by Kaaren Hall, CEO, uDirect IRA Services LLC

Self-Directed IRA investment in Private Placement Equity and IRA-Owned LLCs are on the line right now.  Congress is not just targeting mega-IRAs!

We all heard of Peter Thiel who turned his IRA into a multi-billion-dollar nest egg. Thiel is the exception to the rule, most IRAs won’t grow to the billions. Only about 156 people in the entire country have at $25 million or more in their Roth IRAS.

Compare that with the over 60 million taxpayers owning individual retirement accounts (IRAs), which include traditional IRAs, Roth IRAs, Simplified Employee Pensions (SEP IRAs), and Savings Incentive Match Plans for Employees (SIMPLE IRAs). The average IRA balance for taxpayers with IRAs is about $157,000.

Congress allowed the extra-large IRAs when they passed TIPRA, the Tax Increase and Reconciliation Act (TIPRA).  TIPRA allows anyone to convert pre-tax retirement accounts to Roth regardless of income. A few people took advantage of this and created mega IRAs.

So, when it comes to the “Responsibly Funding Our Priorities” proposal presented by the House Ways & Means Committee on September 13th, Section 138132 and 138134 need to be deleted.  Let’s cap contributions for those who make over $400,000 (married) or $450,000 (heads of household).  But, let’s not allow Congress to wreck the retirement saving plans of millions of middle-class Americans.

Hands-off the right to choose investments

Section 138312 of the House reconciliation bill limits our right to invest in assets with our retirement savings where we must prove income or education status. That means, if you cannot prove you are an “accredited investor”, your IRA cannot acquire these assets.

Section 138314 says an IRA owner cannot invest his or her IRA assets in a corporation, partnership, trust, or estate in which he or she has a 10 percent or greater interest.  That means your IRA can no longer hold an IRA-Owned LLC, sometimes called the “Checkbook IRA”.

It means more than that.  It also means if your IRA presently holds these assets, you have two years to remove them from your retirement account or your IRA ceases to be an IRA and becomes taxable to you.

What Can You Do to Stop This?

Make your voice heard. Contact your elected officials in the United States House of Representatives and Senate. Visit them, call them, send an email or a letter or even a fax. Tell your story!! If Congress only hears about rare exceptions like Peter Thiel they will continue forward with proposals that hurt the average IRA holder! Let your Representatives and Senators know how this proposal could impact you personally.

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What This Proposal Does Not Affect

Brick & Mortar Real Estate (physical real estate)

Raw Land

Precious Metals

Lending from IRAs

Mobile Home Parks

Investing in performing and non-performing debt

When Could This Take Effect?

Congress seems eager to have this and other matters resolved before the session adjourns December 10th.

Act now.  Call, write, email, or visit the offices of your representatives in the House and Senate.