In Uncertain Economic Times, SAFE HARBOR® Directed IRA Real Estate Proves Its Worth
Case outline: When Mr. Murphy became a client of Uranga & Associates he was 66 years old and in the process of buying a second home which would ultimately become the retirement home for him and his wife. Mr. Murphy had the necessary down payment for the second home of his choice, but in order to afford the monthly mortgage payments it would be necessary for him to draw from his retirement fund. Mr. Murphy enquired at a local bank to find out if they could assist him with structuring his IRA for the purchase. The Bank informed him it was outside of their expertise to structure IRA real estate purchases and referred him to our company, Lasaii of Uranga & Associates. Mr. Murphy consequently contacted us to learn how his retirement monies could be utilized for his real estate purchase. The OUTSIDE® method allows for non IRA monies to be coordinated with IRA monies and also allows legal occupancy for the purchaser of the real estate. Additionally the OUTSIDE® method structures the retirement monies dedicated to supporting the real estate purchase to avoid any loss of principal through investment exposure. This precaution is important at any stage in life, but particularly in one’s latter years, where a substantial loss in the principal value of a retirement account has a high probability of never recovering to its prior value within the lifetime of the owner. The Lasaii division of Uranga & Associates structured a plan for Mr. Murphy placing approximately $1,100,000 of his IRA in a SAFE HARBOR® IRA account to create the structural foundation for his IRA real estate plan. This SAFE HARBOR® IRA account, guaranteed to earn a minimum of 3% with a potential of 4% – 5% as a ten-year average , was structured to provide an income stream to be used toward paying Mr. Murphy’s monthly mortgage payments. Any tax liability generated by this income stream was calculated to be offset by allowable real estate tax deductions.
Summary: This structure was implemented four years ago in 2005. In the past twelve months many retirement funds exposed to stock market fluctuations have lost as much as forty percent of their value. Mr. Murphy’s SAFE HARBOR® account lost no principal value whatsoever. Had Mr. Murphy’s retirement monies not been protected by the vigorous safeguards of the SAFE HARBOR® directed program, the monies he had planned to have support the mortgage for his retirement home would have been diminished to the point where they would have been exhausted long before his home mortgage was paid off. He would now be faced with the difficult prospect of having to sell his dream home in a poor market environment and at a capital loss or to continue to support the mortgage with his remaining retirement monies and face the consequences of the cash flow running out at an accelerated rate in just a few years. However, since Mr. Murphy chose to apply the SAFE HARBOR® strategies to his IRA real estate purchase, his home purchase plan has been unaffected by the recent upheaval in the investment markets and so he and his wife can continue to enjoy their retirement lifestyle in the resort community they chose to retire in.
