4 ms·

How does this compare to funding a company by buying its stock inside a Roth IRA? (Not withdrawing, treating the company as an investment.) Yes, there are pen

by anamax 5y ago

How does this compare to funding a company by buying its stock inside a Roth IRA? (Not withdrawing, treating the company as an investment.) Yes, there are penalties to withdrawing from a Roth before 55, so the profits are locked up for a while, but 0 state and federal income tax can be worth it. Many Roth custodians (Schwab) only allow public company stock, so it does require some work.

sabalaba 5y ago
You can’t own 50% of more of a company you invest in using your self directed Roth IRA. So, QSBS is great for founders who own 50% or more.
vmception 5y ago
Just be your own custodian. Dont conflate the limitations of third party custodians with the actual law, which is way more flexible. You can move Roth Ira funds around willy nilly. You can have a literal stack of cash on your desk labeled Roth Ira and invest in almost anything. Its just the consumptive purchases that would be a problem. To your question, it is always better to have free and clear money with no restrictions, which means 0% tax now is better than locked up funds that you also wont have to pay taxes on in the future. Retirement products and trusts are judgement proof though sometimes even against ex spouses, not IRAs though), so if you have or expect to have creditors, better not to have assets in your name. Even better is to only have debt in your name so you can just tell people to get in line, or discourage them from ever bothering with the courts at all. Stuffing Roth IRAs are good for that.
- divbzero 5y ago
  Are there filing or record keeping requirements to being your own custodian? I imagine the process is somewhat more involved than labeling the stack of cash “Roth IRA”, or is it really that simple?
  - redis_mlc 5y ago
    It's generally that simple. You should have an excel you update annually and print the latest version each year and keep the printout in your records. As long as under the annual limit and it makes sense, you should be good. If you're trying to be fancy, search for more info on how Thiel setup the ultimate Roth. Also, note that a general strategy is to borrow against holdings, so you don't even need to sell the Roth to get access to it. (One of the reasons executives hate short sellers is that it screws with their loans if compensation share prices go down.)
  - vmception 5y ago
    Just be able to pass an audit So people generally like a paper trail for that
- mmd45 5y ago
  Is there a write up of how do be your own custodian? I'm paying a trust company annual fees to basically file irs form 5498 for multiple iras that only own an llc. I would pay money for information on how to do this.
  - divbzero 5y ago
    I tried to look into this and as far as I can tell you cannot actually be your own custodian for IRAs. There are of course self-directed IRAs where you can hold non-traditional investments, but they still require a third-party custodian.
sasquatch69 5y ago
you go tax free after 5 years of ownership for up to 10 or 50 million or something. so you can ball out as a young person (without paying taxes)
- anamax 5y ago
  The "over 55" restrictions on Roth withdrawals isn't a problem for me.

by anamax 5y ago

sabalaba 5y ago

You can’t own 50% of more of a company you invest in using your self directed Roth IRA. So, QSBS is great for founders who own 50% or more.

vmception 5y ago

Just be your own custodian. Dont conflate the limitations of third party custodians with the actual law, which is way more flexible. You can move Roth Ira funds around willy nilly. You can have a literal stack of cash on your desk labeled Roth Ira and invest in almost anything. Its just the consumptive purchases that would be a problem. To your question, it is always better to have free and clear money with no restrictions, which means 0% tax now is better than locked up funds that you also wont have to pay taxes on in the future. Retirement products and trusts are judgement proof though sometimes even against ex spouses, not IRAs though), so if you have or expect to have creditors, better not to have assets in your name. Even better is to only have debt in your name so you can just tell people to get in line, or discourage them from ever bothering with the courts at all. Stuffing Roth IRAs are good for that.

divbzero 5y ago
Are there filing or record keeping requirements to being your own custodian? I imagine the process is somewhat more involved than labeling the stack of cash “Roth IRA”, or is it really that simple?
- redis_mlc 5y ago
  It's generally that simple. You should have an excel you update annually and print the latest version each year and keep the printout in your records. As long as under the annual limit and it makes sense, you should be good. If you're trying to be fancy, search for more info on how Thiel setup the ultimate Roth. Also, note that a general strategy is to borrow against holdings, so you don't even need to sell the Roth to get access to it. (One of the reasons executives hate short sellers is that it screws with their loans if compensation share prices go down.)
- vmception 5y ago
  Just be able to pass an audit So people generally like a paper trail for that
mmd45 5y ago
Is there a write up of how do be your own custodian? I'm paying a trust company annual fees to basically file irs form 5498 for multiple iras that only own an llc. I would pay money for information on how to do this.
- divbzero 5y ago
  I tried to look into this and as far as I can tell you cannot actually be your own custodian for IRAs. There are of course self-directed IRAs where you can hold non-traditional investments, but they still require a third-party custodian.

sasquatch69 5y ago

you go tax free after 5 years of ownership for up to 10 or 50 million or something. so you can ball out as a young person (without paying taxes)

anamax 5y ago
The "over 55" restrictions on Roth withdrawals isn't a problem for me.