As women and mothers, we often think of others before ourselves. Yet the experts are always saying that if we don’t take care of ourselves, then we can’t possible be the best that we want to be for others. You can actually do both in your retirement account!

If you have a self-directed IRA, you can take care of yourself by growing your retirement account for your future needs, and also make investments that will benefit others. A great example of this is using an old 401k or IRA to loan money to individuals with a need, and secure the loan with real estate. This is called a promissory note secured by a first trust deed.

When making a note, or any investment in your IRA, there is a list of disqualified people to the IRA. The list of disqualified people includes, but is not limited to, yourself, your spouse, and your lineal ascendants and descendents, and their spouses. This means your parents, grandparents, children, grandchildren, and their spouses. You may not use your IRA to make a promissory note to anyone on this disqualified list.

Below is a case study as an example of this type of an investment:

Melissa has a traditional IRA with Entrust and wants to take control of her investments and grow her account. Melissa also wants to feel like she is making a difference in the world. She discovers that she likes the idea of loaning money to someone and securing the loan with real estate.

Melissa’s neighbor, Sara, mentions that she is looking to buy a new home because her growing family needs more space. Sara also states that she is having a hard time finding a bank to loan her the funds for the new home at a rate that she is comfortable with. Melissa and Sara discuss the possibility of Melissa’s IRA loaning the money to Sara instead of Sara going to a bank for the loan. Melissa does her due diligence on Sara and the property that Sara wants to purchase. After careful due diligence, Melissa decides to proceed with the loan.

Sara and Melissa draw up a promissory note secured by the first trust deed to the new property that Sara will be purchasing. Melissa remembers to reference the lender as her IRA with Entrust on the promissory note. Melissa then submits the promissory note and a copy of Sara’s real estate transaction documents to Entrust’s real estate department. Entrust then wires the funds to escrow based on Melissa’s direction.

In the promissory note, Sarah agreed to make her loan payments on a monthly basis to Melissa’s IRA. As such, each month Sara mails a check made payable to Melissa’s IRA directly to Entrust. Melissa logs into her Entrust IRA online each month to confirm that Sara has made the loan payment on time and in the proper amount.

All of the profit from this promissory note is going into Melissa’s Traditional IRA and is tax deferred until Melissa decides she wants to take a distribution after she reaches retirement age. Melissa feels very good knowing that at the same time she is growing her retirement account for her and her family, she is able to make a difference in someone else’s family by helping them obtain a new home!

To learn more about how to you use your IRA to invest in notes or other non-traditional assets, contact Jennifer Williams at (949) 788-2970 to schedule a free consultation. Jennifer Williams is the Inside Sales & Client Services Manager for Entrust Financial Services, LLC. She works closely with investors, agents, brokers, and business owners, in addition to her work with CPAs and financial advisors. www.entrustcalifornia.com/oc.

This entry was posted on Friday, June 25th, 2010 at 8:50 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.