IRA issue

[quote=BankFC]

I met with a gentleman a few days ago who has about $450,000 in this 401K.  He wants to start a business, and his original intention was to fund the business through his 401K via distributions.

Obviously, he's looking at massive tax consequences on taking the money (not yet 59 1/2)

I knew that you COULD invest in a privately held business via a self directed IRA (similar to investing in raw land via your IRA), so I did a little research and dug up some specifics...aka type of business structure needed, tax issues, etc.

Anyway, the long and the short of it is there are a couple different options, both of which are much better than simply taking the cash and paying the taxes.

My question is...has anybody done much of this?  Just curious to hear your experiences.

[/quote]

Let me see if I have this right.  You have an intricate tax question and you're looking for advice on a "Rookies and Trainees" forum on the internet?

Beam me up, Scotty.

Hey newbie, check the forum you’re in before you post that.  We’re in the “General” forum. 

[quote=NASD Newbie][quote=BankFC]

I met with a gentleman a few days ago who has about $450,000 in this 401K.  He wants to start a business, and his original intention was to fund the business through his 401K via distributions.

Obviously, he's looking at massive tax consequences on taking the money (not yet 59 1/2)

I knew that you COULD invest in a privately held business via a self directed IRA (similar to investing in raw land via your IRA), so I did a little research and dug up some specifics...aka type of business structure needed, tax issues, etc.

Anyway, the long and the short of it is there are a couple different options, both of which are much better than simply taking the cash and paying the taxes.

My question is...has anybody done much of this?  Just curious to hear your experiences.

[/quote]

Let me see if I have this right.  You have an intricate tax question and you're looking for advice on a "Rookies and Trainees" forum on the internet?

Beam me up, Scotty.

[/quote]

First off, you're an idiot. 

Secondly, I am not asking for an answer to my "intricate tax" question (I already know the answer), I am simply asking how the experience is/was for others...you know, ACTUAL advisors who do more than push products or play advisor on rr forums.

I think there is an exception to the 10% penalty if your client is at least 55 and has separated from employment.  Best part is, you don't have to do 72(t) distributions for 5 years minimum.

Don't quote me on that, but I believe it to be true...

He’s not yet 55…and regardless, just the ordinary income taxes alone are brutal on the type of distributions he’s talking about.

This may be a chicken and egg question…but, if he can establish a business and then an owner-only 401k (funded by 450k rollover), he could borrow…but I guess that’s still limited to 50k.  So, a very partial solution at best.

[quote=BankFC]

Secondly, I am not asking for an answer to my "intricate tax" question (I already know the answer), I am simply asking how the experience is/was for others...you know, ACTUAL advisors who do more than push products or play advisor on rr forums.

[/quote]

For those who don't know let's explain what this child does.

The typical bank broker is assigned to three to five branches.  On Monday they're on Elm Street, on Tuesday they're on Oak Street and so forth.

While there they have a little desk--almost like a child's desk--that is over in the corner.  There is a sign that explains that the investments being discussed at that desk are not insured by the bank and may fluctuate in value.

There is a running conflict between the "advisors" sitting at that desk and the bank on several levels.  The "advisors" are constantly trying cute tricks to obscure that warning sign--putting a plant in front of it is a typical trick.  They, the "advisors" are such poor salespeople that they cannot deal with questions such as, "What does that sign mean when it says that values may fluctuate?"

Banks are afraid that the investment "advisor" may convert time deposits in the bank to mutual funds and/or annuities which will reduce the bank's deposits--making it more difficult for the bank to make loans.  Consequently banks have a habit of hiring fairly dull witted people as the advisors--like most broker dealers they give IQ tests.  Unlike most firms they use these tests to identify smart people so they will not be offered a job.

If you work for a real firm you will have home office types who are there to help you with issues such as a guy who wants to know how to use his 401(k) to fund a dream, but he's not yet 55.

If there's a way to do it that home office expert will know.  You won't have to pose the question on an Internet message board where it could be answered right or wrong, by somebody who may or may not even have a securities license much less an understanding of the tax code.

Be very very careful of what you read on the Internet--including what I have to say.

Bank FC, check your sources again. The owner of the IRA can invest in a privately held business, (if he wants to pay UBIT) just not his business. He’s a party in interest and that’s a prohibited transaction. Doesn’t matter if he structures it as a C Corp, S Corp, LLP, partnership, sole prop, etc, he is a “disqualified person”.

When the transaction comes to light, the IRS treats the amount invested as distribution from the IRA. That makes it taxable ordinary income in the year received. If he’s under 59 1/2, there’s a 10% premature distribution tax and because it’s a prohibited transaction, he gets whacked with a 10% excise tax to top it off.

This is not a pretty sight and you do not want to be in the splatter zone.

Google “IRA prohibited transaction” at the IRS.gov web site for all the gory details.



 

Doesn’t your client have a CPA or tax advisor? I would consult with him/her and I wouldn’t give him any advice in this area as it is tax related and very specialized.  You are an investment advisor, not a tax consultant and are not qualified to advise him on this topic.  If you give him the wrong information even while qualifying the previous statement to him and he acts on it and is hit with fines…your @ss is grass. 

As a former commercial lender, I would look very askance at somebody who is liquidating his retirement to fund a speculative business.  First of all, a start up business usually has a high percentage of failure and especially so if the person has never been in business before.  Your client would probably be best served by you introducing him to the bank lending officer and having the client draw up a formal business plan with cost and income projections and have a professional give it the once over.   It may be that he can borrow funds and finance his "dream" until he is in a position to draw on his 401K as a suppliment if at all. By then his dream will either be a reality or a nightmare.

Otherwise I see his 401K doing down a dark and swirling wet orifice.

Ok guys...calm down.  Once again, I am not posting asking for ADVICE.  I left out just about every detail imaginable BECAUSE it doesn't matter.  I am speaking in generalities.  I already have the specifics down, and YES, were are working with his CPA.  Ok? 

I was simply inquiring to see if anyone had done this type of transaction.  Obviously few have. 

Ya'll need to get a drink!! 

[quote=babbling looney]

Otherwise I see his 401K doing down a dark and swirling wet orifice.

[/quote]

Behold, boys and girls, a wordsmith.

Years ago the best man in my wedding dropped about $20 grand chasing interest rate futures.

One evening we were having dinner and I was drawing an inverted yield curve on a yellow pad and trying to explain what was happening.

He interrupted me and grabbed my pen and pad.  He turned to a fresh page and drew a typical spiral--looked up at me and said, "I don't give a schidt about positive or negative yield curves--that's what I see, my money going down the toilet!"

I asked if he was sure that the toilet flushed that way in the northern hemisphere, that it looked like a southern hemisphere vortex.  That broke the tension, we laughed and ordered another beer.

[quote=NASD Newbie]

[quote=BankFC]

Secondly, I am not asking for an answer to my "intricate tax" question (I already know the answer), I am simply asking how the experience is/was for others...you know, ACTUAL advisors who do more than push products or play advisor on rr forums.

[/quote]

For those who don't know let's explain what this child does.

The typical bank broker is assigned to three to five branches.  On Monday they're on Elm Street, on Tuesday they're on Oak Street and so forth.

While there they have a little desk--almost like a child's desk--that is over in the corner.  There is a sign that explains that the investments being discussed at that desk are not insured by the bank and may fluctuate in value.

There is a running conflict between the "advisors" sitting at that desk and the bank on several levels.  The "advisors" are constantly trying cute tricks to obscure that warning sign--putting a plant in front of it is a typical trick.  They, the "advisors" are such poor salespeople that they cannot deal with questions such as, "What does that sign mean when it says that values may fluctuate?"

Banks are afraid that the investment "advisor" may convert time deposits in the bank to mutual funds and/or annuities which will reduce the bank's deposits--making it more difficult for the bank to make loans.  Consequently banks have a habit of hiring fairly dull witted people as the advisors--like most broker dealers they give IQ tests.  Unlike most firms they use these tests to identify smart people so they will not be offered a job.

If you work for a real firm you will have home office types who are there to help you with issues such as a guy who wants to know how to use his 401(k) to fund a dream, but he's not yet 55.

If there's a way to do it that home office expert will know.  You won't have to pose the question on an Internet message board where it could be answered right or wrong, by somebody who may or may not even have a securities license much less an understanding of the tax code.

Be very very careful of what you read on the Internet--including what I have to say.

[/quote]

Lol, you make me laugh. 

Without even knowing you, I can rest assured that I make more money than you, am more respected in my community than you, and am a whole lot smarter than you. 

The smarter you get, the more open you become from LEARNING for others, not attempting (unsuccessfully) to bash them.

Did you meet that guy in Hunts Point??? And you later developed a true friendship??? Thats cute…

NASD...why do you share your stories?  No friends?

[quote=BankFC]

I met with a gentleman a few days ago who has about $450,000 in this 401K.  He wants to start a business, and his original intention was to fund the business through his 401K via distributions.

Obviously, he's looking at massive tax consequences on taking the money (not yet 59 1/2)

I knew that you COULD invest in a privately held business via a self directed IRA (similar to investing in raw land via your IRA), so I did a little research and dug up some specifics...aka type of business structure needed, tax issues, etc.

Anyway, the long and the short of it is there are a couple different options, both of which are much better than simply taking the cash and paying the taxes.

My question is...has anybody done much of this?  Just curious to hear your experiences.

I think there is an exception to the 10% penalty if your client is at least 55 and has separated from employment.  Best part is, you don't have to do 72(t) distributions for 5 years minimum.

You lose that exception the moment you roll the 401K funds out of the plan and into a traditional IRA.  The exception holds as long as the client can leave his funds in the 401K or if transfered into another 401K.   If a client wants to take a large distribution from their 401K after separation from service, it should be done before rolling the funds out of the company plan if allowed by the plan.  Many company plans want you to be gone after separation from service (quiting, retiring, getting fired) and won't allow you to hang around.  It costs them money to service your account.

Another consideration for the OPs question. If the client can leave his funds in the plan, he might be able to borrow against his 401K with no immediate tax issues.  Of course he has to pay it back sometime or pay the taxes.  And if he is forced out of the plan, in addition to taxes owed the amount withdrawn will count as ordinary income all in one tax year. It could bump him into a higher tax bracket causing even more pain. 

Still a bad idea either way. IMNSHO.

[quote=Cowboy93]This may be a chicken and egg question...but, if he can establish a business and then an owner-only 401k (funded by 450k rollover), he could borrow...but I guess that's still limited to 50k.  So, a very partial solution at best.[/quote]

Thank God for a legitimate post.

That's actually another alternative...like you said, a partial solution, but better than none at all.

Thanks BL and Joe.

Lol, thanks to everyone who actually posted something worthwhile.

[quote=BankFC]

Lol, thanks to everyone who actually posted something worthwhile.

[/quote]

Which advice do you think is worthwhile?

It would be fun to read why a guy with close to half a million dollars in his 401(k) would ask somebody sitting at a child's desk in a bank lobby what to do.

Joe, I gotta differ from you on one point.

It may be foolish to just invest your money in ONE company, but not neccessarily ONE's OWN company.

Have you ever met many successful business owners??? 

I know you have.  Many of them put every last dime they had into the business. 

I have quite a few HNW clients that never even owned a brokerage account until they sold their business, retired, and needed somewhere to put the money.

I have clients who can invest $100,000, get a loan, buy some land, develop it, and make a killing either building or selling lots.  All their money is tied up in the business, IN ONE COMPANY. 

But for some odd reason, I can't (sarcasm) convince them to sell that company and invest everything into the stock market, and get the chance to invest in HUNDREDS of companies.

Why is that?

[quote=NASD Newbie][quote=BankFC]

Lol, thanks to everyone who actually posted something worthwhile.

[/quote]

Which advice do you think is worthwhile?

It would be fun to read why a guy with close to half a million dollars in his 401(k) would ask somebody sitting at a child's desk in a bank lobby what to do.

[/quote]

LOL.  You truly are not worth my time.

[quote=BankFC][quote=NASD Newbie][quote=BankFC]

Lol, thanks to everyone who actually posted something worthwhile.

[/quote]

Which advice do you think is worthwhile?

It would be fun to read why a guy with close to half a million dollars in his 401(k) would ask somebody sitting at a child's desk in a bank lobby what to do.

[/quote]

LOL.  You truly are not worth my time.

[/quote]

A cynic would conclude that you're not bright enough to answer, I'll give you the benefit of the doubt and conclude that you don't have an answer.

It may be foolish to just invest your money in ONE company, but not neccessarily ONE's OWN company.

Have you ever met many successful business owners??? 

It is actually more foolish to invest in your own company without the advice and oversight of another professional.  People tend to over estimate their income potential and underestimate their expenses.  Most people haven't the slightest idea about balance sheet and income statement dynamics, much less profit planning or cost/volume relationships and break even analysis.  

This is something I can speak to with all seriousness.  Idealistic entrepreneurs jump in with both feet into a business without being prepared and with pie in the sky ambitions and fail miserably.  If you want to help your client I suggest most strongly that you urge him to prepare a detailed and researched business plan, a cash flow estimate for one year, for two years and do a market analysis of his business with comparisons of comparable businesses and competitors. 

For every successful business owner there are at least 3 broken hearted failures.

[quote=babbling looney]

I think there is an exception to the 10% penalty if your client is at least 55 and has separated from employment.  Best part is, you don't have to do 72(t) distributions for 5 years minimum.

You lose that exception the moment you roll the 401K funds out of the plan and into a traditional IRA.  The exception holds as long as the client can leave his funds in the 401K or if transfered into another 401K.[/quote]

Really?!!  I had a client's CPA tell me that this works for IRAs?!!  Can you give me a cite that I can share with him?  I know he's going to try and use this exception for 2006...

[quote=Indyone][quote=babbling looney]

I think there is an exception to the 10% penalty if your client is at least 55 and has separated from employment.  Best part is, you don't have to do 72(t) distributions for 5 years minimum.

You lose that exception the moment you roll the 401K funds out of the plan and into a traditional IRA.  The exception holds as long as the client can leave his funds in the 401K or if transferred into another 401K.[/quote]

Really?!!  I had a client's CPA tell me that this works for IRAs?!!  Can you give me a cite that I can share with him?  I know he's going to try and use this exception for 2006...

[/quote]

Yes, really.  The 55 year old exemption applies only to the qualified plan and to the money while it is in the qualified 401K plan.  When they roll it out, the money is recategorized as an IRA and is then subject to those rules not the 401K rules.  If the client wants to take money from the plan they need to do it before they roll it out.

Call any of your providers and ask them the IRS rules on this.  In section 2157 of the IRS guide is specifies qualified retirement plan exemptions and details that separate from amount rolled into an IRA.

[quote=Indyone][quote=babbling looney]

I think there is an exception to the 10% penalty if your client is at least 55 and has separated from employment.  Best part is, you don't have to do 72(t) distributions for 5 years minimum.

You lose that exception the moment you roll the 401K funds out of the plan and into a traditional IRA.  The exception holds as long as the client can leave his funds in the 401K or if transfered into another 401K.[/quote]

Really?!!  I had a client's CPA tell me that this works for IRAs?!!  Can you give me a cite that I can share with him?  I know he's going to try and use this exception for 2006...

[/quote]

 

Indy I am glad I am not getting my advice from you, this stuff is child's play.  55 only for QP and they must have retired, once you roll it it's 59 1/2 in an IRA

[quote=bankrep1]

[quote=Indyone][quote=babbling looney]

I think there is an exception to the 10% penalty if your client is at least 55 and has separated from employment.  Best part is, you don't have to do 72(t) distributions for 5 years minimum.

You lose that exception the moment you roll the 401K funds out of the plan and into a traditional IRA.  The exception holds as long as the client can leave his funds in the 401K or if transfered into another 401K.[/quote]

Really?!!  I had a client's CPA tell me that this works for IRAs?!!  Can you give me a cite that I can share with him?  I know he's going to try and use this exception for 2006...

[/quote] Indy I am glad I am not getting my advice from you, this stuff is child's play.  55 only for QP and they must have retired, once you roll it it's 59 1/2 in an IRA[/quote]

Easy...you'll bruise my fragile ego.  I'll be the first to tell you that I don't know it all.  Frankly, I'd not heard of the 55 and separated from service excpetion until another CPA brought it to my attention.  When he told me that it applied to this guy's IRA, who was I to question the advice?  If you'll remember some advice from basic training, we're trained to tell clients to consult their tax advisor.

I take it you know it all, eh?

[quote=BankFC]

I met with a gentleman a few days ago who has about $450,000 in this 401K.  He wants to start a business, and his original intention was to fund the business through his 401K via distributions.

Obviously, he's looking at massive tax consequences on taking the money (not yet 59 1/2)

I knew that you COULD invest in a privately held business via a self directed IRA (similar to investing in raw land via your IRA), so I did a little research and dug up some specifics...aka type of business structure needed, tax issues, etc.

Anyway, the long and the short of it is there are a couple different options, both of which are much better than simply taking the cash and paying the taxes.

My question is...has anybody done much of this?  Just curious to hear your experiences.

[/quote]

Hmmmmmmmmmm...interesting.

Well...besides all the bickering I would tell the client to do a partial Roth conversion.  Tell him that if he wants to fund this dream to still make precautions to ensure his retirement.  Tell him that the cost of this dream is the Roth conversion tax.  Convert 100-150k to a Roth and design a strategy for that to grow to a reasonable level over the next 20 years.  Effectively making his current 450k that is taxable at least 300k non-taxable 20 years out by carving out 100-150k now.

The remaining 300-350k should be structured in something with a guaranteed income stream.  In this case since 72(t) is not acceptable due to the client's age I would consider looking into a private annuity trust.

Amazing that the obvious hasn't been stated that this dumbass prospect should take out a loan instead of tapping into his QP.

QPs can't be attached by creditors. At least not in my state. That means when, er, if his business fails, he'll still walk away with something.

[quote=babbling looney]

It may be foolish to just invest your money in ONE company, but not neccessarily ONE's OWN company.

Have you ever met many successful business owners??? 

It is actually more foolish to invest in your own company without the advice and oversight of another professional. 

[/quote]

BL, usually you give good advice, as you have here, but WHY ON EARTH do you assume all this hasn't already taken place???  Do you think you're the only professional around here?

This isn't bush league stuff, so OF COURSE there are other things going on. 

Just because I didn't take the time to intimately detail every aspect of everything that is going on with this client, you assume we're just flying by the seat of our pants???? 

With all respect, stop jumping to conclusions...

I simply was putting out the feelers to see if many others were running into this type of business, and as is par for the course, this forum responded with a bunch of "experts" giving specific recommendations with VERY LITTLE knowledge of the client.

It's easy to tell who the true professionals are on this board from the pretenders, newbies, and morons. 

Once again, it makes me realize why so many folks I meet have trust issues with brokers.  So many brokers just think they know it all. 

I wish they tested LISTENING on the series 7.

I appreciate the other responses that weren't client specific, and I am not going to waste any more time on this thread (I suppose I'll waste it elsewhere  ).

[quote=BankFC]

Joe, I gotta differ from you on one point.

It may be foolish to just invest your money in ONE company, but not neccessarily ONE's OWN company.

Have you ever met many successful business owners??? 

I know you have.  Many of them put every last dime they had into the business. 

I have quite a few HNW clients that never even owned a brokerage account until they sold their business, retired, and needed somewhere to put the money.

I have clients who can invest $100,000, get a loan, buy some land, develop it, and make a killing either building or selling lots.  All their money is tied up in the business, IN ONE COMPANY. 

But for some odd reason, I can't (sarcasm) convince them to sell that company and invest everything into the stock market, and get the chance to invest in HUNDREDS of companies.

Why is that?

[quote=BankFC][quote=babbling looney]

It may be foolish to just invest your money in ONE company, but not neccessarily ONE's OWN company.

Have you ever met many successful business owners??? 

It is actually more foolish to invest in your own company without the advice and oversight of another professional. 

[/quote]

BL, usually you give good advice, as you have here, but WHY ON EARTH do you assume all this hasn't already taken place???  Do you think you're the only professional around here?

This isn't bush league stuff, so OF COURSE there are other things going on. 

Just because I didn't take the time to intimately detail every aspect of everything that is going on with this client, you assume we're just flying by the seat of our pants???? 

With all respect, stop jumping to conclusions...

I simply was putting out the feelers to see if many others were running into this type of business, and as is par for the course, this forum responded with a bunch of "experts" giving specific recommendations with VERY LITTLE knowledge of the client.

It's easy to tell who the true professionals are on this board from the pretenders, newbies, and morons. 

Once again, it makes me realize why so many folks I meet have trust issues with brokers.  So many brokers just think they know it all. 

I wish they tested LISTENING on the series 7.

I appreciate the other responses that weren't client specific, and I am not going to waste any more time on this thread (I suppose I'll waste it elsewhere  ).

BL, usually you give good advice, as you have here, but WHY ON EARTH do you assume all this hasn't already taken place???  Do you think you're the only professional around here?

This isn't bush league stuff, so OF COURSE there are other things going on. 

No need to yell .  Of course I don't think that I am the only professional around here.  I do think that I have been doing this much longer than many of you and have had the experience of being in the position of evaluating businesses and granting loans (or not granting) to existing and new businesses and then monitoring those loans and businesses for ongoing ability to repay.  I have seen many businesses fail because of a lack of planning and a refusal to take professional advice.

You are a bank investment rep. I am not denigrating you for that at all. I too was a bank investment rep for some time.  As a bank platform employee, why in the world are you even involved with this client and his business ambitions and business planning? 

Not to be crass, other than just being a helpful person, what is in it for you?  How are you going to be making money from this client?  This is your main function for the bank.  Your function to the client is advising him on investments.  I would assume your pay off is by keeping his 401K money invested with you so you can make commissions, while helping him figure out another way to finance his business and then referring him to some one in that arena.

Keeping investment advice separate from financial planning, which includes his business ambitions, is the reason we have had so much regulation and new rules recently imposed.

No sweat....for awhile I didn't think anyone noticed my comment.

Perhaps if this ends up being the "best" solution, it's a way to limit his entrepenuerial risk to only $50k.  Not sure what kind of start up captial he thinks he needs, but ideally 50k would get him up and running and then hopefully he could be funded with revenue or qualify for a bank loan. 

[quote=Cowboy93]This may be a chicken and egg question...but, if he can establish a business and then an owner-only 401k (funded by 450k rollover), he could borrow...but I guess that's still limited to 50k.  So, a very partial solution at best.[/quote]

i like cowboy's solution- i've done this recently with a client with just under $100k in the plan- he retired, then set up his own biz, we rolled the 401k to a 401k solo and he immediately borrowed (from himself at 1 pt over prime) the almost $50,000 ( caveat: i talked to him about not doing it, protect his retirement, ect...no go, he was going to use it, period.)

the cost is minimal for amts equal to and under $100k -- you can keep the TPA out of the equation, otherwise it can get expensive-

but here is food for thought:

set up a solo 401k with $100k-- borrow $50k from that AND borrow $50k from the existing 401k for $100k total-- i've not looked into it, can you do both?

[quote=TexasRep]

[quote=Cowboy93]This may be a chicken and egg question...but, if he can establish a business and then an owner-only 401k (funded by 450k rollover), he could borrow...but I guess that's still limited to 50k.  So, a very partial solution at best.[/quote]

i like cowboy's solution- i've done this recently with a client with just under $100k in the plan- he retired, then set up his own biz, we rolled the 401k to a 401k solo and he immediately borrowed (from himself at 1 pt over prime) the almost $50,000 ( caveat: i talked to him about not doing it, protect his retirement, ect...no go, he was going to use it, period.)

the cost is minimal for amts equal to and under $100k -- you can keep the TPA out of the equation, otherwise it can get expensive-

but here is food for thought:

set up a solo 401k with $100k-- borrow $50k from that AND borrow $50k from the existing 401k for $100k total-- i've not looked into it, can you do both?

[/quote]

Cowboy you are right. An individual 401K is a good idea to keep the client invested and limit the exposure to only 50K borrowed. 

Texas: I don't know if a company 401K would allow a partial roll out of funds or not. The issue that I have seen with most (not all) company 401K plans after you have retired or left the company is that they don't want you to keep your money in the plan and sometimes force you to roll the account out.  If you have borrowed on the company plan, you might not be able to roll that loan into a new individual 401K if you have already borrowed there due to IRS rules.  The client may have to face a distribution event on the money borrowed from the company plan, if he is forced to close or roll the company plan out.  Not a good thing.

>>Texas: I don't know if a company 401K would allow a partial roll out of funds or not. The issue that I have seen with most (not all) company 401K plans after you have retired or left the company is that they don't want you to keep your money in the plan and sometimes force you to roll the account out.  If you have borrowed on the company plan, you might not be able to roll that loan into a new individual 401K if you have already borrowed there due to IRS rules.  The client may have to face a distribution event on the money borrowed from the company plan, if he is forced to close or roll the company plan out.  Not a good thing.

BL- aren't company 401k's like a box of chocolates? never know what you're gonna' get--

most $450k 401k accounts i've run across, i've practically needed a court order to get them to release-

i'd rollover $100k into a solo 401k if possible, then borrow $50k from it, rollover $250 into an IRA, keep $100k at the old 401k, ONLY IF i could then borrow another $50k from it-  IF i really needed the $100k.

but since they are all different - you should check it out and see if it's possible first--

[quote=TexasRep]

>>Texas: I don’t know if a company 401K would allow a partial roll out of funds or not. The issue that I have seen with most (not all) company 401K plans after you have retired or left the company is that they don’t want you to keep your money in the plan and sometimes force you to roll the account out.  If you have borrowed on the company plan, you might not be able to roll that loan into a new individual 401K if you have already borrowed there due to IRS rules.  The client may have to face a distribution event on the money borrowed from the company plan, if he is forced to close or roll the company plan out.  Not a good thing.

BL- aren't company 401k's like a box of chocolates? never know what you're gonna' get--

most $450k 401k accounts i've run across, i've practically needed a court order to get them to release-

i'd rollover $100k into a solo 401k if possible, then borrow $50k from it, rollover $250 into an IRA, keep $100k at the old 401k, ONLY IF i could then borrow another $50k from it-  IF i really needed the $100k.

but since they are all different - you should check it out and see if it's possible first--

[quote=babbling looney]

BL, usually you give good advice, as you have here, but WHY ON EARTH do you assume all this hasn't already taken place???  Do you think you're the only professional around here?

This isn't bush league stuff, so OF COURSE there are other things going on. 

No need to yell. 

Not yelling, just using bold to help readers differentiate who is talking.  YELLING LOOKS LIKE THIS.

Of course I don't think that I am the only professional around here.  I do think that I have been doing this much longer than many of you and have had the experience of being in the position of evaluating businesses and granting loans (or not granting) to existing and new businesses and then monitoring those loans and businesses for ongoing ability to repay.  I have seen many businesses fail because of a lack of planning and a refusal to take professional advice.

That's great.  Our commercial folks do the same thing every day.  We work as a TEAM.

You are a bank investment rep. I am not denigrating you for that at all. I too was a bank investment rep for some time.  As a bank platform employee, why in the world are you even involved with this client and his business ambitions and business planning? 

Because, believe me or not I don't care, my role in MY financial institution is much greater than "the annuity guy" or "the mutual fund guy."  I work VERY closely with the commercial lending dept, and they rely on the to provide the best strategies for their customers.  That takes taxes into consideration.

Not to be crass, other than just being a helpful person, what is in it for you?  How are you going to be making money from this client?  This is your main function for the bank.  Your function to the client is advising him on investments.  I would assume your pay off is by keeping his 401K money invested with you so you can make commissions, while helping him figure out another way to finance his business and then referring him to some one in that arena.

I am 7 and 66, so sure I get paid by getting assets in the door.  BUT I CARE MORE ABOUT THE CLIENT GETTING THE BEST POSSIBLE SOLUTION.  That is my job foremost.  I have very little pressure regarding numbers, as my numbers are already above expectations.  I can AFFORD to find the best solution for our clients.

Keeping investment advice separate from financial planning, which includes his business ambitions, is the reason we have had so much regulation and new rules recently imposed.

I have a Series 66, so why couldn't I do financial planning if I chose to?  Regardless, financial advice is dispensed from anyone and everyone anyway, from the State Farm guy, to the next door neighbor.  At least if they get it from me they can trust it is correct.

[quote=joedabrkr] [quote=BankFC][quote=babbling looney]

It may be foolish to just invest your money in ONE company, but not neccessarily ONE's OWN company.

Have you ever met many successful business owners??? 

It is actually more foolish to invest in your own company without the advice and oversight of another professional. 

[/quote]

BL, usually you give good advice, as you have here, but WHY ON EARTH do you assume all this hasn't already taken place???  Do you think you're the only professional around here?

This isn't bush league stuff, so OF COURSE there are other things going on. 

Just because I didn't take the time to intimately detail every aspect of everything that is going on with this client, you assume we're just flying by the seat of our pants???? 

With all respect, stop jumping to conclusions...

I simply was putting out the feelers to see if many others were running into this type of business, and as is par for the course, this forum responded with a bunch of "experts" giving specific recommendations with VERY LITTLE knowledge of the client.

It's easy to tell who the true professionals are on this board from the pretenders, newbies, and morons. 

Once again, it makes me realize why so many folks I meet have trust issues with brokers.  So many brokers just think they know it all. 

I wish they tested LISTENING on the series 7.

I appreciate the other responses that weren't client specific, and I am not going to waste any more time on this thread (I suppose I'll waste it elsewhere  ).

[/quote]

I understand your frustration but after all you did ask this question on a PUBLIC forum.  Nobody is forcing you to read all the "irrelevant" posts.
[/quote]

Joe, you're right.  I shouldn't expect much out of this forum. 

However, I am "forced" to read the piles of "irrelevant" posts in order to find the one or to good nuggets of info in any given thread.

Like you said, it's a public forum. 

to = two

[quote=joedabrkr] [quote=TexasRep]

>>Texas: I don't know if a company 401K would allow a partial roll out of funds or not. The issue that I have seen with most (not all) company 401K plans after you have retired or left the company is that they don't want you to keep your money in the plan and sometimes force you to roll the account out.  If you have borrowed on the company plan, you might not be able to roll that loan into a new individual 401K if you have already borrowed there due to IRS rules.  The client may have to face a distribution event on the money borrowed from the company plan, if he is forced to close or roll the company plan out.  Not a good thing.

BL- aren't company 401k's like a box of chocolates? never know what you're gonna' get--

most $450k 401k accounts i've run across, i've practically needed a court order to get them to release-

i'd rollover $100k into a solo 401k if possible, then borrow $50k from it, rollover $250 into an IRA, keep $100k at the old 401k, ONLY IF i could then borrow another $50k from it-  IF i really needed the $100k.

but since they are all different - you should check it out and see if it's possible first--

[/quote]

If you're having a problem getting them transferred in then you need to learn how to handle the transfers better...it's not that hard once you get the right paperwork in your client's hands.....in my experience.
[/quote]

gosh thanks for that, guru-

i'm getting the money, but at times it's taken awhile or a few phone calls (not more paperwork or signatures) -- that has just been my experience vs. BL's: ".....they don't want you to keep your money in the plan and sometimes force you to roll the account out...."

but when you deal w/ the company 401k plan administrators, prepare to deal with almost any curve ball imaginable--

I know this can be frustrating with all the insulting posts and such,
but I learned a new trick here… I LOVE the idea of rollover to solo K
and borrow from yourself… BRILLIANT!  Thanks folks, I love this
place!

[quote=TexasRep][quote=joedabrkr] [quote=TexasRep]

>>Texas: I don't know if a company 401K would allow a partial roll out of funds or not. The issue that I have seen with most (not all) company 401K plans after you have retired or left the company is that they don't want you to keep your money in the plan and sometimes force you to roll the account out.  If you have borrowed on the company plan, you might not be able to roll that loan into a new individual 401K if you have already borrowed there due to IRS rules.  The client may have to face a distribution event on the money borrowed from the company plan, if he is forced to close or roll the company plan out.  Not a good thing.

BL- aren't company 401k's like a box of chocolates? never know what you're gonna' get--

most $450k 401k accounts i've run across, i've practically needed a court order to get them to release-

i'd rollover $100k into a solo 401k if possible, then borrow $50k from it, rollover $250 into an IRA, keep $100k at the old 401k, ONLY IF i could then borrow another $50k from it-  IF i really needed the $100k.

but since they are all different - you should check it out and see if it's possible first--

[/quote]

If you're having a problem getting them transferred in then you need to learn how to handle the transfers better...it's not that hard once you get the right paperwork in your client's hands.....in my experience.
[/quote]

gosh thanks for that, guru-

i'm getting the money, but at times it's taken awhile or a few phone calls (not more paperwork or signatures) -- that has just been my experience vs. BL's: ".....they don't want you to keep your money in the plan and sometimes force you to roll the account out...."

but when you deal w/ the company 401k plan administrators, prepare to deal with almost any curve ball imaginable--

[quote=Ready2Jump]I know this can be frustrating with all the insulting posts and such, but I learned a new trick here... I LOVE the idea of rollover to solo K and borrow from yourself... BRILLIANT!  Thanks folks, I love this place! [/quote]

if you're gonna' blow smoke ...why bother?

if you're gonna' insult, just to make yourself feel better...why bother?

if you've got a legitimate counter that may ultimately educate and/or inform, you've got to go with it, the person who ends up learning the most, may be yourself--- and that's why this forum is here.

[quote=joedabrkr]
mea culpa....admittedly my comment wasn't the most constructive....

I too have found you must follow up on EVERYTHING to make sure that the paperwork is processed correctly and promptly.  A couple thoughts-

I always take notes on conversations, ask when $$ are expected, and follow up with the administrator very politely but firmly within a few days of expected date if no check has arrived.
Lately I've been drafting a cover letter for clients to sign explaining to administrator/custodian that I am acting on their behalf to facilitate the transfer, and that they should give me whatever information or forms are necessary to make that happen promptly.  Only started using it recently, but it seems to work.
I try to get checks sent directly to my branch for deposit, to avoid delays by passing through the client's hands, or the potential that the check could get lost in the mail.
Sometimes I have also included a return Fedex envelope with paperwork, but haven't used this strategy regularly.
Often with bigger company plans the entire distribution process can be handled on the phone.  Try to remember to have your client call and ask this question.  Speeds up the process quite a bit.
[/quote]

excellent post-

some of the VERY big plans allow you to txfer with a few keystrokes and clicks of the mouse-

the mom & pop's tho seem to make it harder to pull money out of by adding this inane form and that repetitious signature, it almost seems like some of them don't want to release the likes of $100k to $500k too easily-

Seems like all the Fidelity plans around here allow for transfers right over the phone.  I just turn on the speaker, tell the Fidelity folks that the client is listening in and let the client confirm my instructions.  The Fidelity folks are very polite and this has worked like a charm every time I’ve used it.

[quote=TexasRep]...the person who ends up learning the most, may be yourself--- and that's why this forum is here.[/quote]

Absolutely.  I'm not too proud to admit that I learned something here yesterday.  Now I have the always pleasant task of informing the client's CPA that I'm questioning his tax advice...yippee...

[quote=Indyone]

[quote=TexasRep]…the person who ends up learning the most, may be yourself— and that’s why this forum is here.[/quote]

Absolutely.  I'm not too proud to admit that I learned something here yesterday.  Now I have the always pleasant task of informing the client's CPA that I'm questioning his tax advice...yippee...