Qualified Retirement Plan: Top 10 Advantages

Let’s look at the top 10 advantages of a QRP over an IRA or other type of investment.  There are many reasons why the QRP is powerful enough to help your break the shackles of financial bondage!

1: NO UDFI with Leveraged Real Estate

2: Fewer Plan Restrictions Mean More Freedom

3: Contribution Limits for a QRP are 10X Higher than an IRA

4: Lots of Investment Options

5: Flexibility to Adjust Your Contributions

6: Borrow Your Money Anytime

7: Total Checkbook Control

8: One, Consolidated Account

9: No Taxes for 100 Years

10: Tax Free Gains of 20, 30, 50% or more for Roth investment in Real Estate

 

 

1.  NO UDFI with Leveraged Real Estate

Did you know the IRS will tax you if you use your IRA for your real estate investment and there’s debt involved?  Yeah, it’s a sneaky tax called UBIT (Unrelated Business Income Tax) that gets triggered by any debt in an investment your IRA makes.  Since IRAs are governed under section 408 they are not exempt and are subject to this tax, which is up to 37% on all the gains you make from the leverage.

So, if you buy a house with your IRA that has a loan, or your IRA invests in a multifamily deal with a chunk of debt involved, you’ll get hit with a tax of approximately 37%.

The QRP is exempt from the UDFI! It conforms to IRS rules under Section 401 which means the eQRP® is exempt from the UBIT tax triggered by UDFI! #gamechanger

What if you already have leveraged real estate in your Self-Directed IRA?

All you have to do is rollover your IRA money and investments into a QRP and presto, no more tax.  You must do this before you sell the assets!  Yes, you can actually transfer ownership of those assets from your self-directed IRA into the QRP.  It’s called an in-kind rollover.  No tax, no penalty, no UBIT slap!

 

2.  Fewer Plan Restrictions Mean More Freedom

The QRP is the Ferrari of 401(k) plans because of the way it’s written – with far fewer restrictions when compared to 401(k)s and even Solo 401(k)s.  For example, Solo(k)s don’t allow employees.  An eQRP® allows them! Most 401(k) plans already have limits written into them.  They restrict what you can and can’t do, what you can invest in, and when you can access your money.

With a QRP, YOU have total control over:

• What you invest in – from real estate, real physical gold and silver, tax liens, business startups, foreign real estate, LLC, joint ventures, private loans, and many more.
• The performance of your investment.
• Asset allocation.

Plus, since you’re managing your money, no more advisor fees chewing up the returns and principal from your account year after year regardless of performance.  The QRP is written to give you every investment option legally allowed.  You can do anything you want within the framework of the law.

 

3.  Contribution Limits for a QRP are 10X Higher Than for an IRA

As you may know, an IRA (Individual Retirement Account) allows you to contribute $6,000 per year, or $7,000 if you’re over age 50.  The problem with this is that over the next 20 years you’re only going to be able to get approximately $100,000 into your retirement plan.  That’s just not enough to get close to what you’ll need for retirement.  It might be a good chunk to live on for a year but it won’t last for decades.  Considering people are living longer than ever, and with new life-extension medical technologies on the horizon, you will need more than an IRA.

Doing the math on contributions:

Regular IRA contributions:

$6000 x 20 years = $120,000

QRP contributions:

$57,000 x 20 years = $1,140,000

That’s Literally 10x more! * Based on single contributions

In addition, with a QRP, you can contribute $57,000 per person, up to $114,000 with your spouse max and even more if you’re over 50.  (An extra $6,500 per person over age 50 per year can be contributed – this is the catch-up bump.)

That’s more than $1 million in contributions over the same 20 years and more than $2 million with a spouse.  Literally 10X more!

If you have any queries or want to know more about eQRP, contact us now: https://mihmastermind.com/contact-us/

4.  Lots of Investment Options

Investment options:

• Syndications
• Real Estate (anywhere in the world)
• Apartments, Multiplexes and Houses
• U.S. Gold and Silver Bullion Coins
• .995 Pure Gold and .999 Pure Silver Bars
• Small Business Startups, LLCs • Trust Deeds and Mortgage Notes
• Single Family and Multi Unit Homes
• Securities
• CDs
• Stocks, Bonds, Mutual Funds
• Co-Ops
• Commercial Property
• Improved or Unimproved Land
• Commodities and Futures
• Cryptocurrency
• Contracts of Sale
• Leases
• And many more!

Physical Possession of Gold & Silver Many people would love to have physical gold and silver in hand, but until now, there’s not been a way to buy metal and take possession of it (legally) with retirement money. With a QRP, you’re allowed to take physical possession of the metals. Total privacy. Total control. Anyone who says you can do this with a Self-Directed IRA should be corrected. The IRS says this is disallowed and can result in penalties up to 100% or more of your investment. That’s a penalty you’ll want to avoid!

Investing in Crypto with a 401(k)

Thanks to the advent of cryptocurrencies and blockchain technology, your retirement fund investment options have expanded beyond stocks, bonds, and mutual funds.  Since the 401(k) plan’s inception in the late 1970s and manifestation in 1980, it has made a huge impact on how Americans save for their retirement.  But cryptocurrencies have the potential to drastically change your 401(k)’s performance. Not only can you contribute more to QRPs than to traditional 401(k)s but you can take advantage of the flexible investment options and potential higher earnings.  Bitcoin’s value alone exponentially increased from $1,016.30 on January 2, 2017 to as high as $7,882 by November 8 in the same year.  Unfortunately, traditional IRAs and 401(k)s are too rigid for cryptocurrency investment.  That’s because they do not offer the ability to invest in different kinds of assets, such as cryptocurrencies.  Instead, Qualified Retirement Plans (QRPs) provide an ideal solution where you can benefit from flexible investment options to use cryptocurrency for retirement planning.

 

Gain Flexible Investment Options with QRP Checkbook Control

With checkbook control, it’s easy and quick to invest in cryptocurrency with your 401(k).  When you’re using a QRP, you’re able to invest in cryptocurrencies, such as bitcoin and Ethereum, within your retirement plan.  This helps to simplify what investments you can choose to be a part of your plan with you as the custodian.  A QRP checkbook enhances that simplicity by making it easy to enroll and invest.

Easy to Invest in Cryptocurrency:

• Set up your QRP with eQRP Co.
• Establish your QRP checking account at the bank of your choice.
• Once your account is funded, open a crypto wallet solely for use with retirement funds.

If you want to invest in more than a few hundred or thousand a week, you can verify your ID with your QRP wallet provider to increase your limits.  Some QRP wallets will also allow you to increase your investment limits by investing more after verification.  One of the best reasons for using a trusted QRP is that you can leverage the security and protection it offers to keep your information private and your data secure.  You can also take your security to the next level by opting for a physical wallet that comes with a password.  This makes it easy for you to travel with without having to go into your digital wallet on your mobile device.

 

5.  Flexibility to Adjust Your Contributions

With a QRP, your contributions to the plan are totally up to you. If business is slow and you need to reduce your personal contributions, you can slow down. If business is going great, you can max out. You’re protected from economic downturns or anything else that would make it difficult or impossible to contribute. This flexibility is one of the reasons the QRP is so much better than other tools. For example, with cash-value life insurance, you must contribute every year or face your principal being eaten up by fees and policy costs. Not so with a QRP. It’s totally flexible to fit your life.

 

6.  Borrow Your Money Anytime

Your QRP is like a private bank line of credit. It is always available to you. At any time, you can write yourself a check and have cash immediately.

Need $50K in 5 minutes? You can borrow up to $50,000 or half of your plan assets, or whichever is less.

Back in 2008 the banks froze almost all real estate investors’ credit cards because they wanted to reduce their risk. Even successful investors got frozen. I had AMEX freeze my black card that was in good standing – it happened while I was trying to buy a pallet of toilet paper at Costco. Card DECLINED. What?

So what happens when you need cash for something and banks aren’t your friend?

Use your built-in $50,000 line of credit. Once you rollover your retirement money into your QRP you’ll simply write yourself a check for up to $50K or 50% of your account. Takes seconds and you’re always approved.

This can be a life-saving option when you need money or just want to use your own assets to fund things so instead of paying interest to the BANK, pay interest to YOURSELF!

The loan must be amortized over a period of no more than five years (except for loans that are used to buy your personal residence). You must also charge a reasonable rate of interest. Payments must be made at least every quarter in substantially equal amounts.

You can always make more frequent payments, such as monthly or weekly. It is important to remember that loan repayments are NOT plan contributions. A neat side effect of the interest you’re paying to the plan, is that money will increase your account balance even more!

As an owner, you cannot deduct interest on the loan, but the plan pays no tax on the interest income either.

All QRPs come with the credit line built in!

 

7.  Total Checkbook Control

The QRP allows you, the owner, to choose any person you’d like to be the trustee, including yourself. Since the trustee is responsible for funding the investments, you suddenly find yourself in total and complete control.

As trustee of the plan, you no longer have to get approval for each and every investment you’d like to make.

No more outside custodian or trustee hovering over you (unless you want one).

When you want to invest in an eligible investment you simply write a check or send a wire.

This control means all assets of your QRP are under your sole authority, direction and discretion.

It also means you eliminate the expense and delays associated with a custodian, a common problem with most Self-Directed IRAs.

This enables you to act quickly when the right investment opportunity presents itself. Timing is everything.

When speed matters, you’ll be glad you have the QRP ready to execute and tie up those great deals.

If you have any queries or want to know more about eQRP, contact us now: https://mihmastermind.com/contact-us/

8.  ONE, Consolidated Account

It can be incredibly time-consuming to manage all the different 401(k) and IRAs that many people have floating around and there’s not a lot of power having money spread out.

With your QRP, you can rollover any and all investment money from your 401(k), 403b, 457, IRA and SEPs.

You’re allowed to transfer those funds and assets into your QRP tax-free and penalty free.

You can roll over as many accounts as you’d like and consolidate them into your QRP.

Consolidating all these funds will save you money and time managing the funds. One account. Easy!

 

9.  No Taxes for 100 Years!

The current tax code allows any owner of a QRP to leave the accounts to an heir who can decide to take distributions of the money over their entire life expectancy. This is true for deferred, (regular) and ROTH accounts.

Let’s say you set up a ROTH account today, grow it for the next 40 years, and then leave it to someone who happens to be 25-years-old when you pass away. That person doesn’t pay any taxes on the account, the gains or the distributions. (Assuming the account balance is less than the current estate tax exemption, which is over $5,000,000 in 2020.)

The heir gets to grow the account, spend the money and do so for 10 years, with zero tax.

You’ve now got the power to opt out of the tax system for the next 100 years. Your children and grandchildren will thank you.

Remember: Any Roth Conversions can IMMEDIATELY be taken out tax free and penalty free!

 

10.  Tax-Free Gains of 20, 30, 50% or More for Roth investment in Real Estate

Your QRP has a built-in ROTH option. This is a chunk of your retirement money (or all, if you want) that you pay taxes on before contributing the money. In this case, you pay the tax now and then pay zero tax on the growth and distributions forever.

Let’s say you contribute $10,000 to your QRP and pay taxes on that money today. Wouldn’t it be nice to have that $10,000 grow by 10X and then 10X again and have it be worth a million dollars? Rest assured this will never happen in the stock market.

But, what if you invest in real estate and use leverage (debt)? What if you buy a property, use your $10,000, and take out a mortgage for the rest of the purchase price?

Example: You buy a house for $100,000 and use $10,000 from your ROTH QRP, then borrow the other $90,000. You do some repairs and sell the house for $200,000 a couple years later. You just made 1000%. Not 10%. Not 100%. But 1000% in two years!

Oh, and since you used the ROTH, all your gains are tax-free and it stays in the plan to continue growing.

Now, remember, if you had used a Self-Directed IRA to buy property and used a mortgage, you’ll trigger UDFI. In the last example, you’d pay about $35,000 in taxes if you used your IRA.

 

Are you eligible for a QRP?

The main qualification to have a QRP is to have some type of self-employment activity, consulting, property management, or even a lemonade stand – pretty simple!

Even if you work for a company and get a W2, you can still qualify if you have side business activity of any type.

For example, many people who are investing in real estate are qualified simply with their real estate activities.

You’ll use earned income to make contributions. This is income that you’re paying self-employment taxes on: Social Security and Medicare (passive income from rental property or interest is not eligible to be used as a contribution).

It’s super simple to be self-employed and qualify. Think about Uber drivers, direct selling, real estate flipping, and many other options. Anyone can become qualified, call us to discuss how to make this work for you!

If you have property you manage you can pay yourself a management fee and, just like that, you have self-employment income!

 

Is Anything Prohibited?

The Internal Revenue Code does not describe what a QRP can invest in, only what it cannot invest in. Prohibited transactions are listed in Code Section 49755 and are transactions between the plan and a disqualified person that are prohibited by law.

• Selling or Buying an interest in real estate owned by the QRP to a “Disqualified Person.”
• Purchasing real estate with QRP funds and leasing to a “Disqualified Person.”
• Investing QRP funds in a house that is used by the QRP owner or other “Disqualified Person.”
• Using personal funds to pay taxes and expenses related to the QRP plan real estate investment.
• Being compensated for any services performed for or on behalf of the QRP.
• Using your retirement funds to make a real estate investment and earning a commission personally from the purchase.
• Making an investment using your QRP into a company or fund that will benefit the QRP participant or a “Disqualified Person” personally.

What’s a Disqualified Person?

• An employer of any of the participants in the plan.
• A 10% (or greater) partner in a partnership that has the plan.
• A fiduciary of the plan.
• A highly compensated partner (an employee who makes 10% or more of the employer’s annual wages.)
• An employee organization with any participating members who are covered by the plan.
• Any related persons of the “Disqualified Person,” some of whom include spouses and direct descendants.

 

When Can I Receive Distributions from My QRP?

Distribution from the QRP can be made when:

• You reach age 59 ½ or suffer financial hardship.
• You retire, die, become disabled or severs employment.
• The plan ends and no other plan is established or continued.

 

Thank you for reading this guide and continuing your journey to responsibility of your financial future. We wish you all the best with your financial transformation!

This report is designed to provide general information pertaining to retirement accounts and investing. Laws and general practices vary from state to state and change constantly.  Specific advice for specific situations should be obtained by the reader’s own advisors.  The author has taken reasonable precautions in preparing this book and believes the facts are accurate as of the date it was written.  Many of the thoughts, ideas and opinions are subjective and relevant to the current environment.  They could change based on any number of evolving environments, laws and geo political shifts.  Neither the author nor publisher assumes any responsibility for any errors or omissions.

The author (Damion Lupo) and publisher specifically disclaim any liability resulting from the use or application of the information contained in this article, and the information is not intended to serve as legal advice related to individual situations.  The author highly recommends you consult with your advisors, including your attorney and accountant, about any plans you may have or are considering and that you get their professional opinion and advice before taking any action.

If you have any queries or want to know more about eQRP, contact us now: https://mihmastermind.com/contact-us/

1. ICI.org (2015)
2. GPO.gov
3. Financial Finesse 2015 Year in Review research on employee financial trends
4. https://www.dol.gov/general/topic/health-plans/erisa
5. https://www.irafinancialgroup.com/wp/internal-revenue-code-section-4975-impact-onthe-self- directed-ira/

 

01/01/2020