The Walls Street Journal reported on January 19th that former Massachusetts Governor and Presidential candidate Mitt Romney has an IRA valued between $20 million and $100 million dollars. The article speculates about how those earnings were made and eventually concluded that because there is now way he could have such significant returns in mutual funds or typical stock or bonds that he must have invested in companies that he was consulting and working with while running the private equity firm he founded called Bain Capital. In other words, he self directed his retirement account into investments with small companies that he knew.

 

There are two important lessons to be learned from Mitt Romney’s $20 Million IRA. First, you don’t have to settle for a select group of mutual funds when investing your retirement plan and you can self direct it into all kinds of investments allowed by law including small companies such as Gov. Romney. Other popular self directed options are real estate, or loans, or precious metals. A Romney campaign aide who was questioned about Romney’s investments answered that the tax treatment for Romney’s IRA “is the same for Gov. Romney as it is for every citizen of the U.S.”  This is true. Don’t feel trapped into investing your IRA or other retirement plan into the menu you get from your account custodian. Look to put your retirement account with a self directed retirement plan custodian who will allow you to invest in any investment allowed by law. Typical prohibited investments by law include collectibles, life insurance, s-corporation stock, and related family member transactions and others outlined in IRC 4975. All else is fair game.

 

The second lesson to be learned is that Gov. Romney’s IRA account success was a result of him investing in what he knew. Many of our clients express frustration in their retirement plan investments because they end up investing in mutual funds, bonds, or stocks that they have no idea how they will turn out and have no skill or insight that gives them an advantage in their investments. However, many of our clients who self direct their retirement plans have found success in investing their retirement plans into what they know. This could be real estate or a small start-up company. Keep your investment portfolio open to self directed retirement plan options and don’t feel trapped into the typical stocks, bonds and mutual funds. As with all investments, please consult with competent legal professionals before investing money. There are scams and bad deals out there and you need to make sure your retirement account is properly protected before you invest.

 

In sum, the rules for self directed retirement plan investing can be tricky but with the proper counsel and with good investment decisions you can be well on your way to a $20 Million IRA. If you’d like a referral to a self directed retirement account custodian or if you have questions about self directing your retirement account, then please contact us at the law firm at 435-586-9366.

Share This