What is a QRP?

These retirement accounts have been available in America for over 40 years. They’re not new. The rules and regulations for these plans are written into the IRS tax code in publication 590, and the ERISA code. All Qualified Retirement Plans are considered qualified plans under IRS regulations.

You have complete and immediate access to your retirement money for investment purposes, which means you don’t have to fill out any paperwork to access your money, get permission from an outside trustee, or get approval from an administrator for the type of investments you want to make. Investing in an asset can be as easy as writing a check from your QRP bank account. This is not the case with an IRA – even with a self-directed IRA, you have to go through a third party administrator and often have to get approval for the type of investments you want to make.

You have absolute flexibility on how much money you want to contribute yearly; you can put any amount from $0 up to $51,000 per year per person without tax consequences, whereas with an IRA the yearly contribution is only $5500. In fact, the QRP allows you to make pretax or after tax (ROTH) contributions into the plan. ROTH contributions for 2013 are $17,500 ($23,000 if older than 50). Compare this to a maximum ROTH IRA contribution of only $5500, which is subject to income eligibility.

TYPES OF ALLOWED INVESTMENTS:

Your QRP can invest in many different non-traditional types of investments presenting attractive opportunities as well as giving you a much higher degree of investment diversification and the ability to own tangible assets. Here is what you can invest in:

  • Tax Lien Certificates and Tax Deeds

  • Real Estate: Apartment Buildings, Co-Ops, and Condominiums, Commercial Property, Single Family and Multi-Unit Homes, Improved or Unimproved Land (leveraged or un-leveraged)

  • Gold Bullion

  • Joint Ventures

  • Limited Liability Companies (LLC’s)

  • Trust Deeds and Mortgage Notes

  • Securities, Certificates of Deposits, Stocks, Bonds, Mutual Funds

  • U.S. Treasury Gold and Silver Coins

  • Leases

  • Like and Unlike Exchanges

  • Commodities / Future Accounts

  • Contracts of Sale

  • Factoring

  • Life Insurance

ASSET PROTECTION

As mentioned previously, assets held in a QRP are required to contain “anti- alienation” provisions under ERISA. Therefore, pursuant to bankruptcy laws, employer and employee assets in qualified retirement plans are generally protected from creditors including the IRS. I recommend you discuss this with your tax advisor as every situation is different.

How does a regular IRA compare to a Qualified Retirement Plan?

Here is a point by point comparison that shows how a QRP improves your financial wellbeing.

  • Point #1: Ability to borrow. With your QRP, you have the flexibility to borrow from your retirement account; with an IRA, you absolutely cannot borrow from your retirement account.

    You’re allowed to borrow up to $50,000 from your QRP. Now you’ve become your own bank. So, you can borrow $50,000 from yourself, set a reasonable interest rate, and pay yourself back within 5 years. Now, you always have access to your own money when you need it, without penalties or fees.

    With an IRA, this is not allowed.

  • Point #2: Debt financing with real estate. With your QRP you can finance real estate with no tax consequences, which greatly accelerates your financial success. In other words, you can safely make a lot more money, in a much shorter period of time.

    With an IRA, you can finance real estate, but there’s a significant tax consequence which really damages your profitability. This means with an IRA, you make a lot less money, and it takes you much longer to achieve financial success.

  • Point #3: Deductible contributions. ¬†Your deductible is much higher in your QRP, than an IRA. As of 2013 the deductible amount was $51,000 per year in your 401[k] QRP, and even more for high-income clients. If you are older than 50.5 years of age, the total contribution for the year is $56,500.

    With an IRA, regardless of how high your income is, the maximum you can contribute without tax consequences is only $5,500. You literally can contribute 10X more to your QRP without tax consequences, than you can to an IRA.

  • Point #4: Protection from creditors. Your QRP is afforded much higher levels of protection from creditors, lawsuits, and the IRS. Much higher than than and IRA. In fact, it has some of the highest levels of protection out of all retirement plans. This level of protection is stated in the ERISA Code going back to 1974.

    With an IRA, 100% of your money is always at risk. You can lose all the money in an IRA to creditors and the IRS.

  • Point #5: Ability to purchase life insurance. You can hold life insurance in your QRP. You cannot hold life insurance in an IRA.

  • Point #6: Be your own administrator and trustee. You can write and sign checks, and be in direct control of the assets in your retirement account with your Qualified Retirement Plan. This is not permitted with an IRA.

  • Point #7: Catch up contributions. If you’re over the age of 50, you can contribute an extra $5,500 per year without tax consequences inside of your QRP. With an IRA, you could only contribute $1,000 per year. So, if you’re behind in your retirement planning, you can catch up 5 ½ times faster with your QRP, than with an IRA.

When you look at this comparison of a Qualified Retirement Plan vs. an IRA, you can easily see that a QRP is far superior to an IRA for financial security and financial independence.