Use your IRA/401(k)/SEP/Roth/403(b) Any Way you Want!

Anyone having a retirement plan such as for example: IRA (Individual Retirement Account), 401(k), Solo 401(k), SEP (Simplified Employee Pension Plan), 403(b), Coverdell Education Savings (ESA) or also known as Educational IRAs, Qualified Annuities, Profit Sharing Plans, Money Purchase Plans, Government Eligible Deferred Compensation Plans, Keoghs, etc… can determine where to invest its funds. This has been the case since the 1970s! when a lot of these plans were created.

Most people believe that these funds cannot be touched without incurring penalties and additional taxation.

These plans were created by the IRS and most of their names such as 401(k), 403(b), etc… derive from the section of IRS Code which describes them.

An IRA, 401(k), SEP, or any such plans, are NOT an investment. They are RULES established by the IRS that when you follow them, the funds under these rules receive certain tax advantages.

Your IRA or 401(k) is an entity separate from you which can invest in almost any type of investment you choose. There are certain transactions that according to the IRS are prohibited which your IRA or 401(k) cannot do. Participating in these prohibited transactions may cause all the tax-advantaged benefits of the IRA/401(k) to be lost, potentially generating a very large tax bill.
You need an external third party called a “Custodian” to make sure that you don’t touch the funds. Traditionally investment firms such as Goldman Sachs, Merrill Lynch (now defunct) and banks have a Custodian department that offers to administer these retirement plans according to the IRS rules.

These private companies want you to use your retirement funds to invest only in their products: stocks or bonds, money market, etc… Most people believe that this is the only way to invest money from a retirement plan and usually the options are limited to the particular financial products these companies offer.

The belief that retirement accounts should only be invested in financial Wall Street products, (stocks, bonds, etc…) is so entrenched that even when you call the Custodian administering your retirement funds he/she will tell you that you can’t move your funds elsewhere, this is of course not the case.

In our minds we tend to identify the RULES: IRA. 401(k), etc.., with the TYPE of investment: bonds, stocks, etc… whereas these two have ALWAYS been SEPARATE.

Why would this matter to you? After all, aren’t you better off by leaving these investment decisions to professional money market managers and financial planners? Aren’t stocks and bonds supposedly the “best” and the “safest” types of investments? Haven’t they outperformed any other types of investments consistently over time? The simple answer is no.

Very far from it, when you consider the alternatives and how the alternatives have performed over time, you realize that traditional Wall Street products are indeed a very poor unsafe choice.

See the companion article entitled “Your IRA & Wall Street” located at

What if instead of investing in a stock, you could buy a house and rent it? What if you could loan some money to a company that you knew well and paid you 15% or more?

What if you could invest in a real estate development company and make upwards of 30% return? What if you knew of an invention and you had the chance of buying some stock in the company?

What about raw land? rental properties? commercial properties? condominiums? mobile homes? Earth-moving machines? race horses? tax liens? airplanes? tax certificates? foreign real estate? and more…(the above are just some examples of possible investments using your IRA funds).

The range of possible investments is only limited by your imagination. Since your IRA/401(k) is considered to be a separate entity from you, the key is to handle all these strictly as investments and cannot be used personally. For example: buying a home using your IRA which you then use to live in –this would be an example of a prohibited transaction, unless you were at least 59 ½ years old and paid taxes on what the home cost you –then it would not be a prohibited transaction.

Instead of getting your money taken out of your paycheck and then thrown into a corporation and investment into which you have no control or very little, or that your selection of investment products is limited to the same type, what if you could control every single dollar and YOU decided what is the best type of investment?

This could have a tremendous influence on your retirement portfolio. A lot of people are getting and have been getting very poor, mediocre results using the “established” alternative. See companion article entitled “Your IRA & Wall Street”.

Remember, an IRA or 401(k) or any such plan, IS NOT an investment, it is just a set of rules, making up an entity separate from you. This entity is entitled to invest in anything YOU decide, except for a small number of transactions called “prohibited transactions”.

There are many Custodian services out there which offer to do just that: take your retirement funds and have them in trust in strict compliance with the IRS code so that you don’t lose the tax advantage umbrella and who will not try to sell you anything or make you believe that you have no other option but to invest with their company.

The advantages are not only that you may get a much higher rate of return and security since now you can control where your retirement funds go, but also this alternative costs much less. Goldman Sachs et al, would charge you around 2% per year in fees and charges, (this is in addition to another 3% average that you get charged when you purchase the securities, and this does not take into account the fees built-in the financial products they sell you) whereas, just to give you an idea, a well established Custodian Trust is about $600 per $100,000 per year. Not only you make more, expenses are less, but now you can invest in things you understand and you are not the effect of “the market”.

You don’t need to use all of your IRA funds, you can just use a portion, in this manner you can diversify as much as you want.

This is an excellent opportunity to get a much higher rate of return, under your control, while preserving the tax-advantaged retirement plan structure of your IRA or 401(k).

There is a very simple e-book that you can download for free put out by Pensco Trust, one the oldest Custodians, which answers many of the questions you may have in a simple straightforward manner, without attempting to sell you anything. You can get a copy by going here:

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