Did you know that you can convert your 401k savings into a self-directed IRA? Most people don’t understand nor know how much home purchasing power they have with their 401k. In the second West Coast Homebuyer Townhall show on The Power Is Now online radio and T.V for October, we had a special guest Donnell Stidhum, who knows and understands the potential in the 401k. Stidhum is a private pension plan consultant who focuses on self-directed retirement plans. Stidhum works with Self-Directed Retirement Plans LLC.
About Stidhum.
Stidhum aims at assisting clients and investors in their quest for financial freedom, creating generational wealth through one-on-one consultation and various online tools to educate. For the past five years, Stidhum has been a private pension plan consultant with self-directed retirement plans working directly with his partner, Rick Pindiasky.
Stidhum has traveled across the U.S., speaking with thousands of people, real estate, and general investment groups, personally supporting and helping thousands of clients to establish their self-directed IRAs. As a result, his clients and many other people he has addresses have achieved true investment freedom to invest in what they want and where they want, with 100% checkbook control. Stadhum is not a financial advisor or a tax attorney, but he’s an engineer, a leader, and an educator with over 20 years of experience in investing in real estate.
Getting to know 401k.
At first, Donnell heard about investing using 401k from a friend, an idea he strongly rejected, thinking it wasn’t possible and that he would be penalized or taxed for that. From there, he set course on a fact-finding mission and decided to try it with one of his old retirement accounts. He converted it to a self-directed IRA through one of the west coast companies. He got frustrated due to the lack of 100% checkbook control over his money and the freedom to invest.
After the frustration, he decides to do more research, where he searched for self-directed 401k on the internet instead of self-directed IRA. At this point, he came across a company from Arizona. He consulted the company and, in the process, ended up with a self-directed retirement company. Since then, he has been helping people set their retirement accounts free and educating them on the possibilities.
About 401k and self-directed IRA.
According to Donnell, the goal of Self-Directed Retirement Plans LLC is to rescue retirement funds. “There are about $29 trillion tied up in retirement accounts as we speak,” Donnell says. “And as an investor who loves to use other people’s money, wouldn’t you like to know how to access $29 trillion tied up in retirement accounts?”
People work every day and put money on retirement accounts with the hope that they’ll have enough to last a lifetime once they retire. What they don’t realize is that there are better ways to grow that money faster, according to Donnell.
What many don’t know.
Another important thing to note is that there was an allocation under the CARES Act meant for the people with retirement plans. “If you have a retirement account, there is $400,000 available to you that wasn’t there prior to the CARES Act,” Donnell says. It would be best if you took advantage of that fund before it’s too late.
Many people think that traditional dollars go through a specific process to convert them into Roth dollars and that their retirement accounts aren’t allowed to borrow. Both are not correct. A retirement account is allowed to borrow in the form of a non-recourse loan.
Whether it is TSP, 403b, or 401k, any retirement plan is a qualified plan that can be self-directed. According to Donnell, you can only self-direct it in one of the four forms that include; traditional self-directed IRA, traditional self-directed 401k, Roth IRA, and self-directed Roth 401k. “Regardless of the plan, as long as it’s a qualified plan, can be moved into any of those four arenas,” Donnell says.
Benefits of using Self-Directed 401k.
The ultimate benefit you enjoy from deploying a self-directed 401k plan is that it’s properly structured. According to Donnell, being properly structured means having checkbook control, zero custodial interference and fees, asset protection, and being able to invest in what you want.
How do you differentiate between a Roth and a traditional plan?
The key difference is that for a Roth plan, you get taxed when you’re depositing your money, and anything that grows from that is tax-free. On the other hand, in the traditional plan, you’re taxed during withdrawal.
Differences between an IRA and a 401k.
- IRA’s contribution limit is $7,000 per year for people aged 50+ and $6000 for those under 50 years of age. For 401k, the contribution limit is $26,000 per year for 50+ years of age, and $19,500 for 50 and below years old.
- IRA individual retirement savings account is a “glorified savings account,” while 401k is a qualified pension plan backed by the government.
Creating a self-directed IRA
When creating a self-directed IRA, first, your IRA funds are moved to a new custodian. Regardless of your IRA funds being in a new custodian, you still don’t have access to it. So your IRA has to create an LLC. This means that the money in your IRA has to fill out the SS4 form and create an LLC that will live inside that IRA. With the LLC comes the EIN that you can use to open a checking account. At this point, you can now funnel funds from your self-directed IRA into your LLC, then into your checking account. At this point, you have checkbook control over your IRA funds.
The Donnell Stidhum show was very educational and full of helpful information. You can watch the whole show here.
The Power Is Now continues to equip you with the necessary info that can increase your purchase power and show you the possibility of becoming a homeowner. We also continue to advocate for homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. In this regard, we have a team of professional realtors— VIP Agents stationed nationwide to help you with anything you need in attaining your homeownership dreams. You can get in touch with the VIP Agents at https://www.thepowerisnow.com/vipagentsservices/. If you can’t find an agent from your area, you can contact me directly for a referral. Also, ensure you stay updated with any developing real estate market news by regularly checking our blog page at https://www.thepowerisnow.com/blog/. You can also set up an appointment to speak directly to me at https://calendly.com/thepowerisnow/ericfrazier.
Disclaimer: The views and opinions of Eric Lawrence Frazier are his own and do not necessarily represent First Bank or any organization affiliated with Eric Lawrence Frazier, or the Power Is Now Media Inc. First Bank is an Equal Credit Opportunity Lender. Eric Lawrence Frazier, MBA, is also a Vice President and Mortgage Advisor with First Bank. NMLS#461807 and a California Licensed Real Estate Broker DRE# 01143482. Email: Eric.frazier@fbol.com. Ph: 714- 475-8629.
Eric Lawrence Frazier MBA
President and CEO The Power Is Now Media Inc
