

Income. Let's say you purchase a piece of income-producing property with your IRA. You pay

$30,000 in cash from your IRA and you finance the other $70,000 for a total purchase of

$100,000. During the year this property generates $10,000 in income.

Seventy percent, or $7,000 of this income, would not be sheltered since this relates to the amount

that was financed by your IRA. Thirty percent, or $3,000 of this income, would be sheltered since

this was the amount that was not financed.

Page | 10

You would be responsible for reporting this UBTI on IRS Form 990-T each and every year the

property produced a taxable income stream.

The Pros and Cons of Using Your IRA to Buy Real Estate

Some commentators say it is not a good idea to buy real estate with your retirement plan while

others have whole-heartedly embraced the idea. Like anything, there are pro's and con's. Among

the key positives...

You get to access capital in your IRA for real estate purchases, and this can provide a very

valuable alternative to stocks, especially when the stock market is overvalued and weak.

You also get the tax-deferral benefits of IRAs while investing in real estate.

With a traditional IRA, capital gains from property sales and any income grow tax deferred while

remaining under the retirement plan umbrella. But they are taxed at ordinary income rates when

withdrawn. (However most participants are in a lower tax bracket at this point in their lives.) With

a Roth IRA, your contributions are with after-tax dollars. So capital gains and income grow taxfree.

Among the drawbacks is the fact that you lose some of the write-offs and depreciation you

normally enjoy when owning real estate outside of a retirement plan. Yet, at the same time, you

also avoid the depreciation recapture upon sale if the property is held under the plan umbrella.

In my opinion, owning real estate in a retirement plan makes a great deal of sense. The investors I

have assisted have been thrilled to be able to invest in a number of different types of projects and

finally put their retirement assets to work in an investment they know and understand. And I

believe many more investors would welcome the opportunity if they only knew the option exists.

Now, you are one of those in the know. So let's take a look at a few deals we have been able to

put together for our clients... so you can get an idea of how using your IRA to buy real estate

might help you.

Case Study # 1: Doc Tim Buys His Future Retirement Haven

Doc Tim had been a client of mine for several years. One day I casually mentioned to him I had

helped a client purchase real estate with his retirement plan. Tim visibly immediately sat up and

took notice.

It wasn't long after that when I received a call from Tim. It turns out Tim had another IRA account

at Schwab. Like most investors in so-called, self-directed IRAs, Tim had primarily owned mutual

funds over the years and the occasional stock. None of these had performed very well.

Also, like a lot of Floridians, Tim was thinking about owning a piece of property in the mountains in

North Carolina. He wanted to use it as an investment property today, with the possibility of using

it as a second home (fully paid off) after he retires. (Remember, Tim or any other disqualified

persons are prohibited

from using the property today-except for the exceptions already noted.)

Tim is one of those guys who seem to know everyone and whom everyone likes. As it turns out,

one of Tim's contacts had told him about some property he could get on the side of a mountain in

NC as a real steal.

Tim contacted my office and inquired if this really was something he could do. He was more than

ecstatic to find out not only was it possible, but we were one of the few firms who knew how to

make this kind of transaction happen smoothly.

Page | 11

Case Study # 2: A Seasoned Real Estate Investor Taps into Her IRA Funds

Barbara A from Olympia WA has been speculating in real estate for years. She was tired of not

earning the kinds of returns in her IRA she had become accustomed to earn as a real estate

investor. Barbara contacted our office when she heard about our ability to purchase real estate in

a retirement plan.

Turns out Barbara is either very lucky or is quite the visionary. She had a hunch that lumber prices

(which had been depressed) were overdue for a cyclical rally. So she used our firm to turn her

under-performing IRA into 23.7 acres of prime timber, which she bought for just $31,000.

That property has now shot up in value. And Barbara has been able to shelter 100% of the gain in

her tax-deferred retirement plan.

We were able to help Tim get his IRA transferred from Schwab to a new IRA custodian, legally and

as a non-taxable event. The transfer of assets took about two weeks. The new custodian then

completed the purchase agreement and all other necessary documents to complete the

transaction.

Tim is now the happy owner of 3 lots on the side of a beautiful mountain in NC. Currently, these

lots are in the form of unimproved raw land. Tim is free to hold these purely for speculation or to

build on these lots using other retirement assets.

Case Study # 3: Developing Caribbean Real Estate through an IRA

The experience of Dan T from Jacksonville is best captured by a letter he wrote to The Sovereign

Individual, an investment letter to which I contribute from time to time. Forgive me if it reads a bit

like a commercial, but this is a real letter... with actual details of the transaction... and a pretty

good synopsis of the steps that were involved.

"I'm Developing Caribbean Real Estate with My IRA Funds. I read one of Larry Grossman's articles

about using IRA funds to purchase real estate overseas and called his group for more information.

Soon, I embarked on an adventure to purchase and develop some ocean front property on a

Caribbean island.

"Larry and his group worked to get the funds consolidated from 20 individual accounts to fund the

adventure. They helped establish new IRA and non-IRA accounts with a new custodian. They also

set up a corporation, and transferred the funds on an accelerated schedule.

"We have now purchased the land; we have building permits and environmental impact

statements approved. Our comprehensive Master Plan for single-family homes, condominiums,

apartments, and commercial and office space is exciting. The survey is finished; the lots are

staked out and go on sale in a week. We have Letters of Intent on six lots. The promotional

materials will be done within two weeks and the roads and utilities will be in within 90 days."

Case 4 is a hypothetical case to show just how diverse a transaction like this can actually be.

Case Study # 4: A Hypothetical Case (This Could Be You)

Jim was tired of losing money in the market and knew there had to be a better way to do things.

Jim lives in Boston, which has been a hot real estate market and he thought it was only going to

get hotter. Jim had his eye on a new office complex he drove by every day on his way to work. He

had checked into the property and knew there was a shortage of good office buildings like that in

the area.

Page | 12

The problem was the developer wanted $1,000,000 for the property. Jim has a million dollars; he

has done well over the years. But he did not have a million in either his personal accounts or his

retirement accounts. But he did have a million between them all combined.

Jim found out the rules are much more flexible than he had ever been told they were. So he

bought a 34% interest in the property with all of his IRAs combined under one custodian. He

bought 33% with his company's profit sharing plan and 33% with a Nevada LLC he had set up for

asset protection planning.

Jim likes to be actively involved in real estate and has decided to manage the property himself.

Interestingly, Jim found out the IRS allows you to pay yourself a fee from your retirement plan for

managing the assets of the plan, but not for direct property management. Jim is now collecting a

quarterly salary from his retirement plan for managing the plan assets. Jim, of course, pays taxes

on this income but does not have to pay a penalty, as this is not considered a premature

distribution of the plan.

The property is actually owned and titled in the name of all 3 entities. Jim therefore keeps track of

all expenses and income and prorates this to all three entities in the same percentages as it is

currently owned.

Types of Individual Retirement Plans That Can Invest in Real Estate

Virtually any individual retirement plan is eligible to invest in real estate. These include...

�� Traditional IRAs

�� Roth IRAs

�� SEP IRAs

�� SIMPLE IRAs

�� 401(k)s

What's more, the rules governing these types of investments are basically identical for all types of

plans. The key is to work with a knowledgeable team of advisors or a custodian who understands

truly self-directed plans and will allow you to make these types of investments.

Until next time, invest well.

Larry Grossman, CFP®, CIMA®

About the Author

Larry C. Grossman, CFP®, CIMA®, is the Managing Director of Sovereign International

Pension Services, (SIPS), based in Tampa Bay, Florida. SIPS is an IRA Administrator offering

custodial services through an FDIC insured bank as well as offering a full range of customdesigned

Pension Plans. Larry was one of, if not the first, financial advisors in the country to

develop a compliant method for helping clients take IRAs and pension plans offshore for asset

protection and greater investment diversification. Larry’s method has been reviewed and approved

by some of the top ERISA attorneys in the country.

Page | 13

Larry has earned the coveted designation of CIMA®, (Certified Investment Management Analyst)

awarded in conjunction with the Wharton School of Business. Larry graduated Summa Cum Laude

with a Bachelor of Arts in Business Management from Eckerd College. He went on to acquire his

Certified Financial Planning designation from the College of Financial Planning in Denver, Colorado.

Larry is the author of “The Ultimate Retirement Protection Plan”, published by The Sovereign

Society. In addition, he is a Fox News contributor and has written numerous articles on topics related

to asset protection and investing for The Sovereign Individual, The Oxford Club Communiqué

and International Living.

You can contact Larry Grossman directly, at Sovereign International Pension Services, Inc., 1314

Alt 19, Palm Harbor, FL 34683.

Tel. 727-286-6237
Fax: 727-286-6239
 
Website: www.offshoreIRA.com

Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

More Info on Buying Real Estate through Your IRA

For More Information on Self-directed IRAs, go to the IRS website (http://www.irs.gov/) and select

publication 590.

© Copyright 2009, Pangaea Ltd., trading as Pathfinder, Elysium House, Ballytruckle Road, Waterford,

Ireland. All rights reserved. No part of this report may be reproduced by any means without the

express written consent of the publisher. The information contained herein is obtained from sources

believed to be reliable, but its accuracy cannot be guaranteed. Registered in Ireland No. 441952.

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Don't Be Scared and Unprepared for Retirement

 

 

Wednesday August 23, 2006
Vol. 8 No. 168
In Today's Letter:Comment:Don't Be Scared & Unprepared for Retirement
Offshore:The Playground of Europe
Wealth:Extremely Bullish on Gold
Privacy & Rights:The Latest Passport Scam
Don't Be Scared & Unprepared for Retirement

Today's comment is by Larry Grossman, Certified Financial Planner, managing director of Sovereign International Asset Management Inc. and a member of The Sovereign Society Council of Experts.

Dear A-Letter Reader,

It's becoming clear to me that many future retirees, particularly Baby Boomers, don't understand retirement. Oh they understand the concept of retirement well enough - meaning no work and all play - but they don't understand the specifics. They don't know the best time to retire, how big their retirement funds should be or even how long their retirement funds will last.

In my 20+ years of experience, I've found that people often fear what they don't understand - especially when it comes to money. So it's no wonder Baby Boomers are scared.

Plus, to complicate matters, these same misguided Boomers don't even agree with their spouses or partners about their retirement. I just read a recent study which indicated about a third of those married or living with a partner agree on what they should save for retirement. However, one in five couples have not even discussed how much they should save. This is obviously a problem.

So here is what you can do to ensure you'll have a long, well-funded retirement...

First, assess where you stand on reaching your retirement goals. How much money have you saved? What will it likely be worth in the future? How much do you need to save and or earn now to be properly funded for your retirement? Questions like these can put you on the right path towards your retirement. For more guidance, try using a financial calculator. (See the further resource section for a link.)

Next, decide how much in today's dollars you will need to live on when you retire. The rule of thumb is between 60-90% of your pre-retirement income per year. But only you can be the judge if that's really going to be enough. Statistics have shown that most people underestimate their spending, so keep that in mind as you're calculating.

Also, make sure you are putting away as much as you can possibly afford. Find out if there is another retirement plan available, which would allow you to make a higher contribution than you are currently making. Every dollar counts.

Finally, make sure your retirement assets are appropriately invested and in the best investments vehicles possible. If you are in a company plan and can't control your own investments, then talk to your plan administrator about modifying the plan to allow for self-direction and greater investment flexibility. If you are in a decision making position, consider taking part of your plan offshore for greater investment flexibility. Or, diversify part of your portfolio into nontraditional investments, which don't only rely on a constantly rising stock market - things like precious metals, commodities, alternative investments, real estate and principal protected notes.

LARRY GROSSMAN, CFP, CIMA and
Our "Retirement Guy"
On behalf of The Sovereign Society
 
EDITOR'S NOTE:Even if you make six figures a year, you could still exhaust your retirement funds by the time you reach age 72. You should start taking steps right now to ensure this doesn't happen. Last week, Larry Grossman hosted one of our Wealth Wise Teleconferences and revealed specific actions to strengthen your retirement fund. Click hereto find out how you can ramp up your retirement fund with these secrets.

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