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September 2020

Self-Directed IRAs in Uncertain Times

The Covid-19 pandemic has caused much turmoil and uncertainty in our society. Many people have lost their jobs, been furloughed, or been forced to change employers. Businesses have been shut down temporarily, and unfortunately, some have had to close their doors permanently. In the midst of this crisis, one question you may be asking yourself is, What about my retirement account?

If you worked for a company that offers a retirement plan, and you are laid off, change employers, or separate employment for any reason, you will have to decide what to do with that retirement account. This could be a 401(k), 403(b), or any company-provided retirement plan. Typically, it makes the most sense to transfer these types of accounts into your own personal IRA plan, called a "Self-Directed IRA."

The primary benefit you can enjoy with a Self-Directed IRA is the ability to access a wider variety of investment options, including alternative assets on an institutional platform. You can diversify your retirement account beyond the fluctuating stock, bond and mutual fund markets by repositioning some of your retirement savings into a much more stable position in an asset such as income-producing real estate. It's always advisable to work with a professional who can help you determine which investment opportunities are the most appropriate for you.

Though the name "Self-Directed IRA" may imply that this is something you do entirely yourself, you need to make the transaction — transferring your old account to the new one — with the help of a new trustee. But because the transfer from your existing retirement account into a Self-Directed IRA is from "trustee to trustee," it is tax-free.

What if you have an existing IRA account that isn't part of a company-sponsored plan? In this case, too, you may want to consider the benefits of a Self-Directed IRA. With a Self-Directed IRA, you can diversify, without tax consequences, into income-producing real estate. This can be a powerful way to reduce your exposure to overall market volatility and increase the diversification of your hard-earned investment money that you may desperately need for generating income in retirement.

One of the ways we help people access local income-producing real estate through their Self-Directed IRA is with one of our Real Estate Investment Trust (REIT) funds. Qualified investors can invest in our REIT for as little as $40,000 per share and participate in the tax-advantaged income. Our equity REIT Funds are divided into 100 shares, and no individual can own more than 50% of the shares. The names of the shareholders go on the title to the property.

Equilus Capital Partners, LLC, is a REIT management company. We are responsible for the maintenance and operation of the properties in our REIT Fund. We are required to pass through at least 90% of the pre-tax income produced by the REIT to the shareholders in the form of quarterly dividends. Equity REITs thus offer investors a wonderful, hands-off way to enjoy the benefits of real estate as an asset class without the property-management headaches of trash, toilets, and liability.

If you have an old retirement account or you're just not happy with the performance of your current retirement account, contact one of our experienced Equilus Capital Partners professionals at (509) 665-8349 and find out if a Self-Directed IRA could be right for you.

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