Ep 206 - Types of Self-Directed IRAs

Hey, everybody. Flipping Danny here. And our guest host today. And for the next few episodes you'll see this is Ben Cat. And Ben's going to be with us for, for the next, I don't know, four or five or depending, six, seven or eight episodes. Yeah, we're not sure. We're not sure. But anyway, welcome to another episode of our podcast.

And our podcast is called Freedom through Passive Income.

That's right. And you see me holding the microphone if you're watching. If you're not watching, you don't see anything. But if you're watching, you see me holding a microphone because we only have dos microphones. Oh, my God, that's Spanish. And so he's got the one. And so as if I did anything on these episodes now I really don't have to do anything because Ben's going to be doing everything today.

So that's actually why I sat in the middle. I was just like, you know, I'm just going to sit back and watch you two work.

Welcome to another episode. Now, this episode is called. The title of this is Types of self directed IRAs. Which is better traditional or Roth? And at this point, I'm going to give the microphone over to Danny.

Yeah, well, I was just going to say that the reason that we have Ben here is because Ben went through an entire process of transitioning funds. And we have been talking about retirement funds for a while, especially our meeting with Andrew Cordle when we flew to Atlanta. We've got this big idea of all these things that we're going to do. And Ben sends me this email. He goes, I've got this idea. I've been through all of this. It could be content for the episode. And I was like, you just went through all of it. We were planning to talk about it anyway. Why don't you come on and talk about it? So really, Ben's going to take over for the next few episodes, however many they might last, because we're already three minutes in. I mean, come on. So we'll just see how it rolls. But this is all about self directed IRAs, the transition between them, all the fees, the process, just all the goods. I really, really like episode. So make sure that you hang on all the way to the end because he's really going to talk to you about how to turn all this money into lots and lots of moolah.

Right.

So, Ben, it's all yours.

Well, thank you. It's great to be here. You know, for a lot of people, they, if they haven't started their self directed IRAs. Yet it's sometimes you're like, what's the first step? And so one of the purposes and our intention here today is to be able to answer your questions and simplify what the process is. So the first question we're going to be talking about today is the different types of IRAs. And this, the best way to start is this is a good discussion to have with your tax professional because there's so many different factors that can adjust what type of IRA or self directed IRA best fits what your particular goals are. So there's a traditional type of IRA, self directed. And again we're talking about IRAs in general. There's a traditional and there's a Roth and then you have a series of other types of, you know, retirement type of accounts that you can get like your 401ks or solo 401ks, etc. So when you began and you, you're getting lots of different education from about real estate, this is a good place to start is with your tax professional. Let them know what your objective is, what's the type of things you want to be doing in your self directed ira and they can help direct you based on what your amount of income is, what your goals are, etc. So that's a good starting point, is just with that now your choices are traditional or Roth. That's one thing we'll talk about here a little bit in this episode. Which is better, Roth or a traditional? Traditional is where you're able to take pre tax dollars even before you start to pay any taxes on it. You put that into a traditional IRA and you allowed that those pre tax dollars to be able to grow. Roth IRA is where you pay your taxes first and then with those post tax dollars, you're able to put that into your Roth ira. And so this is quite a discussion about which is better. And before I go into some of the details of this, let me ask you what based on what you two have discovered about your situation, and again my situation is different and each of the viewer situations a little different, what are you initially drawn towards?

Do you want me to answer this or do you want to.

Well, no, I'll answer it.

Okay.

It's whatever Danny wants.

There's a very good strategy in what he just said there, by the way. Pay attention to that.

That's top level education right there.

So I feel like as I was growing up, all I heard about was traditional IRAs. So I really didn't know and understand the Roth as much as I do now and have learned probably over the last 10 or 15 years. But I really, truly started understanding it when we went to Atlanta. And I always knew I like the Roth better because I want to pay my taxes today. I wanted to pay my taxes when I know what the tax environment is, not in the future, when it's an unknown and I may be making a whole lot more money, I plan to be anyway, and I'll be in a higher tax bracket and then I'm forced to pay taxes on the money that I put away plus everything that grew within it. So I wanted to do the Roth. I always really knew that. But once we went to Atlanta and saw the math on the board, I was like, oh, oh yes, the Roth. So that's my answer.

Right, okay. And I kind of inclined towards a Roth. So when it comes down to this, and again, we direct you towards your tax professional to talk about this with it. There's certain limitations with an ira, with a traditional ira, but yet, depending on what your income is, depending on what your goals are, a traditional in your conversation with your tax professional, it might in fact be the best option for you. That being said, generally speaking, I agree with what Danny just said that I'm inclined to follow the Roth because you can start it at any age, as long as you don't make too much money, you can continue to add to your Roth. You are not forced to start taking withdrawals from your Roth like you are in a traditional ira. So that means as society, and as you know, we tend to live longer now, many of us are living to our 80s and into the 90s. We have parents and family members that have done that. So your Roth IRA allows in this tax free growth environment to continue for an extra 15 or even 20 years and beyond than what your traditional would, where you'd have to be able to take your distributions. Now you can reinvest those distributions, but you're paying tax on it. You're out of the tax free environment. So. So that's the case that I have for this. So let me just end with this one thing. We're about out of time on this podcast, but because we live longer, it's important to plan, generally speaking, for us to live longer. And what is your current dollars now going to be worth 20 or 30 years from now? And as an example, and I leave this final thought with you just for thought, 1950, the average income in America was $3,300. 1950, by 1980 it was about $17,000. So almost a five fold increase by 2010, it was around $50,000. So about a threefold increase. So a lot of people, we have a friend I grew up with, good family friend, he retired, worked 30 years at his company. In 1980, he had $2,000 a month retirement income. That was a lot of money. I mean, the average, the average income for was 17,000. He had this huge income and yet he's still alive today enjoying retirement. He's much older now, but what's $2,000 a month today per retirement income? So that's the type of thing we should think about. If the average income now is in that 50 to 60,000, depending on if you're talking about income or salary, what's it going to be 30 years from now when you're still enjoying your retirement years? And this is one of the things to think about when you're considering whether traditional or Roth is the best choice for you.

I love this. So one thing that we didn't mention at the very beginning is that Ben is on our investor relations team. He's also a very good friend from, for, from like a long past, like many movies. Yes. We were on cruise ships together and we were our auctioneers. This, yes, this piece right behind us. This is the type of stuff that Ben and Flip would get on stage and auction off to clients on the cruise ship. So we're going to put his information on all of these episodes because he's the one that's presenting this great content for everybody and he knows everything that we're doing. He's incredibly intelligent. Like I said, he's a very, very good friend of ours. We trust him and we are so grateful that he is here sharing this information with you. And we would love for you to get a chance to talk to him one on one. And don't tell any crazy stories.

I'll do my best.

Remember, what happens on a cruise ship stays on a cruise ship. Remember that. Remember that. But we hope that you enjoyed this episode. Make sure you head on over to our website freedomcapitalinvestments.com to join the investor club and all the other stuff that's on there. And we're also on all the social medias and all that stuff. But we like to end all of our episodes with Invest Smart, Live happy. Bye everybody. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions and information on this show are not guaranteed. All investment strategies have the potential for profit or loss.

Sam.