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My IRA account Has Received Funds. Now What?

Where Does My Money Go When I Transfer It to My IRA?

We get a lot of questions about what happens when you receive money into your IRA account. I thought I would take a few minutes and explain the process. When money comes into your Sunwest Trust IRA account, it is immediately deposited into a FDIC insured savings account with US Bank. The FDIC insurance covers deposits for each individual up to $250,000. If you have more than $250,000 in cash, we split it up and put it in multiple banks to ensure that all of your cash is FDIC insured.

Once we have deposited the money, we notify the client that the funds have been received. This usually happens through email, but if we don’t have your email address on file, we send you a letter in mail. If we receive a wire transfer or a cashier’s check, the funds are available immediately. If we receive a personal check or a check from another custodian for over $3,000, we put an 11 business day hold on the check.

Sunwest is Ready to Move When You Are.

When you are ready to make an investment, you will need to provide us with a Direction of Investment form. This form tells us the dollar amount that needs to be sent, what you are purchasing and where to send the money (either an address of where you would like a check sent or bank wiring instructions). We will also need something to show proof of investment. The required document will depend on the investment. For instance, if you are investing in an LLC, we will need the Operating Agreement. If you are investing in private stock, we would need a subscription agreement, membership certificate or some other type of proof of investment.

Before making any investment decisions, please make sure to speak with a CPA or tax professional.

THE DECISION OF HOW TO INVEST IRA ASSETS is complicated because the law does not allow taxpayers to hold certain investments in an IRA. CPAs will find little formal guidance on IRA investments from the IRS or the Department of Labor.  according to Robert Preston, The Do’s and Don’ts of IRA Investing. www.journalofaccountancy.com.

Don’t I need a lot of money in my IRA to make alternative investments?

I get a lot of questions from people asking what they should invest in through their Self-Directed IRA. Sunwest Trust is just a Self-Directed IRA Custodian, so we cannot provide any investment advice nor do we endorse any investment products. With that being said, I am happy to share success stories or stories of investments that did not work out so well. If anyone has a success or failure story that they would like me to share on the blog, please email it to dustin@sunwesttrust.com.

Until I start getting some of your stories to share with everyone, I’ll go ahead and share one of my own. I think there’s a common misconception out there about self-directed IRAs. People think that you have to already have a lot of money in your IRA to be able to get started. This simply isn’t true.

In January of last year, my wife and I decided that it was a good time for her to start her own IRA. She established a Roth IRA with Sunwest Trust and made a $5,000.00 prior year contribution (prior year contributions can be made up until April 15th).

Next, we started talking to some investor friends who specialize in buying and selling Real Estate Contracts. A Real Estate Contract is used here in New Mexico for people who are buying or selling a property using seller financing. If you don’t have Real Estate Contracts in your state, you probably have something similar like a Deed of Trust, Contract for Deed, etc.

We found a seller on a Real Estate Contract that was looking to sell the contract to get some cash. The contract was on a small piece of land in the mountains and was originally sold to the buyer for around $23,000.00. The buyer had quite a bit of equity in the property and had paid down the contract significantly. From looking at the payment history, we could tell that the buyer had been very consistent in making his payments and if he were to continue making the payments at this rate, he would have the property paid off in approximately 2 ½ years.

My wife and I ran some simple calculations on a financial calculator to determine what we would offer the seller for his contract. After some negotiation, we agreed on a price that would earn my wife’s Roth IRA 10% interest on her money over the next 2 ½ years (that interest rate will be even higher if the buyer decides to pay off the contract sooner). Even though the buyer was only paying 7.5% interest on the contract, by discounting the purchase price of the contract we increased our yield to 10%.

After we worked out all the details with the seller on the Real Estate Contract, my wife filled out a Direction of Investment form and sent it in to Sunwest Trust. Once the paperwork had been processed, Sunwest Trust sent a check to the seller from my wife’s IRA and we provided the Real Estate Contract, an assignment of the contract and the original deeds to Sunwest Trust. The entire deal took less than a week to complete.

You’re probably saying to yourself, 10% on $5,000.00 is not very much money. True, but this is just an example and if $5,000.00 is all you have in your IRA, you have to start somewhere. Now imagine doing 10 investments like this or buying bigger contracts and you’ll start to see the value. Plus, there’s not a bank in the country that can offer you that much of a return on your money and if you want to take your chances with that casino they call the Stock Market, be my guest.

I hope this was beneficial to some of you and if you have any comments or questions, please don’t hesitate to ask. Please remember that this was merely an example of what my wife did with her Roth IRA. Sunwest Trust does not endorse or recommend any investment products and any investment questions that you have should be discussed with your CPA.

Terry White

About Terry White

I started my business career after getting my degree in Accounting from the University of New Mexico in 1983. My first job was as a controller for a local title company, and in 1987 I started First Financial Escrow, Inc. Over the years I played a part in several startup companies including First Financial Equities, Inc., First Financial Trust, Inc., First Financial Marketing, Inc. and Asset Ventures, Inc. In 1997 First Financial Escrow, Inc. was able to purchase the escrow accounts from Sunwest Bank and changed its name to Sunwest Escrow. As the market changes, Sunwest has grown and changed along with it. Besides my wife, Sheila, we have three boys, two daughters-in-law, one grandson, another grandson on the way and a future daughter-in-law. Sunwest is my passion, and I enjoy coming to work every day to see what will happen next. I enjoy fly fishing, spending time in Colorado, biking and watching my boys play soccer.