Episode 61: Understanding Self-Directed IRAs – Featuring Kasia Macioch

Kasia: So, the term self-directed, again, as you mentioned, it’s used and the meaning means that, essentially, you have control in what you’re gonna invest in. So, if you were to find a great deal, find a great investment, you did your homework, you know, you ran the numbers and you’re like, “Wow, this is a great opportunity for my family and I,” you call up the brokerage firm and you say, “I would like to do this deal,” you know, “I find some great land or a great apartment-complex opportunity,” what that person is gonna tell you is that you can’t do it. And they’re only telling you half of the truth, you just can’t do it with that company.

Michelle: Hi, I’m Michelle Bosch, a real-estate investor, mom, wife, and host of the InFLOW podcast. And I’m passionate about helping women invest in land and apartments. Join me each and every week for real-estate investing strategies and interviews with thought leaders that will leave you inspired and ready to step into flow for inflows of cash, inflows of ease, and inflows of grace in your life. Now, here on YouTube are the video versions of my podcasts and, in order for you to get my latest information, please go ahead and subscribe. And now, let’s go.

Welcome to the InFLOW podcast, I’m your host Michelle Bosch. Super excited today to have with me Kasia Macioch, she is a senior client-relation manager at the IRA Club. This is the IRA Club that actually Jack and myself also have our accounts with. You know, we moved them from a competitor that wasn’t giving us the service and was way too expensive. And we’ve just been blown away by their service, we actually…you know, they’re a part of the vendors that we actually endorse, you know, of companies that you should be working with when it comes to IRAs.

And so, I want to give you guys a little bit of background on Kasia. Kasia is, like I said earlier, the senior client-relation manager for the IRA Club. The IRA Club is a self-directed IRA custodian. Kasia was born in Warsaw, Poland, so she’s also an immigrant into the U.S. Her family moved to New York in 1994 for greater work opportunities, that’s classic…the immigrant, you know, story. And they’ve relocated to Chicago a few months later, she’s graduated from the Dominican University with a degree in merchandising and business. And lately, she basically travels really the country educating people on various retirement plans, setting up new accounts. And so, thank you so much for being here, Kasha, welcome to the InFLOW podcast.

Kasia: Thank you so much, Michelle, for having me. It’s a pleasure to be here.

Michelle: Perfect. So, Kasia, let’s start with…tell me a little bit about how you grew up around money, especially because, as an immigrant, you probably have a different, you know, unique perspective.

Kasia: Oh, absolutely. So, as you mentioned, my family and I came to the United States in 1994. We grew up in Warsaw, Poland, both of my parents were actually musicians. So, you know, kind of just having work whenever something was available. So, my dad would do concerts, he worked on cruise ships and he was really kind of hustling all the time just trying to feed his family. My mom was a music teacher, so her paycheck was a little bit more stable, but again, you know, she was only working part-time and taking care of my brother and I.

So, we decided to move to the United States in 94. Essentially, my dad traveled a little bit and a lot of his friends were moving to the States just for work opportunity, education, just again having that opportunity to work. It didn’t matter to my parents what type of work they did. So my dad was a security guard, he drove limos, he worked in factories. My mom, she cleaned houses. And a lot of our friends, when they lived in Poland, they were doctors, pharmacists, professors, and so, they essentially kind of gave that up for just the opportunity that the United States has. And again, they, you know, kind of did more of the blue-collar career path, but again, the opportunity that they had for education, investing, just, you know, having that opportunity is more important to them I feel like than maybe some of the pride.

So, my parents did that. They worked really hard, worked multiple jobs all day, all night, just again to have that opportunity for my brother and I, for a better life. I think most parents always want their children to have a life better that they had.

And so, the way that we grew up on money was, you know, it was very scarce. You know, we didn’t get everything that we wanted, my brother and I did not get an allowance. Essentially, I started working really young if I wanted to buy clothes or go to the movies with my friends. I had to work for that. So I would walk my neighbor’s dogs and babysit and different things like that.

But essentially, I think the mindset was…my dad was definitely in charge, so my mom, even though, you know, at times she would be making more than my dad, essentially he kind of ran the household. So, you know, he decided, at the end of the day, what we’re buying, as far as big purchases go, where we’re going on vacation, you know, kind of…you know, again, taking charge of money that way. And so, you know, it was kind of sometimes difficult to see because my mom was working just as hard, if not harder, yet he had the last say about, you know, what we’re doing with the money.

My dad also spent a lot of time just learning to invest. He himself, early on, invested in real estate. And so, that was, you know, besides his typical…not nine-to-five because he’s working essentially like 7:00 to 4:00, you know, so long hours, sometimes working weekends. But in addition to that, my dad also, again, really early tried to get into real estate, any opportunity that he could.

And it’s a lot of work. You know, he has some apartment complexes that he rents out, and so, you know, it’s kind of, again, hard to see that he works really hard during the day, and then, on top of that, he has to go and fix a leaky sink. You know, so it’s… Yeah, you know, they worked really hard for that. So…

Michelle: Yeah. So you definitely intimately understand, you know, now, you know, as someone that educates others on investing on IRAs, you intimately understand people and and your role kind of like as custodians and fiduciaries of people’s monies. Because, at the end of the day, you know, that money represents a lot of, you know, sacrifices, a lot of mistakes, a lot of lessons learned, but also a lot of breakthroughs, a lot of successes. And so, tell me a little bit…let’s shift a little bit into IRA talk. And for our listeners, you know, if you don’t know much about IRAs, there’s two different types of IRAs. Especially if you’re with a company right now, they might say that you have a self-directed IRA but that’s not the case. So, can you explain the two different kinds of IRAs out there?

Kasia: Sure. Absolutely, I’ll do a really quick story. So, IRAs were invented…not invented but IRAs were established in the early 70s. And so, essentially Congress saw that pension plans were going away, we can’t rely on Social Security, so that’s how IRA were created. What IRS said is that you can invest for your future however you’d like. But as we know, Fidelities, Schwabs, Vanguards, you know, the big brokerage firms really took over the advertising. So most clients, you know, in the 70s, 80s, and 90s, just took their money where they thought they should, which would be a bank, a brokerage firm, an insurance company. And they didn’t realize that their retirement account can be invested in other vehicles such as real estate, such as doing a syndication, such as lending that money out. They just didn’t know that because companies like the IRA Club were not advertising as much as the larger brokerage firms.

So, the term self-directed, again, as you mentioned, it’s used and the meaning means that essentially you have control in what you’re gonna invest in. So, if you were to find a great deal, find a great investment, you did your homework, you know, you ran the numbers and you were like, “Wow, this is a great opportunity for my family and I,” you call up the brokerage firm and you say, “I would like to do this deal,” you know, “I find some great land or a great apartment-complex opportunity.” What that person is gonna tell you is that you can’t do it. And they’re only telling you half of the truth, you just can’t do it with that company.

Michelle: That company. Yeah, exactly.

Kasia: Yeah, it doesn’t have anything to do with, “It’s not allowed,” yeah.

Michelle: Especially real estate does not allow them to basically park your money in something that is gonna create, you know, fee income for them. So…

Kasia: Right, they’re not making any money off of that transaction so they’re not gonna advertise it, they’re not gonna, you know, advise you to do that. But again, with a company like IRA Club, we are more flexible and we will allow you to invest in your future if that’s what you think is right for you. We’re not gonna tell you if it’s, you know, a good deal or a bad deal, we’ll let you know if there are any red flags, we’ll make sure everything is IRS-compliant, we’ll file everything, we are the bookkeeper for your account. But again, that term, self-directed, just means taking control and really, you know, investing in what you think is best, not what the guy has been doing for you for years and you’re paying, you know, him or her a large fee essentially to take control of your money, instead of you taking control of your money.

Michelle: Yeah, yeah. So now let’s say somebody, you know, either wants to start flipping land, you know, investing in land and they don’t have an IRA, they wanna set one up. And then, they decide, “Okay, I would like to,” you know, “if I don’t need that money right now, I would love for, whatever funds are inside of that self-directed IRA, to go towards,” you know, “acquiring this property and flipping it and keeping…” Like is that kind of like how it would go if you wanted to use your IRA to flip a piece of land for example?

Kasia: Sure, there’s different ways to do it. So, essentially, most of our clients will invest by using their current IRA that they’ve established a few years ago. That’s one option. Number two is to move funds from a previous employer plan, that is a 401k, 403B, TSP, multiple names for an employer plan. And then thirdly, you can definitely start your IRA. And what you would do is you would just put money into the account, you could set up a monthly contribution or an annual contribution. And then, that money you can get, you know, started on the deal as soon as possible. You can put the money on Monday, and then, make your deal by Friday. So really, there’s no time limit of how long it has to stay in the account.

So, most of our clients…again, what’s great about doing the land deals is, you know, you can find some really great deals that they don’t require tons and tons of cash. So, if you find a great deal for a few thousand dollars, essentially your IRA can get started right away. If you have more funds, than you could do other, you know, real-estate transactions which is, you know, syndications, apartment complex. But, you know, the beauty of that self-directed IRA is that, if you find that great deal, then, you know, get your IRA to start working and start generating that cash flow.

Michelle: Yeah. I know you mentioned, you know, you can bring and transfer and roll over funds from a prior employer. So there’s restrictions on being able to do it from the current? Why is that? Is that just basically each employer having a different…

Kasia: Yeah, that’s a great…yeah, kind of going back to that control. So, you know, the employer just tries to make it as easy for everyone and as low-risk. So, if there’s a big company and they have, you know, 200 employees, they’re just gonna kind of provide the most basic plan for a 401k and invest that in stocks, and bonds, and mutual funds. So, you know, when you look at your 401k statement, it’s kind of just, you know, kind of going [inaudible 00:13:56], it’s not really doing much. And especially now with everything that’s happening. But even a few months ago, if you were to look at your statement, you know, it’s just essentially just, you know, keeping up with inflation is what we say.

So again, there are restrictions. Right? A lot of these brokerage firms have just different lobbyists that just don’t allow the account holder to move their money, which to me is just really silly because it’s your money, you’re working hard, you’re making your contributions. And, you know, again, you don’t have control of that money. So it doesn’t hurt to ask, you can definitely call up your HR department and see can they transfer the funds, but 9 out of 10 times they will not be able to transfer the funds. Just too bad.

Michelle: Yeah, that has been our experience too with, you know, just friends that have been wanting to invest, and then they’re like, “Oh darn, I can only move so much because,” you know, “the rest is with my current employer.” Now, going back to the flipping of the land, especially because our model and our method, you know, the Land Profit Generator method, is to buy properties for 5 to 25 cents on the dollar, so it is ideal. And how we’re buying those properties is, you know, we put those under contract, it’s a contract that is assignable. So how would a person then go move from there? Do they assign the contract to their IRA and then the IRA basically is the one that comes in and jumps in, you know, with a title company and purchases the property and sales the property? Is that how it will work?

Kasia: You got it, that’s essentially it. Yeah, so all the paperwork would come to us, we would sign on behalf of the IRA, funds would go in and out of the IRA. And then, that is how the IRA grows income-tax free. But our investment team will walk you through that. They’ll let you know what documentation we need, they’ll talk with the title company. So that is what we do all day every day.

Michelle: What about if there was an apartment syndication, Kasia, how would that work?

Kasia: It’s almost the same thing. So you would just, you know, fill out a form just letting us know, you know, how much is going towards the project. We would look at the documentation, you know, we have a lot of clients that have worked with this company before, so it’s pretty easy for our investment team. You know, they’ve already seen the paperwork so they will just double check everything, make sure it’s IRS-compliant, send out the funds, and now your IRA owns that asset. So your IRA either owns land, physical land, or your IRA is part of this syndication. And it will, again, generate the profits income-tax free.

Michelle: Yeah, yeah. Now tell me a little bit about…because we’re right now, at the time of this recording, we’re on April 8th, we’re in the middle of a pandemic, we’re also quarantined at home. And what has happened is that legislation, on the medical side and on the financial side, has changed more than…and I don’t know how many years. You know what I mean? And so, there’s certain, you know, changes to the law, recent changes to the law, that effect specifically IRAs when it comes to your ability to draw, your ability to borrow, and possibly even more. Can you tell us a little bit how are those changes affecting IRAs right now, self-directed IRAs?

Kasia: Sure, sure. So this is called the CARES Act, which was established a few weeks ago. And so, a couple of things is…you mentioned distributions, so we’re taking money out. Right now you are able to take funds out of your IRA, whether that’s Roth or traditional, and if you are below the age of 59 and a half, you will not pay the 10% early-distribution fee.

Michelle: 58 and a half you said?

Kasia: 59 and a half. So, if you’re 30, 40, 50, you can withdraw the funds, take out a distribution, and you will not be pinged with that 10% early-distribution fee. So, essentially you’re able to take the money out and save 10%. What you will do is you will have to, if you have a traditional IRA, pay the taxes. You have 3 years to pay them. So again, you know, that’s up to you and your CPA, you’ll work that out if you wanna pay the taxes up front, if you want to spread it out throughout the 3 years. But essentially you’re able to take funds out of an IRA without the 10% penalty. So again… Go ahead.

Michelle: Yeah, can I do a follow-up question right now for somebody that doesn’t know the difference between a Roth and a traditional?

Kasia: Sure. So, the Roth and traditional, those are essentially just the different tax types. They’re both IRAs. With with Roth IRA, the taxes have already been paid. So, when you put money into the Roth IRA, the taxes were taken care of. You don’t have…

Michelle: So basically it’s after-tax dollars?

Kasia: After-tax dollars, you don’t have to worry about paying the taxes in the future. We really like the Roth IRA, there’s just a lot of great benefits. You’re paying taxes up front, you’re gonna grow your IRA income-tax free. And then, when you’re older and you take the funds out, you don’t have to worry about paying those taxes. So, the Roth, I think it’s a great deal. The traditional IRA…

Michelle: [inaudible 00:09:05].

Kasia: Yeah, yeah. The traditional is just the opposite. When you put money in, you are eligible for a deduction, so you don’t pay the taxes. And then later, when you take the funds out, you would pay taxes. Again, that’s just based off of your tax bracket, how much income you have for the year. So, you know, it’s either, “I pay taxes at the beginning,” or, “I pay taxes at the end,” it’s up to you. So that’s a difference between the Roth and the traditional.

Michelle: Okay. And then, going back to the CARES Act, ability to borrow against it and any other changes that you know of.

Kasia: Yes. So if you have a 401K, you are able to borrow funds. And that’s up to a $100,000. In IRA, you don’t take a loan out of an IRA, you would just take a distribution, but with a 401K, you can actually take out a loan. Again, so that’s something that you’d work with your, you know, employer or HR department. And again, if you need the funds because you were affected by the coronavirus, you’re able to take out a loan for up to $100,000. Again, you know, some of the interest rates and the penalties, those are away. So essentially the IRS is letting you take out funds. Again, you know, either your wages were jeopardized, someone in your family was sick…and I think, you know, everyone’s income and finances have been jeopardized, I can’t think of anyone that hasn’t been affected by this. And yeah.

Lastly, one other thing about the CARES Act is there is no RMD. So, if you have a traditional IRA and if you are over 70 and a half, you will not have to take money out. So essentially, that allows you to leave money in your IRA, letting it grow tax-free. So they’re being a little bit more lenient with the RMDs right now.

Michelle: Interesting. Now, Kasia, if, you know, for a woman that is either starting out, you know, investing or maybe a seasoned investor already, what are the top three pieces of advice you have when it comes to IRAs?

Kasia: Great question. So, I think, you know, number one is just educate yourself, know what you have. Kind of going back to my example with my mom and my dad growing up, I mean I don’t think my mom ever looked at a statement, I don’t think my mom ever logged into her account. Yes, she’s not the most tech-savvy person, but again, I think just taking accountability for your finances, so, number one, just knowing what you have. Write down, you know, all of the assets. Write down, you know, what you owe and where are the funds. And sometimes you’d be surprised if you log onto your statement and say, “Wow, I have,” you know, “$50,000 in my 401K. I didn’t even know I had this.” So I think it could be, you know, a positive experience to actually…number one, just know what you have, know your worth. You know, so, definitely educating yourself and thinking outside the box. I think, you know, we tend to just, again, as women, people tell us we need to do this, we need to do that, we should put our money here, we should put our money there. But by going to different, you know…right now we’re not going to different seminars, but by just going to different seminars, listening to different podcasts, youtubing, you know, listening to audiobooks, just really try to educate yourself what else is out there besides just the stock market and kind of what everyone else is doing. You know, be that 5%, be that, you know, just the guru.

Michelle: A contrarian.

Kasia: Yeah, absolutely. So, you know, again, we see a lot of clients that just come up with some really interesting investments, again, you know, investments that are providing cash flow, their IRA is growing, and they’re happy, and it’s great to see that. So definitely knowing what you have, thinking outside the box, and I think, you know, kind of taking that risk too. If my parents didn’t take that risk, didn’t come to the United States, you know, I think our life is definitely a lot better than what it would’ve been. So, you know, sometimes you gotta take a risk.

Michelle: Take a risk, absolutely. Especially if it’s a calculated risk, you know what I mean? And there’s so much upside potential, you know. Absolutely. Now, so, if somebody wanted to talk to you and learn more about IRAs, start an account, move an account, you know, start, you know, a self-directed, what is the best way to reach you, to contract you guys?

Kasia: Absolutely. So yes, so you can definitely call us, we are answering the phone. Our phone number is 312-795-0988. You can also visit our website, www.iraclub.org. And that web site has a lot of videos, blogs, just kind of easy-to-understand information about self-directed IRAs. And then, you can also email me at info@iraclub.org. So, a couple different ways to get a hold of us. But just give us a call, we’re answering the phone.

And I know everyone’s situation’s a little bit different, as far as what they have, what their investment goals are. So I would love to definitely, you know, chat with you 10-15 minutes and just hear your story and, yeah, see what account fits best for you.

Michelle: Perfect. Now tell me a little bit about the IRA Club when it comes to your guys’, you know, mission and the values, you know, that you and Dennis, the CEO, stand behind. Tell us a little bit more about that.

Kasia: Sure, absolutely. Definitely. So, as you mentioned earlier, I mean 90% of the time we are spending educating folks all over the country, all over the world. Dennis and I travel, you know, two to three times a month, sometimes four times a month, just educating people about this opportunity, the self-directed-IRA opportunity and what a great vehicle it is. So our mission is really just to, you know, educate clients, let them know that there’s opportunities out there, diversify your portfolio. And we’re here to educate and, you know, walk you through the process every step of the way.

Michelle: Yeah. And now one last question that I always have for all of my guests here, at InFLOW, because InFLOW is not just about inflows of cash but it’s also about inflows of ease, and grace, you know, and faith in your life. So, how do you incorporate, you know, faith, spirituality, ease, grace into your daily life? Any tips?

Kasia: Oh gosh, that’s a loaded question, so, I love it. So, with spirituality, I think what I’ve been working on lately is just being more mindful. I grew up Catholic, I would consider myself Catholic, and so…

Michelle: The same here.

Kasia: Yeah, so, but, you know, the last few years I’ve just been really kind of taking a different approach, as far as, you know, meditating. And I think, you know, whether it’s meditation or prayer, whatever you wanna call it, but really being in the moment and being mindful of things around us, our family. And I think the last few weeks have really been kind of enlightening some things, you know, just being…spending time with your loved ones, focusing on my growth, and so…I don’t know, let’s say, definitely just being in the moment and being present.

Michelle: And when all hell goes in a basket, how do you come back to Center?

Kasia: Just take a breath. Yeah. Just stay positive, just stay positive. I think, you know, this is an opportunity…

Michelle: Yeah, you know, everyone talks about how, you know, a positive mindset helps you seize opportunities and look at opportunities to begin with. And it used to be like a nice rah-rah kind of, you know, slogan or statement and it could be more a necessity these days in terms of, you know, keeping your attention focused on something positive and on the good things that we do have and appreciating those. Because anything that you appreciate appreciates. You know.

So yeah, thank you so much Kasia, for all the info, for all the goodness. And anyone that is, you know, listening or watching, since we are both on YouTube and on iTunes, you guys…they’ll be on the show notes, all the contact information for Kasia. And if not, you can go to…what is the website again? iraclub…

Kasia: iraclub.org.

Michelle: iraclub.org, that’s where it’s at. Thank you so much, Kasia. I greatly appreciate, it was such a pleasure having you.

Kasia: Thanks, Michelle. Take care.

Michelle: Thank you.

Together: Bye-bye.

Michelle: I hope this episode left you feeling inspired and ready to get inflows of cash, inflows of light, and inflows of faith in your life. I welcome your reviews on iTunes, please leave me a review and help me create an amazing community of women in flow. Thank you, as always, for sharing your voice by going to michellebosch.com and joining the conversation about this show. And while you’re there, grab a copy of my 10 Commandments to living a life in flow. You can also follow me on Facebook at Michelle Bosch and on Instagram @michelleboschofficial. Thank you very much and until the next one.