In this episode, Anne Marie Rogers, CISP, delves into the realm of self-directed IRAs and alternative investments, offering valuable insights to help you navigate these financial avenues. Tune in to gain a deeper understanding of how these unique investments work and uncover effective strategies to enhance your financial journey today!

Key takeaways to listen for

• [0:42] Self-directed IRA: What it is, how it works, and what alternative investments you can use it on
• [11:26] What you need to know before investing using your 401k and IRA
• [17:00] An effective way to leverage your self-directed health savings account
• [20:45] The importance of diversifying your investment portfolio
• [22:26] Perks of joining an investor network

Resources mentioned in this episode

• [04:52] Airbnb
• [04:54] Vrbo
• [11:17] Nomad Capital

About Anne Marie Rogers, CISP

Anne Marie is the Vice President of Sales and Business Development of Quest Trust Company. In this role, she defines strategic sales plans and company objectives to maximize the growth of the company.

In the past, she has been a Sales Officer and Marketing Director of the same company and a Certified IRA Services Professional (CISP) from 2015 until the present. She helps clients in investing in a variety of private assets and is actively involved in educating individuals about investment options. She has a degree in Bachelor of Arts in Communication from St. Edward’s University and is currently based in Houston, Texas, USA.

Connect with Anne Marie

• Website: Quest Trust Company
• Phone: 855-386-4727

Follow Us On Social Media

Mentioned in this episode:

Sponsored by Nomad Capital

Looking to invest in self-storage? Nomad Capital converts vacant big-box retail spaces across the Southeast into climate-controlled storage, with a target of 20% annual returns. Our fund combines low leverage and high depreciation for strong growth and valuable tax benefits. By buying properties at deep discounts, we often achieve break-even at just 40% occupancy. Join a proven model in a resilient asset class that continues to deliver, even in today’s market. Learn more at nomadcapital.us/tpi. Accredited investors only.

As you have money coming over from where it's currently at, it comes right into your Quest account. You can deploy it, invest it, or in fund, for example. And as you have the money coming back, that all flows right back into your Quest account.

Welcome to Truly Passive Income. I'm Neil Henderson.

And I'm Clint Harris.

Our guest today is Ann Marie Rogers from Quest Trust Company and she's here to talk to us about self directed retirement account investing and alternative asset investing.

Thank you, Neal and Clint. Happy to be here today with you guys.

All right, it's a pleasure to have you. So for somebody who's completely unfamiliar with the whole self directed retirement account world, what is a self directed retirement account?

So we find that a lot of people will come to us and they will think that a self directed IRA is a totally different type of account than the retirement account that they might already have, maybe an IRA or a 401k that you might have from your job. But there is really no difference. The accounts are the same. The difference is in what the companies allow you to do with them.

So at most of the major financial companies that are out there, you're able to choose all different types of publicly traded investments.

So things like different mutual funds or CDs, for example, stocks versus at quest, you're able to invest using the same types of accounts and except that it's in all different types of alternative investments. So things like real estate, different syndications, all different types of passive and active but alternative style deals.

I know that there's basically two categories that you can't. Honestly, that's the reason I bring this up is because I think we'll get into it.

There's so many things that you can invest in with self directed retirement funds that sometimes it's easier just to focus on the. What you can't talk to us about the two categories of things that you're not allowed to invest in.

Yeah, so there's about two categories of things that you can't do. So first one's pretty straightforward is you can't invest in life insurance contracts.

But the other one, a little bit more broad, is you cannot invest in anything that's considered a collectible. So some common examples of things like that would be you typically cannot do antiques or art if you have an alcohol collection or coins.

Generally those are things to stay away from because their value is more opinion based. And so they're generally not permitted in self directed IRAs.

Am I able to, let's say, buy a vacation rental using my self directed retirement accounts and stay there for a week every year so you can definitely.

Purchase a vacation rental. But if you were looking to stay in it, that's where you start crossing over that gray area into what you cannot do with self directed IRAs.

You always want to keep in the back of your mind that you're not supposed to be getting any type of like personal benefit.

You're able to choose investments for your self directed account, whether that's buying a vacation rental property or whether that's investing passively into a fund.

But remember that the returns that you're making and the benefits are really exclusively for the account and for the investment rather than for like you and your family members.

So one of the things I think that's important to keep in mind here is that this retirement account is basically a separate entity. Like it's an entity that's making the investment. Obviously it's on your behalf, but you can't take any immediate benefit from that.

So you're not getting cash flow, you're not getting quarterly distributions. It all has to come from that retirement account and it has to go back to that retirement account.

So with that in mind, I think it's important to maybe really focus more on, first of all, long term strategies, because it's all a long play. Second of all, be really careful about the amount of work that you're going to have to put into that investment strategy.

Now, if it's going to require a lot of work for you to manage a vacation rental or anything else, just remember you're working now, but you're not going to get paid for a long, long time because that money has to go back into the retirement account. So I think that's one of the reasons that a lot of people tend to go more towards the passive investment strategies when using self directed IRAs.

I connected with you first, Anne Marie, at the Best Ever Real Estate Conference in Salt Lake City. You've helped several of our clients since then. That conference is obviously pretty heavy in the real estate space.

It's mostly multi family apartment complexes, self storage, RV parks and categories like that that are a little bit more mainstream when it comes to real estate investing. What are some of the most popular alternative strategies that you guys pick and what are some of the weird ones?

So, you know, we see clients that are investing in real estate. We have clients that are definitely doing something like Airbnb or vrbo and then just more, you know, your traditional style landlording.

They have a long term rental property fix and flips obviously with everything that's going on right now economically, and in the country, we're seeing a big uptick in like subject to deals or tax liens or foreclosure deals. For sure. Passive investing is the most common thing that we see. About half of our clients, almost exactly half, are investing more passively.

Because to your point, Clinton, with self directed IRAs, it is oftentimes for people that have a long term play, it's how do I build wealth for myself, for the future, for when I'm ready to hang up the hat and not be working and looking to retire. And so for many people that could be, you know, 20 plus years away.

And so if you're looking to kind of eat off that money today, then self directed IRAs might not be necessarily the fit.

It's more coming at it from an angle of how do I start putting my money working in investments that I'm going to, you know, 10 years down the road really be able to have a big upside. And so I know a lot of times these funds have that. So that's really common.

Like you said, self storage, multifamily car washes, RV parks, all of those are common ones we see maybe because we're based in Texas, but we see a lot of oil and gas deals too. That's really just prevalent in our region.

And some unusual ones, like, you know, I was sharing with you guys recently that we have a client that invests in horse embryos. And they're breeding racehorses, right? They're selling them. We also have someone that's investing in a company that produces soy sauce bottles.

So kind of, you know, unusual, extreme examples, but it just goes to show you really how much you can do in these accounts.

So we talk a lot about traditional IRA investing, which is stocks, mutual funds, things like that, bonds. And then with self directed retirement accounts, we're talking about alternative assets. What you're talking about here is alternative alternatives.

And it's perhaps the things that, you know, most people when they're thinking self directed retirement account, they're thinking real estate and things like that. Forgive me if we've already covered this, so I don't want to reiterate it.

So people really understand what are some of the things that you absolutely cannot invest software retirement funds into?

Big no nos are anything in life insurance. And then the other category I would say are collectibles as well.

So art, antiques, most coins, gems, jewelry, those are ones to stay away from for the most part. We're seeing people investing in real estate in some variation of that or Some type of a fund.

So, Anne Marie, we had some of our investors, a husband and wife team, reach out to me this week. They've invested with us in several deals in the past. They told me that they want to come back and invest with us with our current offering.

And they wanted to use retirement funds, which they have not done up to this point. So they let me know that they were reaching out to you, I guess early this week.

And then I just got an email that their account was complete and they're ready to go.

So for people that are listening to this, that are curious about the process, the timeline, and like the education that comes along with it, what does that look like when someone reaches out to your company and they're considering that, what does it look like for them?

We find that a lot of people that come to us, they are not the most familiar with self directed IRAs.

For a lot of them more traditionally investing, maybe they've had a retirement account for many years or a 401k at their job, but a lot of times they're just dipping their toe into this world that we're all in and that's familiar to us. And so we really like to start out by doing a consultation. It's free, it's really no strings attached.

It's just a good opportunity to learn more about how exactly self directed IRAs work and what it would look like for you personally.

So we can explore what types of accounts that you have and what the process would look like to get those moved over, which for most people is really simple.

And you can get all set up with about a day or two and get the ball rolling to get your funds moved over from maybe where they're currently at and move them over without taxes and start investing into something alternative and really get that diversification.

But I'd say that's the first step is to sit down and to talk with one of our certified IRA specialists and see if it's something that you know you're interested in and that you want to pursue.

Now, if I have funds in a regular traditional retirement account, I'm not able to tap those and bring them over into a self directed retirement account, am I?

You most likely are. If it's in an existing ira, then definitely you can move that over.

If it's in an employer plan that might be with the company that you know you're currently at, then there could be some limitations. But that's why it's a great idea to sit down and do a consultation. Because for each person it's case by case.

And you know, even if we hit a roadblock and find that, you know, maybe you can't use your work for a 1k, there's always other scenarios of how we can still talk about different accounts that we have that are retirement accounts or maybe education accounts for children to save for college, family health savings accounts, which can all still be invested into the same types of investments.

So it's even things outside of retirement account that can be beneficial to people that, you know, you might not be immediately on your mind that you're thinking about, but that can really benefit you in the long run.

So I know that there can be limitations.

If somebody's got a 401k that's attached to the company and the job that they currently have was told at one point in time that they may not be able to invest those funds, but sometimes they may be able to invest the portion of the funds that were matched by the company. I think that's probably on a case by case basis. But let's say that someone left a job and is with a different company and has a 401k.

In fact, I'll use myself as an example. So I've got an IRA as well as 401k from when I was selling pacemakers for 16 years. That's where the 401k is. I've left that company.

I'm full time Nomad Capital as a real estate investor now. What are my options or limitations with taking a 401k and putting that money to work?

You're exactly right. If you're still working at the company where you hold your retirement account, then chances are you're not able to move it.

But more and more companies are starting to let people have flexibility. So the big thing to go and ask at your company or to the custodian that holds the account is whether you can do what's called an in service rollover.

So exactly like it sounds, while you're still working there, are you eligible to move maybe a portion of it? Maybe the parts that you've put in or invested, you know, amounts in that 401k.

Now if you've left the company, you know, whether that's moving to a new company or retirement, something like that, then yeah, you definitely can move those funds over. And for the most part there's no tax implications for doing that either.

Now correct me if I'm wrong, the funds can never hit your own personal account. They'll usually they've got to go from whatever fund was managing Your account before it has to go straight into whoever the custodian is. Correct?

Exactly. So as you have money coming over from where it's currently at, it comes right into your Quest account.

You can deploy it, invest it or in fund for example. And as you have the money coming back, that all flows right back into your Quest account.

And so it's waiting there for you when you are ready to start taking those distributions out.

Question for you. If you've got an ira, obviously that's after tax dollars that are going in there. If you've got a 401k, those are pre tax dollars.

So if you're taking a 401k and I want to convert that to a self directed ira, I'm assuming that I'm paying taxes on those dollars to convert them to after tax dollars in a self directed IRA account, is that right?

So there's seven different accounts that we hold at Quest, from traditional IRAs to Roth IRAs.

So a lot of times clients will come to us and they've got a 401k, it's all pre tax and they'll initially move that into a traditional IRA with us, which has no tax implications for doing that. However, all of the money that you're making in there, you know, one day you're going to have to eventually pay tax on that when you take it.

And so we find that once clients come to us and maybe get like a deal under their belt, they will learn about the benefits of a self directed Roth IRA where all of your future profits are tax free. And they're like, hey, it might be worth it to me to pay the taxes up front, move my money over.

Because I know if I'm investing for the next 10, 15 plus years, the amount of upside I'm going to have over that period is way, way better for me to do that tax free free versus me paying taxes today. So again, that's kind of a reason to sit down and do a consultation. You know, it is all education.

Obviously we're not financial advisors per se, but we can definitely point you in the right direction and give you the questions to explore with your CPA or talk over with your spouse and see what makes sense for you guys.

And that also brings up the strategy of if you're going to do that, thinking about when you're going to do it in terms of what your income is and what your tax bracket's going to be and if, you know, Covid affected you one way or another and your business is on the way, bouncing back or if you're having a career change or you're going to have up years and down years, there's some strategy involved in if you're going to do it as to when you would, because it could determine what tax bracket you're in and it could make or break you with a lot of tax dollars big time.

Yeah, there's a lot of thought process of whether it makes sense to do something like that at the beginning of the year versus the end of the year. And different types of tax strategies.

So the different kinds of accounts that Quests handle, self directed IRAs, self directed health savings accounts, solo 401k, is that correct?

Yeah.

Are those the three primary self directed accounts?

So in terms of retirement accounts, we have traditional and Roths, which most people are familiar with. And then we also have three different accounts for people that are self employed.

So if you fall in that category where you do have your own business and you have that self employment income, maybe a solo 401k or simple IRA could be a good fit.

And then we also have, like you mentioned, a health savings account where you can save and pay for all of you and your family's health expenses completely tax free. And we have an education savings account as well where you can pay for your kids education tax free.

So again, a lot of times people will come to us and you know, they start off with a traditional ira, but then they realize, hey, I could be bringing in some of my kids money, some of my spouse's money, some of our health money, pool it all together and be having it flow back into the accounts, you know, to have for the different uses.

One of the more brilliant health savings account strategies that I ever saw someone implement was they bought a rental property in a self directed health savings account and the rental income from that rental property paid for his health insurance premiums.

He used the self directed health savings account to buy a rental property free and clear, so there was no debt on it and it put off enough cash flow that it paid for his health insurance premiums in addition to any extra expenses he had as well. It was a brilliant strategy. Have you ever seen anyone do anything like that?

Tell you my own story. Clint and I, you know, before we started recording, we were kind of talking about our kids and all of that.

My husband and I, we have a son, he's 14 months old now, but we had both started health savings accounts probably about 10 years ago now.

And we were putting a little bit of money in, their employer was putting some money in and we were investing it and you know, slowly it started accumulating and nice chunk. And so we were able to pay for all the medical expenses for having our son completely tax free.

We never had to dip into savings or coming out of the checking account or nothing like that. We were able to from the deals that we had done over that 10 year period when we had our son, all, all of it was completely tax free.

And you know, even if you have the best health insurance, it's still costly to have kids. It's still is probably at least ten grand between all the blood work and the testing and all of that that you have to do.

So, you know, rinse and repeat, depending how many kids that you want to have. But little strategies like that I think can really make a huge difference. If you start learning about it and using that in your personal life, I.

Can vouch for that. Kids are expensive, that's for sure.

Thank you for that relevation, Clinton.

Yeah, that's right. Groundbreaking. As a four year old, an eight month old at the house, I can vouch for that. Looking ahead. So you're living this every day, right?

This is what you guys do. You're in the trenches. So how stable is like the current laws and self directed IRAs? Like is there a lot changing?

There is this kind of a living, breathing type of a situation.

Are there any future trends that we're looking at or any loopholes or anything coming down the pipeline that people should know about or be excited about? Or is this something that's pretty stable in your world?

It's definitely stable. There's always legislation or proposed legislation that we hear about, but usually it doesn't get too far.

You know, in the last 11 years that I've been with Quest, when I got started, the industry as a whole, only 2% of Americans were investing their retirement accounts in these types of assets, like what we're talking about today. And now about a decade later, it's up to 5%, which doesn't sound like very much.

And in the grand scheme of things, 5% is still really small, but that's a huge, huge jump. It's more than doubled in the last 10 years. And so I think people are really demanding this and there's a lot of opportunity in the space.

So, you know, I think legislative changes are inevitable. But with a company like Quest, we really pride ourselves in being on the forefront of that.

I know in my time here I've had the opportunity to go and lobby D.C. and that's something that we typically do every single year.

So we like to be really dialed in, but nothing that we should be nervous about, at least for right now.

You know, one of the fundamental things that you're told as an investor is to diversify. And most people who are investing using traditional retirement accounts, they're only in stocks.

They may be diversified across different industries, they may be in bonds, they may be in international funds, but they're still in the stock market, you know, unless they're investing in a reit, which is a, you know, a type of real estate fund that you can invest with a traditional retirement account.

But you really aren't getting diversification unless you start to self direct and you invest in direct ownership real estate or real estate syndications or oil and gas futures or horse embryos, correct?

Yeah, definitely. A lot of times our clients, they will say, oh well, I am, you know, diversified, but they've got all publicly traded deals.

And so for us, you know, we don't think that you should cash out all of your 401k that's, you know, invested in stocks and mutual funds and move all of it over to a self directed. I think, you know, the sweet spot is somewhere right in the middle where you've got your foot in both sides.

And so when real estate's hot, you get the upside there. And when the stock market is down, you know, you have kind of the benefit of really having that diversification.

So that's great.

I mean, you've given people the opportunity to take their own retirement and invest it where they see fit, choose the strategy, the timeline that works for them. However, that creates a little bit of a conundrum here because this is something traditionally most people have not been doing.

And sounds like 95% of retirement accounts are still not doing it. So when you open up the doors and people have so many different things that they can invest in, it can be a little bit daunting. Right.

And there's a lot of education that has to go along with that as to the type of investments and also more importantly, the operators who's running the deal, you know, that you like, that you trust, that you have clear communication with, you trust their moral compass and everything else.

So it kind of puts people in a situation where they've got to do a lot of self educating with different strategies to kind of figure out what's the right fit for them and how much do they want to move. So what are some of the things that Quest does from an educational standpoint and to create community among your investors to help with education?

I know you guys are doing webinars and I think you've got an expo in the summertime as well. Talk to us a little bit about that.

We like to joke that we're doing something almost every single day of the week. So if you're looking for education, you are in the right spot. From webinars to in person events.

And we're expecting a thousand investors at that one and probably about 80 sponsors. So the kind of unique thing about our events, you know, a lot of times when you go to the industry conferences, they have a specific topic.

You know, they'll be about passive investing or they'll be about oil and gas or how do I do short term rentals.

But for us, because our clients are doing everything under the sun, we get to bring in and really showcase all of the different opportunities that are available in the space. So it's a good place for information overload and kind of figure out, you know, a good direction.

I think that's really important. The value of community is I'm a team player, but it's got a lot of different benefits. Right.

Community is important because who you are right now is who you're going to be 10 years from now, with the exception of the books you read, the places you go, and the people you talk to and communicate with. Right.

So in terms of outside influence and how it affects us as people, I think teams and community are very important from standpoint of education and investing.

A thousand sets of eyes looking at a deal or an operator and picking it apart is so much more valuable than you doing it yourself and the opportunity to learn from other people's combined life experiences.

It's going to save you a lot of time and heartache every time you get the opportunity to learn from somebody else's mistakes instead of making your own.

So I think obviously Quest is doing something special in terms of giving people the ability to have control over their retirement and make their own decisions. The community side of that and the opportunity to have conversation with like minded investors is equally important in my opinion.

And that's what the value of podcasts and webinars and everything like that. It puts you in a situation where you can communicate with like minded people or people that are not like you.

And that's good because one way or another, they're going to influence you. You're going to influence them. It's going to make you better in the long run. So I'm a big fan. I'm looking forward to actually being there.

So we will see you in Dallas.

Looking forward to having you.

Well, Emory Rogers, thank you so much for sharing with our audience today. I know I learned a ton. I hope they did as well.

If any of our listeners want to find out more about Quest Trust about you, what would be the best way for them to reach out and find.

Out more about more Best way is check out our website quest trust company.com or they can give us a call. Our phone number is easy to remember. It's 855-fun- IRAs. We try to make it fun, easy to understand.

I know it can be kind of dense tax talk, but we try to break it down and make it enjoyable so people can really get interested in it because it's important.

All right, well, thanks again, Anne Marie.

Thanks, Anne Marie. Appreciate your time.

Thanks. Thank you so much for listening and watching the Truly Passive Income podcast.

If you liked the show, if you think it would be useful for someone else, the greatest compliment that you could give us would be to share the episode. Leave a comment down below or leave us an honest review. If you have any questions, don't hesitate to let us know down below.

And remember, with Truly Passive Income comes freedom of time, place and the freedom to to pursue your higher purpose.