In a Nutshell: Since 1974, investors have been free to leverage retirement account assets for alternative investments. The problem is that the technology for doing so has been stuck in the ‘70s ever since. IRA Financial Group is changing that with a full-service mobile platform that makes self-directed investing of IRA and 401(k) funds in real estate and other alternative assets as easy as using any modern equity investment platform. IRA Financial uses technology to help investors better control their retirement funds, which can be helpful as a hedge against future credit card debt.
Tech platforms have democratized access to equity investment products like stocks, mutual funds, and ETFs. Trading is basically free, and the culture around trading is far less exclusive than what prevailed before the internet.
The platforms make money from interest on securities and margin loans and payments for order flow — revenue sources that are outgrowths of the markets. There’s no incentive to accommodate other types of trading because their business models are built to draw on those specific sources.
That’s why traders rarely hear about other great trading options available to them. For example, since the passage of the Employee Retirement Income Security Act (ERISA) in 1974, the IRS has allowed retirement account funds to be used for self-directed investing in real estate and other alternative assets.
But because the modern platforms haven’t built businesses around those opportunities, that information has tended to stay bottled up.
IRA Financial Group has a model for changing that, using tech to make the process of investing traditional and Roth IRA funds in real estate and other alternatives as popular as modern equity investing. It’s a great fit for investors in search of diversification options, for folks who may not trust or be entirely comfortable with stocks, and for everyone who wants to grow money tax-free, perhaps as a hedge against credit card or other debt.
“Since 1974, the tax code has allowed investing IRA funds in everything but collectibles, life insurance, and self-dealing,” said Adam Bergman, IRA Financial’s Founder and CEO. “It’s my passion to educate people and let them know that they can do this — efficiently and cost-effectively.”
Diversify Retirement Account Investments
Bergman was inspired to create IRA Financial Group because, in his previous career as a New York tax lawyer, he only learned about these self-directed opportunities by chance through a client.
“I worked at some of the largest law firms in the country, and I had no idea that you could use your IRA to buy real estate or make a hedge fund investment,” he said. “If I didn’t know, how is the average American going to know?”
Researching the field, he learned about legacy trust companies that were offering self-directed retirement services. But in terms of customer experience, they were stuck in the dark ages of the ’70s.
“The process was super slow, with all original signatures required on forms that had to be downloaded,” Bergman said. “There was also high cost — up to a few thousand to open a simple IRA to buy real estate — and the process took months.”
IRA Financial streamlines all of that through a fully functional mobile app and electronic signature integration through DocuSign.
Products include Self-Directed IRAs, one of which establishes an LLC for complete investor control in place of a custodian. Sole proprietors, consultants, and independent contractors can choose the Solo 401(k) product.
All can be set up with traditional (pre-tax) or Roth (after-tax) structures, and they all bring the benefits of tax deferral.
“In the case of a traditional IRA, you receive a tax deduction when you make an IRA contribution, so if you put $6,000 into an IRA and you earn $100,000 a year, you pay tax on $94,000,” Bergman said.
“That $6,000 now grows without tax, so if you invest that $6,000 and it grows to $12,000, now you have $12,000 in your IRA without tax,” he said.
Support For Accomplishing Money Goals
All of that has been true since ERISA became law. What IRA Financial Group is now able to contribute is the technology and the consultative puzzle pieces that give investors the insights and transparency they need to make the best choices within a complex investment landscape.
“We invest in two areas for growth — people and technology,” Bergman said. “Our growth in new accounts is at over 400% this year, and we wouldn’t have been able to do that without technology and our great team of people.”
On the tech side, the entire experience from onboarding to distribution can happen on mobile. IRA Financial is the only company in the self-directed space that can claim that.
In addition to DocuSign integration for more efficient communication, the app integrates with the Gemini Crypto Exchange. IRA Financial clients can link their IRAs over on the Gemini platform and use the Gemini app to trade on their own without paying a commission. Another partnership with CapitalOne lets IRA Financial customers open a bank account directly in the app.
Customers are in control of the investments through the platform, and a large customer service team is available to address the tax implications of various strategies and other nuances.
“You come to us with the investment, and we’re there to make sure you do everything tax efficiently, from rollover and account setup into investments and then, ultimately, into distribution,” Bergman said.
“IRA Financial not only provides expertise in the retirement space for how people can invest their money in alternative assets, but it also uses technology to make the process more efficient and cost-effective,” he said.
Invest Money to Protect Against Credit Compromise
The structural benefits provided under ERISA provide a way to address life’s contingencies — such as credit cards and debt — with self-directed IRA and 401(k) investment accounts.
“The nice thing about saving for retirement is your money is going to grow,” Bergman said. “And if you make Roth IRA contributions, you can always pull those out anytime you want, tax-free.”
Say an investor puts $2,000 a year in a Roth IRA starting at age 25. Five years later, that investor has $10,000 in contributions that very well may be worth $25,000 owing to appreciation.
But then something happens to cause a significant credit card hit — unforeseen medical bills, perhaps, or some other contingency.
“Stuff happens,” Bergman said. “You could always pull out that $10,000, tax and penalty-free, and pay down that debt. It’s always good to have a savings option.”
There’s another route for self-employed individuals who have a Solo 401(k) — borrowing against it. “If you take money out of a 401(k), paying 3.25% interest, let’s say — a rate based on prime interest rates — the credit card debt is usually going to be much higher,” Bergman said.
So clients have options. “We all know things happen in life,” Bergman said. “It’s fine to put things on your credit card, but a retirement account can be a really good vehicle for paying some of that debt off.”
And there’s really no downside. “I always tell people, just save,” Bergman said. “That’s the huge benefit of deferral — it makes the retirement system the smartest way to do it.”
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