[00:00:01] Speaker A: You're listening to PTC point of view, brought to you by preferred trust Company, the preferred custodian for all alternative investments. We're here to provide retirement savers like you with the tools you need to succeed. Need a confidence boost when it comes to investing outside of the stock market? Do you want the power to build a tax sheltered nest egg that will last through your golden years? You've come to the right place. Turn up your speakers and turn off cruise control, because we're taking you on the alternate route to investing with your IRA.
[00:00:40] Speaker B: Hello and welcome to our very first episode of PTC Point of View. My name is Matty. I work here at Preferred Trust Company. Today we're going to be discussing who is the company behind PTC point of view, and that is preferred trust company. So we're going to be discussing who we are and what we do a little bit, and then we're going to really dive into what is a self directed IRA. First off, let's go over who is preferred trust company. Preferred trust Company is a state regulated company. We have 14 years of experience and we specialize in self directed iras that hold alternative assets. Here at Preferred trust Company, you can use your self directed IRA to invest in alternatives such as real estate, private placement notes, deeds of trust, tax, liens, precious metals and much more. So, preferred trust Company, as I stated before, is a state regulated company. So we facilitate both custodial and administrator roles as a licensed trust company. Which means we can't give you advice on what to invest in. We can't give you our opinion, but we can make sure that you're educated in what is available to invest in. And that brings me to our next topic. Let's get into self directed iras. Today I have with me Chris Trembley. She is the director of operations here at Preferred Trust Company. So, Chris, do you want to introduce.
[00:02:18] Speaker C: Yourself a little bit?
[00:02:19] Speaker B: How long you've been working here, what you do?
[00:02:22] Speaker C: I've been with Preferred trust Company since January of 2009, actually. Kind of worked my way up through the company, started in general client services, made my way through accounting and investments, and now I'm the director of operations.
[00:02:38] Speaker B: So you've done it all?
[00:02:39] Speaker C: I've done it all. Kind of oversee all the departments, working very closely with marketing department, the accounting department, general operations, obviously customer service, client services, working help process the investments and compliance overall of the company and the investments.
[00:02:56] Speaker B: So now you kind of focus on compliance and making sure everyone's following the rules.
[00:03:01] Speaker C: Yes. The biggest thing, I think when you're dealing with a self directed IRA, especially. Obviously, there are IR's rules and regulations. Super important that we follow those and stay within those guidelines, especially in that self directed world. A lot of times, clients like to go out of those guidelines. They kind of have to reel them in. So compliance is a huge part of my job, not only educating our staff and keeping them up to date on everything, but making sure our clients have that same education.
[00:03:27] Speaker B: Yeah, I know. You just trained me last week.
[00:03:29] Speaker C: Yes. On compliance. All things compliance. That's my favorite thing out of everything I've done here. I think that's my favorite piece of everything. I know it's boring to a lot of people, but Ir's and rules and regulations and guidelines, those are things I love to read about. And now, more today than ever, things are changing in our industry. And so rules and regulations and proposals and all types of things are going up to the federal government to make changes. So it's very interesting. It feels like it's definitely on the move.
[00:04:01] Speaker B: Interesting and important, right? Yes. So let's dive right in. What is a self directed IRA? We're bringing it back to the basics here.
[00:04:13] Speaker C: Back to the basics, back to the beginning. So self directed. And that's really what we try and focus when we tell people. Think about you controlling your retirement and the things that you use your retirement account to invest in. Really, it takes the control out of the hands of a financial advisor, if you will. You're used to seeing in a traditional setting, if you're at an account, like for instance, if you have an account at Wells Fargo, TD Ameritrade, Edward Jones, usually there's an investment advisor attached to those accounts. Helps you look at your risk, look at the investment types out there, and helps you select those investments. Depending on your risk tolerance. They look at a lot of different factors in this world. In our world, it's really self directed. Means the client themselves, the owner of the retirement account, is selecting all of the investments themselves. There's no one helping to provide advice. This means that you have to do your due diligence on every company you want to invest in or any product that you want to invest in. You have to really do your research and be aware of all the risk, because you really bear all the risk in what you decide to invest in. So, preferred trust company, our employees, we're not licensed to give any kind of investment advice. We are actually. Our role is to custody the investments and to process the investments that you select. But there's no advice there at all. So it's all in the hands of the client. Truly self directed. You are selecting everything.
[00:05:38] Speaker B: That's awesome.
[00:05:39] Speaker C: Yeah.
[00:05:39] Speaker B: Okay, so I know you mentioned investments, so what can someone invest in with their self directed IRA?
[00:05:47] Speaker C: So we focus on alternative investments.
[00:05:50] Speaker B: Okay.
[00:05:50] Speaker C: We are licensed to hold those alternative investments so different, we don't have any licensing to hold stocks, bonds and mutual funds. Anything publicly traded, you've got to go with your traditional brokerage house or custodian. We specialize in the alternatives, and alternatives in the IR's is eyes or anything that's not publicly traded. So we're talking real estate, real property, anything. Reits, startup companies, precious metals, digital currency. Today is a big one.
[00:06:20] Speaker B: Yeah, very big.
[00:06:20] Speaker C: Yeah, very big. Private debt, private equity. So anything that you're not going to find at your local brokerage house, basically it's all considered alternatives. Basically it's probably easier for us to talk about what you can't invest in then what you can is it's a very fine line. The IR's kind of maps it out for you. There's all these things that you can invest in and then there's this small line that says no, some collectibles is one, life insurance and certain parts of s corporations. And basically that's it. Everything else is pretty fair game. I mean we have clients investing in cattle and goat farms and all sorts of different things. So yeah, the sky's the limit really when it comes to the alternative world.
[00:07:02] Speaker B: So he's taking his self directed individual retirement account, investing in cows.
[00:07:07] Speaker C: In cattle. That's right. Wow. Yeah. So pretty cool. Yeah, I think it was something like he gets 25, 25 cattle that are assigned to him and then they raise the cattle and obviously the meat is then produced and sold to different vendors, restaurants.
[00:07:26] Speaker B: And he makes money off of that.
[00:07:28] Speaker C: And he makes money off that. Right in his self direct diary.
[00:07:31] Speaker B: That's interesting. Yeah, I know you could do that. Okay, so if someone were to open a self directed IRA at preferred trust company, what kind of fees?
[00:07:42] Speaker C: So it's unique because we cannot make any money off of the investment itself. So there's no percentage of income that you earn that we get off of that investment. Everything that we earn is flat fee based for processing of the investments you select. So very unlike your typical brokerage house, that might get a percentage of the income you earn off of investing in your stock. We can't do that. We are, that's not allowed in our industry. So we're flat fee based. We get an annual fee for actually administering your account, reporting to the IR's keeping within the irish rules and regulations, making sure your account keeps qualified. So there's an annual fee for that. And then once you process an investment or select an investment, there's a flat fee for us to actually process it for you correctly and get it in the name of the IRA.
[00:08:35] Speaker B: So, is every custodian like that very.
[00:08:38] Speaker C: Similar in the self directed world. Most of them you're going to see is a very flat fee based industry. Processing fees, transactional fees. Nobody in our industry is making anything off of the investments we're not allowed to.
[00:08:52] Speaker A: You're listening to PTC point of view brought to you by preferred trust company.
[00:09:02] Speaker B: So, let's dive a little bit into types of self directed iras. I know there's four different types. Let's start out with the traditional.
[00:09:11] Speaker C: Okay, so those are traditional and Roth are the most common. If you're looking at, you know, Iras across the board, an IRA is an IRA is an IRA. There's no such thing as a real estate IRA. Or you find a company that says, oh, well, you can invest in precious metals through a precious metals IRA. There's no such thing. The IR's created four types of iras. So it doesn't matter if you're investing in stocks, bonds, and mutual funds, or you're investing in alternatives, there's still iras, period. So traditional, pre tax, roth, post tax. So those are your most common. That's what most people have. And then really what makes the difference in these type of accounts is what you're investing in.
[00:09:49] Speaker B: So, is a traditional IRA the same for preferred trust company as it is for a normal bank? Let's say like Wells Fargo?
[00:09:58] Speaker C: Yes, they are absolutely the same way. So pre tax, individual retirement account, traditional. So it's exactly the same. Just at Wells Fargo, you're probably investing in publicly traded assets. Maybe you have stock in target or Walmart or something. And with us, maybe you're buying a piece of property for a rent, for rental income, or a fixed and flip. So that's the only difference between the iras is what's held inside them as far as investments. But a traditional IRA is the same everywhere you go.
[00:10:30] Speaker B: So why would someone choose preferred trust company over Wells Fargo?
[00:10:34] Speaker C: So that they can invest in things that they know and invest in alternatives. So somewhere like Wells Fargo or TD Ameritrade, they specialize in their suite of products. They're not licensed to hold alternatives, just like we're not licensed to hold publicly traded assets. So two different vehicles. As far as the type of investments that can be held doesn't mean that you can't have both. You can definitely keep your account open where it is today and do your traditional, if you will, investing and then open a secondary one at a self directed custodian like preferred trust, so that you can dip a little into the alternative world. We always like to tell people it's not good to put all of your eggs in one basket. So, you know, leave a little bit in the stock market, put some in alternatives. It's good to be diversified. Super important, especially at, you know, as the economy changes, things go up and down. Stock market rises and falls. Sometimes some of those alternative investments can hedge against that. So it's helpful to be diversified.
[00:11:29] Speaker B: So there's this tax deferred or tax free income. Can you differentiate between the two for me?
[00:11:36] Speaker C: Sure. So that tax free is that Roth account, which is like, you know, the best gift the government could have ever given us. So you're basically, you're investing within your Roth IRA, and all of the income that you're earning basically is tax free. Meaning when you get to the age to start taking distributions of your account, when you reach that retirement age and you need to live off of those distributions, then you can do so tax free. Tax deferred is in the traditional IRA. So any income that you're earning, the tax is deferred until you start taking those distributions. Once you start taking distributions, then you have to pay the tax on that money. But all of your investments that are happening within your account, there's no taxation on those investments. Everything. That's why it's important to make those investments within the retirement account, because they're growing exponentially. The income's growing and it's really not taxed until you take it out. So the government says that you have to start taking distributions from your IRA, from your traditional IRA. When you reach that age of 72, they think that's the age according to the IR's. And so once you do that and you start taking distributions, then you're going to have taxation. So you can really build your wealth tax deferred or you can do it tax free in that Roth account.
[00:12:53] Speaker B: And why wouldn't you want to?
[00:12:54] Speaker C: Right? It's very attractive. And if you have a traditional IRA, some people think, you know, it's too late. I have a traditional IRA. I can't get to the Roth. You can get to the Roth Ira. There is such thing as a conversion. So you can take some or all of the assets within your traditional account and you can convert them to a Roth account, you are going to pay taxes on the conversion. But depending on where you are in your retirement, in your life and your retirement goals, depending on your age, your tax bracket, there's probably that sweet spot. Everybody has a different sweet spot for when that conversion might be beneficial to you. We always recommend that clients reach out to their CPA or a tax specialist. They can really figure that out. But there is that option to take that tax deferred to a tax free environment.
[00:13:41] Speaker B: Can preferred trust company help with people wanting to do that?
[00:13:45] Speaker C: Absolutely. We can convert your account for you. It's one quick form that you fill out. You have to first make sure your roth account is open. Get that Roth account open, and then it's a conversion form. And you can do little by little too. We have clients doing a little bit at a time. They're not necessarily converting the entirety of their traditional account all at once. So maybe a portion of it, and then you leave a portion of it in the traditional, maybe a little bit each year. Every situation is a little bit different, but we certainly have clients that take advantage of it in different ways instead of doing it all at once and taking a tax hit all at one time.
[00:14:19] Speaker B: Yeah. So that would be the purpose of splitting it up so they don't have to pay a bunch of taxes all at once.
[00:14:23] Speaker C: Exactly. You can kind of spread it out through tax years.
[00:14:26] Speaker B: So let's get back to types of self directed iras. Let's go over Sep IRA. What does that mean? What does it stand for?
[00:14:34] Speaker C: Simplified pension. So that Sep IRA, this is really super unique. So this was really created for the self employed. A lot of our clients who are self employed, you can definitely do it self employed and having employees underneath you. But we see most clients that are taking advantage of this. They are the single employee underneath their company. This provides for a larger contribution amount every year depending on the earnings of the company associated with it. So you have a little bit more leeway in growth. Contributions are different than earned income off of the investments in your account. Contributions, just to make clear, are the monies that you can put into your personal funds that you can contribute to an IRA every year. The IR's sets limits every year for traditional Ross Sep simple. There's different IR's IRA limits for contributions each year. And so Sepp has a little bit greater, a little bit more flexibility to it when it comes to what the contribution limits are. And it allows you to create something for yourself as being self employed. So it's a really great tool.
[00:15:44] Speaker B: Do you know what the limit is for SeP.
[00:15:46] Speaker C: I believe this year in 2022, it's 61,000 or 25% of your gross income, whichever is less. So it can be pretty significant. It can be pretty significant. So great option out there. One that a lot of people aren't aware of and don't take advantage of. We don't see it a lot in our industry. You see a lot more people rolling into like 401 ks for 403 B's, things like that. But a lot of people don't realize that you can have both. Actually, as long as the employer is different, as long as you're getting w two income off of a different employer and they're the ones providing like a 401K plan, you can have a SEP plan as well. So you can really maximize your contributions. So it's things, definitely things to consider if you have your own business and you're the only employee. It's a great tool and we recommend, like I said, always want to get your CPA in your corner. Have someone that's knowledgeable in taxes work with you so that you're establishing the correct account.
[00:16:43] Speaker B: Okay. And moving right along what is a simple IRA.
[00:16:47] Speaker C: So this is really unique too. This is also for small employers. This is a small employer plan that you can offer to your company. It's beneficial because it doesn't hold as much reporting as like a 401K. There's a lot of administration that goes into a 401K. Even for us as a custodian, you know, that's not something that we offer. We specialize in self directed, just the iras. But obviously 401 ks are big for employer stay. But if you're a smaller employer, the cost associated with a 401K can be very great. And you may still want to be able to offer your employees some kind of benefit plan, a retirement plan. And yet the not work for you, it may be too not cost effective enough. The simple IRA actually gives you that opportunity to provide a plan for your employees without that huge overhead cost and not a lot of reporting to the IR's. So again, not something that we see a whole lot of, but I think that's probably an untapped resource that a lot of small businesses don't really utilize. For us personally, we had a simple plan years ago when we were smaller.
[00:17:59] Speaker B: Is there a size limit on who can have that?
[00:18:01] Speaker C: It's 100 employees. Yes. So when you reach above a certain amount, then you want to move over into a 401K. But this is great for 100 employees or less. This is something really great option and.
[00:18:14] Speaker B: It stands for savings incentive match plan for employees. So does that mean the employer matches what the employee puts in?
[00:18:22] Speaker C: Right. There's a requirement of that match in there.
[00:18:25] Speaker B: Okay.
[00:18:26] Speaker C: Yeah.
[00:18:26] Speaker B: Interesting. So let's talk a little bit about beneficiary options with a self directed IRA.
[00:18:34] Speaker C: Okay. So you always have to name a beneficiary.
[00:18:38] Speaker B: Okay.
[00:18:38] Speaker C: In your accounts, you have the option of splitting up beneficiaries just like you would your normal retirement account. So you always want to have a beneficiary on your account. Most of the time, it's your spouse. But you certainly, you know, you can certainly name somebody else in that case. Lots of people split up their beneficiaries into multiple beneficiaries. There's not a limit to the amount you can have, but it's good to have them in place. We also recommend having a contingent beneficiary if something should happen to you and then something happens to your primary beneficiary. Having that contingent beneficiary is important. That, that way, your assets, actually, your retirement account assets do go somewhere. They're not left to the state figure out. Right. They're not left to the state to figure out how to distribute or what to do with them. And so it's important that you have both that primary and that contingent. Like I said, most people have their spouse, but you can do a combination, and we recommend that just every year, you make sure you update your information. Anything changes in your life, you make sure you know who your beneficiaries are. And it's good to let your beneficiaries know that you have this account out there, because what we find, what we see happen is someone will pass away and not realize that they're a beneficiary of, you know, this person that passed away had a retirement account, and the person that's the beneficiary never knew it. And so there's money out there. That's these retirement dollars that aren't being collected just sitting there. Just sitting there, because people don't realize they're a beneficiary of an IRA. So it's important that you have those discussions. Make sure you notify the beneficiaries in case anything should happen.
[00:20:15] Speaker B: Okay. Do you think there's anything else we haven't discussed that needs to be discussed about self directed iras?
[00:20:22] Speaker C: I just think the most important thing when you have a self directed IRA, obviously you're going to be in charge of making the decisions on the investments in the account, is that due diligence is very, very important, especially in today's. Day and age where you have a lot of attempts at theft and fraud and things like that, that you really do your research and you understand the investments that you're getting involved in, the companies that you're buying your investments from or you're investing with. That's one thing we encourage clients to make sure that they do is understand every facet and do some comparative analysis, too. If you're buying precious metals within your IRA, make sure that you compare different precious metals companies and that you just don't go with the first one that calls you. It's just very important that you do your due diligence.
[00:21:08] Speaker B: So do your research. Do your research before you invest in.
[00:21:12] Speaker C: Something, before you make that investment selection. Because once you've made that investment selection and the money's been sent to the investment sponsor, it's hard to get it back if you change your mind. And that's not what you want to do. So you want to make sure this can be a great vehicle, self directing. You can earn your income and interest exponentially, grow your retirement account exponentially. But you have to do it in a way that's responsible and making sure you understand the investments that you're getting into. I think we're used do as a society, having other people make those choices for us. We have those investment advisors that go out there, make the selection, and you kind of set it and forget it type of thing, really. You get your statements once a month, you throw it in your drawer and, you know, oh, the stock market went up or it went down, so my retirement account followed that. You kind of don't think of it. You think of somebody else having that responsibility. But really, in this area, you're completely 100% responsible. So if you take a risk and it goes not the right way, you're responsible for that. So we just encourage people to make sure they understand that.
[00:22:15] Speaker B: So I'm sure a lot of people are wondering, as the director of operations at a self directed IRA custodian, do you yourself have an IRA?
[00:22:27] Speaker C: I do have an IRA, yeah. I do invest. I do. Real estate's a big thing. I like having that hard asset behind what I'm investing in, so. But it's not the only thing that I have, too, as well. You know, like you said, all your.
[00:22:40] Speaker B: Eggs aren't in one basket.
[00:22:41] Speaker C: All my eggs are not in one basket. Diversification is key, you know. So we've got some sitting in the stock market as well. Just want to make sure, well rounded all the way around.
[00:22:51] Speaker B: But, yeah, perfect. Well, thank you so much for joining me today. I appreciate it.
[00:22:55] Speaker C: You're welcome.
[00:22:56] Speaker B: All right. Thanks for listening, everyone. I wanted to let you know next week we're going to dive a little bit deeper into investing in real estate with your self directed IRA. And helping me with that will be our very own Carrie Cook. She is the CEO of preferred Trust Company. So I'm really looking forward to that episode, diving in on real estate and how you can invest in it with your self directed IrA. So if that's something you're interested, definitely give it a listen. If you liked this episode, give us a like share it with your friends. Subscribe to our channel. We have lots of fun episodes planned, very informational material, and we look forward to next week. Thanks for listening to PTC Point of view.
[00:23:44] Speaker A: Thanks for joining us for another episode of PTC Point of View where retirement savers meet alternative investments. Know someone who's struggling with a retirement strategy? Tell them about our show. Can't wait for the next episode. To learn more, visit our
[email protected], or give us a call at 888992.
