Top 10 QRP (Qualified Retirement Plans) Advantages
Top 10 QRP Advantages
Let’s look at the top 10 advantages of a QRP over an IRA or other type of investment. There are several reasons why I termed the QRP as the “Learjet” of 401(k) plans. Let me provide you with my Top 10 reasons of why this engine is so powerful!
#1: NO UDFI with Leveraged Real Estate
Since the QRP conforms to IRS rules, it qualifies for special tax breaks and provides small business owners (you) with substantial tax saving opportunities – and, yes, even tax elimination!
Imagine paying no taxes on your retirement savings for 100 years or more. It’s possible with a QRP.
Why? Under the ERISA ACT of 1974, qualified plan investments are protected from creditors, bankruptcy, and the IRS.
Unlike an IRA or Solo 401k, which may be seized in a lawsuit or a bankruptcy, your eQRP® has powerful protections against creditors because of TCF’s patented process and construction of your plan. This is a huge difference between all IRAs Solo 401ks and the eQRP ®.
In the current economic environment where many people struggle to save for retirement and face many obstacles in building true wealth, this protection becomes more important every day.
#2: Fewer Plan Restrictions Mean More Freedom
The QRP is the Ferrari of 401(k) plans because of the way it’s written – with far fewer restrictions when compared to a standard 401(k).
For example, most 401(k) plans already have limits written into them. They restrict what you can and can’t do, what you can invest in and when you can access your money.
» What you invest in, from real estate, real physical gold and silver, tax liens, business startups, foreign real estate, LLC, joint ventures, private loans, and many more.
» The performance of your investment.
» Asset allocation.
Plus, since you’re managing your money, no more advisor fees chewing up the returns and principal from your account year after year regardless of performance. The QRP is written to give you every investment option legally allowed. You can do anything you want within the framework of the law.
#3: Contribution Limits for a QRP are 10X Higher Than an IRA
As you may know, an IRA (Individual Retirement Account) allows you to contribute $6,000 per year, or $7,000 if you’re over age 50.
The problem with this is that over the next 20 years you’re only going to be able to get approximately $100,000 into your retirement plan. That’s just not enough to get close to what you’ll need for retirement. It might be a good chunk to live on for a year but it won’t last for decades.
Considering people are living longer than ever, with new life-extension medical technologies on the horizon, you will need more than an IRA. In other words, you won’t get rich with an IRA; you’ll just get old.
On the other hand, with a QRP, you can contribute $56,000 per person, up to $112,000 with your spouse max and even more if you’re over 50. (An extra $6,000 per person over age 50 per year can be contributed – this is the catch-up bump.)
That’s more than $1 million in contributions over the same 20 years and more than $2 million with a spouse. Literally 10X more!
Doing the math on contributions:
Regular IRA contributions: $6000 x 20 years = $120,000
QRP contributions: $56,000 x 20 years = $1,120,000
That’s Literally 10x more!
* Based on single contributions
There are, literally, millions of things that you can invest in with a QRP, including real gold and silver. Here are some of options:
» Real Estate (anywhere in the world)
» Apartments, Multiplexes and Houses
» U.S. Gold & Silver Bullion Coins
» .995 Pure Gold and .999 Pure Silver
» Small Business Startups, LLCs
» Tax Lien Certificates
» Stocks, Bonds, Mutual Funds » Co-Ops
» Commercial Property
» Improved or Unimproved Land
» Contracts of Sale
» And many more!
#4: Lots of Investment Options
» Trust Deeds and Mortgage Notes
» Single Family and Multi Unit Homes
» Commodities and Futures
» Physical Possession of Gold & Silver
For example, many people would love to have physical gold and silver in hand, but until now, there’s not been a way to buy metal and take possession of it (legally) with retirement money.
With a QRP, you’re allowed to take physical possession of the metals. Total privacy. Total control.
Anyone who says you can do this with a Self-Directed IRA should be corrected. The IRS says this is disallowed and can result in penalties up to 100% or more of your investment. That’s a penalty you’ll want to avoid!
“The age-old idea of putting money into the stock markets and getting an 8-10% fixed reliable return without being savvy (i.e. “passive dumb income” is a dead idea), those days are over.”
Bill Gross, PIMCO -
With a QRP, your contributions to the plan are totally up to you. If business is slow and you need to reduce your personal contributions, you can slow down. If business is going great, you can max out.
You’re protected from economic downturns or anything else that would make it difficult or impossible to contribute.
This flexibility is one of the reasons the QRP is so much better than other tools. For example, with cash-value life insurance, you must contribute every year or face your principal being eaten up by fees and policy costs. Not so with a QRP. It’s totally flexible to fit your life.
Your QRP is like a private bank line of credit. It is always available to you. At any time, you can write yourself a check and have cash at the swipe of a pen.
You can borrow up to $50,000 or half of your plan assets, or whichever is less.
The loan must be amortized over a period of no more than five years (except for loans that are used to buy your personal residence). You must also charge a reasonable rate of interest. Payments must be made at least every quarter in substantially equal amounts.
You can always make more frequent payments, such as monthly or weekly. It is important to remember that loan repayments are NOT plan contributions. A neat side effect of the interest you’re paying to the plan, that money will increase your account balance even more!
#5: Flexibility to Adjust Your Contributions
#6: Borrow Your Money Anytime
As an owner, you cannot deduct interest on the loan, but the plan pays no tax on the interest income either.
#7: Total Checkbook Control
The QRP allows you, the owner, to choose any person you’d like to be the trustee, including yourself. Since the trustee is responsible for funding the investments, you suddenly find yourself in total and complete control.
As trustee of the plan, you no longer have to get approval for each and every investment you’d like to make.
No more outside custodian or trustee hovering over you (unless you want one).
When you want to invest in an eligible investment you simply write a check or send a wire.
This control means all assets of your QRP are under your sole authority, direction and discretion.
It also means you eliminate the expense and delays associated with a custodian, a common problem with most self-directed IRAs.
This enables you to act quickly when the right investment opportunity presents itself. Timing is everything.
When speed matters, you’ll be glad you have the QRP ready to execute and tie up those great deals.
#8: One, Consolidated Account
It can be incredibly time-consuming to manage all the different 401(k) and IRAs that many people have floating around. It’s time consuming and there’s not a lot of power having money spread out.
With your QRP, you can rollover any and all investment money from your 401(k), 403b, 457, IRA and SEPs. You’re allowed to transfer those funds and assets into your QRP tax-free and penalty free.
You can roll over as many accounts as you’d like and consolidate them into your QRP.
Consolidating all these funds will save you money and time managing the funds. One account. Easy!
#9: No Taxes for 100 Years
The current tax code allows any owner of a QRP to leave the accounts to an heir who can decide to take distributions of the money over their entire life expectancy. This is true for deferred, (regular) and ROTH accounts.
Let’s say you set up a ROTH account today, grow it for the next 40 years, and then leave it to someone who happens to be 25-years- old when you pass away. That person doesn’t pay any taxes on the account, the gains or the distributions. (Assuming the account balance is less than the current estate tax exemption, which is over $5,000,000 in 2019.)
The heir gets to grow the account, spend the money and do so for the rest of her life, with zero tax.
You’ve now got the power to opt out of the tax system for the next 100 years. Your children and grandchildren will thank you.
#10: Tax Free Gains of 20, 30, 50% or More for Roth investment in Real Estate
Your QRP has a built-in ROTH option. This is a chunk of your retirement money (or all, if you want) that you pay taxes on before contributing the money. In this case, you pay the tax now and then pay zero tax on the growth and distributions forever.
Let’s say you contribute $10,000 to your QRP and pay taxes on that money today. Wouldn’t it be nice to have that $10,000 grow by 10X and then 10X again and have it be worth a million dollars? Rest assured this will never happen in the stock market.
But - what if you invest in real estate and use leverage (debt)? What if you buy a property, use your $10,000, and take out a mortgage for the rest of the purchase price?
Example: You buy a house for $100,000 and use $10,000 from your ROTH QRP, then borrow the other $90,000. You do some repairs and sell the house for $200,000 a couple years later. You just made 1000%. Not 10%. Not 100%. But 1000% in two years!
Oh, and remember you used the ROTH, so all your gains are tax-free and it stays in the plan to continue growing.
Now, if you had used a self-directed IRA to buy property and used a mortgage, you’ll trigger something called UDFI, Unrelated Debt-Financed Income. In the last example, you’d pay about $35,000 in taxes if you used your IRA.