The Tax-Free Retirement Strategy 95% of Americans Don’t Know About

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29:48Thanks for sticking with us. I love it. So I'm a high income earning W-2 with a million and a half in my 401k in my 40s. And I'm thinking about retiring early. I go get my rental property, my agent license, and I stink at it for the first year. I get no income. I begin rolling over my 401k dollars into my Roth 401k. And by year three, I'm starting to earn a big income, but now I'm a real estate professional. I am able to create the self-directed... Yeah, we can get going on this fun stuff. But that's what the power of this tool is, is there's a large number of people out there, specifically that overlap with the bigger pockets, real estate investor persona out there.

30:30The people that have a couple of properties, a 401k, a good job out there. And we have this concept, the middle-class trap, where folks are worth two, two and a half million bucks. And it's all in their home equity. their 401k and a couple of rental properties that are 50-50 debt to equity ratios. And they just don't generate cash flow. They feel stuck despite the fact that they've done everything right and built up a multi-million dollar net worth. And I believe that the tools, even before we get to self-directed IRAs, just the tools of 72T, substantially equal periodic payments and distribution tools to access the funds early to spend in your personal life, the tools for the Roth conversion ladder, for example, and strategies like that that allow folks to roll over money from the 401k to a Roth without paying penalties, and then begin withdrawing principal from the Roth several years down the road.

31:25Those tools are super powerful. But when you layer them in with at least a portion of those 401k or those IRA dollars with the just knowledge that you can use one of these self-directed IRA tools to provide access to different asset classes, to debt funds, syndications, or traditional regular old-fashioned real estate. I mean, it just becomes a very powerful dynamic. It's advanced. There's a lot of jargon that we're using here. You're going to have to do your homework on this one, and it's going to be complex in there. And I'm a little bit more cautious of when I hear the word complex, where I'm a little bit more scared than you are.

32:02I don't run towards complexity. I like to run towards simplicity personally, but I think that the complexity here is worth it because it may free you mentally much earlier in life. It may mean your 40s are spent doing what you want. If you can just think about all the tools that are available to you and create the right strategy to access that money in the retirement account. And Scott, I'll add, you reminded me of something. I was just talking to a husband and wife couple earlier today, and they're in their early 30s. One is 32, the other one's, I think, 33 or 34. And they drained all of their money out of their retirement accounts.

32:42They had high paying corporate jobs. They had large 401ks, and they knew nothing about self-directed IRAs, unfortunately. And they actually drained all the money out of their accounts, paid a lot of money in taxes. And I'm talking 45 % to 50 % of their accounts wiped out just to get access to the money to be able to go out and invest in real estate because they didn't know about this concept of self-directing into real estate with their retirement accounts. So now they're sort of in this rebuilding mode. Well, these investors, they're very good at finding motivated sellers and they're very good at finding opportunities.

33:18And they have a network of private money lenders and private investors. So I shared with them a story earlier today that was encouraging for them, where I have a client that only had about$13 ,000 and some change in his Roth IRA. So he had two years of contributions. So for example, you could contribute$7 ,000 to a Roth IRA. So he was between two years where he was able to contribute for two years. He had about$13 ,000 and some change. He's in Dayton, Ohio. He found an opportunity, three bedroom, one bath, fix and flip deal. He needed about$106 ,000 for the deal. He didn't have$106 ,000. He only had about$13 ,000 and some change.

33:57So he only had about 10 % from the Roth IRA to be able to put in the deal. He worked with a call an investor teammate. So this is someone that's not related to him. You will learn there are disqualified persons to your IRA. So you can't do transactions like this with people like your spouse or yourself or your children or your parents known as disqualified persons under 49.75 of the tax code. But this happened to be a non-disqualified person. So this individual partnered their Roth IRA with this other investor. They did the$106 ,000 fix and flip deal. And the investor with their Roth wasn't the one swinging the hammer to the nail.

34:33He was the one just overseeing the transaction. They sold the property and made$68 ,000 in profit. And they had a joint venture agreement that spelled out that 50 % of the profit goes back to the Roth IRA and 50 % goes back to the other investor. So this Roth IRA investor with only$13 ,000 and some change in the transaction made$34 ,000 tax-free. So he grew his Roth IRA from about$13 ,000 and some change to over$47 ,000 tax-free. Now, of course, there's always caveats with this. How many of those types of transactions can you do a year in your Roth IRA? Well, you got to be careful. If you do too many, Now your IRA looks as if it's running as a business, an ongoing trader business that's regularly carried on, and you actually have a different form of UBIT.

35:17So in this case, he's just doing one transaction. But hey,$34 ,000 tax-free, had he done that deal outside of his Roth IRA at about a 30 % tax rate, he would have been paying over$10 ,000 in taxes. Okay. So another one of the components of my... If I came in with, here are the five things I don't like about self-directed IRAs and And traditional real estate investing, again, they were, you lose the depreciation and tax benefits that are inherent to real estate investing outside of the accounts. Two, you may be subject to UBIT or UDFI, whichever term you prefer. Three, it's going to be harder to get a 30-year fixed rate Fannie Mae insured mortgage.

35:59We haven't covered that one yet. And then fourth, where we're starting to cover here, there's a fifth one here as well. But the fourth one is you cannot materially participate in the deal. and there are clear restrictions about who or how you work with the properties. So can you give us a broader overview besides these prohibited persons that can be associated with any business activity inside the self-directed IRA? What are these prohibited? How do I think about what I can and can't do? Can I negotiate the deal? Can I manage the property? Can I change the locks? Can I sign a lease with the tenant?

36:32What are the rules that I... What are the guardrails I need to be aware of going in in terms of managing or participating a rental investment? Absolutely. I always like to use the rule of thumb. This is an easy rule of thumb to think about when you're going to start doing self-directed IRA transactions or even solo 401k transactions, because all these accounts, the rules are the same under 49.75 of the tax code. You can do the desk work. You need to stay away from the physical sweat equity. Within the tax code 49.75, it states that a disqualified person cannot furnish services. to the IRA or to the plan.

37:09Who is a disqualified person? That would be yourself. You're the account owner. That would be your spouse. That would be your children. That would be your parents, your grandchildren, your grandparents, and then businesses that you own or control 50 % or greater of. So your property management company, your other LLCs and entities, your trust, your living trust, those are also disqualified persons. So what is services? Well, it's not clearly defined within the tax code. It's not clearly defined by the IRS. Could swinging the hammer to the nail be considered a service? It could be. And so that's why the rule of thumb is used in the industry that you can do the desk work, but you need to stay away from the physical sweat equity.

37:51One of the questions I get very routinely, Scott, is, well, can I be the property manager? Well, to what extent are you the property manager? Are you physically doing work on the property? Or are you administratively overseeing the transaction? I'm using administrative oversight very specifically here. So it's an optics. It's an optics thing. There's going to be no clear this is absolutely right or this is absolutely wrong. For somebody that is very concerned with respect to the prohibited transaction rules, they hire a property manager. for people that understand the optics component of it. And they're very good at keeping good records and maintaining the transactions and not going over to the property and doing the physical work on the property themselves.

38:40Those are generally the people that are going to self-manage, if you will. They're not going to compensate themselves. That's a big part of this. So you cannot take compensation from your IRA. If you were to do that, there's a good argument under 49.75, the tax code, it's a prohibited transaction. What happens if you do that? What is the penalty for getting this wrong? Well, I think Mindy is going to like this one. Okay. So IRAs, Roth IRA, HSA, the consequences can be severe. The consequences could be the entire account is distributed January 1 in the year in which the transaction occurs. There are some investors that are overly concerned by this that will have separate IRAs for their separate transactions.

39:24So maybe they do a lot of private money lending. You had brought that up, Scott. Maybe they do a lot of private money lending. So they do that in this Roth IRA or IRA, and then they have rental properties and they do it in this IRA over here. But guess what? A solo 401k doesn't have as severe of consequences. If you do a prohibited transaction in a solo 401k, you only have a 15 % penalty on the amount that's engaged in the prohibited transaction that compounds year over year until you correct it. So you can correct the mistake and you don't entirely lose the status of the solo 401k. That is another, if you will, maybe benefit to the solo 401k.

40:03It's not something that I lead with because we don't want to be going out and doing prohibited transactions, right? We want to follow the rules. We are not going to get to number by all the questions I have outside of the rental property piece, but let's make sure we finish that one for the traditional rental here because this is really john you're absolutely fantastic wealth of knowledge on this on this uh on this subject matter this is awesome i'm learning so much right here okay so going back to my framework on rental properties self-directed ira i again came with the bias of depreciation benefits are lost self-directed ira um uh can create problems with or subject properties to forms of taxation like UBIT or UDFI.

40:48We discussed how the solo 401k, self-reacted solo 401k can resolve that problem to a large degree and how, in your opinion, in many cases, it's really not that big of a deal depending on how much income you're going to generate. Third, I said you're not going to be able to get a 30-year fixed rate Fannie Mae insured mortgage on there. That is surely true, but I bet you that there are workarounds and loan products that are reasonable for folks in this space. Could you tell us about the different types of financing available and what you'd see folks doing for single family rentals or small multifamily?

41:22Yeah. And you're right, Scott. So if you're looking at a rental property and you say, should I do this with my IRA or should I do it with non-IRA funds? If you can't get financing for the IRA, depending on the opportunity, it might make sense to not do it with the IRA. And that's something as an investor to look at. Don't use broad generalizations like we started with here. Oh, never do rental properties in an IRA. It just never makes sense. You lose all the depreciation. Well, again, we already talked about you're not losing depreciation. There's no taxable income to offset. And so when it comes to IRAs borrowing money, the type of loan that you have to obtain is called a non-recourse loan, meaning in the event of a default, the only recourse is against the subject property.

42:07Now, why is that? Why can't your IRA borrow with a conventional loan? The reason why is because conventional lending requires the individual borrower to sign a personal guarantee. Under 4975C1B of the tax code, it would be a prohibited transaction. Look at that. Just know it off the top of your head. Yes. We live this all day, every day, Scott. Yeah. It'd be a prohibited transaction. So you have to get a non-recourse loan. Now, I will tell you, Scott, there are non-recourse loan products out there. We have hundreds of clients that buy real estate with their IRA with a non-recourse loan. So there are lenders out there.

42:42There are more and more lenders emerging into this market. And I think a lot of it has to do with they see the opportunity. They see that there's over$14 trillion in IRAs. And back when I started nearly 20 years ago, there was only like$4 trillion. So because the market has grown and more and more people have an appetite to buy rental properties with their self-directed IRAs and solo 401ks, there's more availability for non-recourse loan products. The rates, of course, are going to be a little bit higher than your 30-year fixed mortgage, but not unreasonably higher. The idea is these folks are doing it because the cash flow is still good.

43:15If they're in a decent appreciating market and ultimately their renter is paying for their mortgage, eventually they're going to own a free and clear asset. And Scott, I should have mentioned this before when you asked me about UBIT. Here's one of the beauties of UBIT. So you might have a little bit of taxable exposure if you're doing this with your IRA, not your solo 401k paying the UBIT tax. But let's say you pay off the debt in its entirety. You own the property now free and clear in your IRA. As long as you wait 12 months in a day from the time that you pay off the debt, no UBIT tax, no recaptured depreciation, no UBIT tax.

43:52So imagine a Roth IRA. I know someone that bought 20 houses with a Roth IRA on owner financing. They had an aging landlord that was willing to sell on owner financing. They borrowed money from a private money lender to rehab the units. They were nearly 100 % leveraged. Well, guess what? He's got over a million dollar portfolio now in his Roth IRA of rental properties that he owns free and clear. Eventually, when he starts distributing those or selling them to distribute the money from the Roth IRA, he pays no tax. So there's some interesting really longer term strategies that can be discussed with respect to these Roth IRAs and even while someone might have some UBIT exposure.

44:29Awesome. Okay. And then that brings me to my last question here around fees and headaches. So again, I think these two things kind of go together with the questions about prohibited persons and the prohibited activities with respect to managing or providing services to properties or businesses inside of a self-directed IRA. Can you give us an overview of what the costs look like to set up a self-directed IRA or self-directed 401k? And if I want to buy a property, what am I looking at in terms of transaction expenses, paperwork, fees to specialists? What are those specialists called in order to facilitate a transaction or changes to the property?

45:11Sale, signing a property manager, those types of things. How do I think about the costs that I'll incur above and beyond outside of the IRA transaction if I'm doing it inside one of these accounts? Yeah. Yeah. So the first place I would start is there's a fee to pay a custodian or trust company or an administrator for if it's like a 401k. So you're going to pay a company. If it's going to be an IRA, it's going to be a trust company or oftentimes referred to as a custodian. And that fee is going to oftentimes be dependent on the portfolio value of the account. So, for example, at this moment in time, if you had an account with Equity Trust Company, and let's say it was around$100 ,000 that you started with, you'd be looking at a maintenance fee of$500.

46:01But it's a sliding tiered scale. As the portfolio value increases, your annual maintenance fee is generally going to be a little bit higher. Now, you look at it on a percentage basis. So oftentimes it's less than a half a percent. So when you compare that to manage money, if you had someone managing your money for you, you could be one, one and a half, maybe even 2%. Keep in mind, it's a self-directed IRA. So when you go out and you make profit, you get to keep 100 % of that profit in your IRA. You don't have to share that with your trust company or custodian. Do you have to pay an annual fee to your custodian?

46:37Yes. And they're going to give you exactly what that fee is. Solo 401ks, to touch on that, it depends comparing a solo to an IRA on the portfolio value of your account. Sometimes it's a little bit less, sometimes it's a little bit more. Generally, a solo 401k is going to be anywhere between$1 ,300 to$1 ,700 on an annual basis is what I see. Solo 401ks do carry a little bit more burden in terms of the administration of the actual plan, because it is a solo 401k. For example, if you have over$250 ,000 in the solo 401k, you have to file what's called a 5500 on an annual basis. And for example, the way we do this is we have systems and pipes and plumbing to make it easy and accommodating for that individual to be able to accomplish all of that.

47:25So to answer your question, Scott, first piece is what are your annual maintenance fees to your custodian or trust company. Some firms do pay like, or I should say charge, they will charge a per transaction fee or per asset fee. And then some firms just charge you one fee, regardless of how many assets and how many transactions you have in the account. So you just want to have a conversation with them with respect to what that's going to look like for your specific circumstances. And then outside of that, in terms of like you, you asked about specialists. So we always encourage folks to work with their CPAs, their tax attorneys, their other professionals as they engage in transactions.

48:06Equity trust is one member of their financial team. So we're not endorsing or recommending investment opportunities. We don't give tax legal or financial advice. And that goes for pretty much all trust companies and custodians out there. They're not going to give you that degree of advice. A lot of it can be done by the individual account owner in terms of educating themselves and learning about the system, asking their trust company or custodian who oftentimes has a lot of education and information that they can share with them. And then when needed, especially if they're going to do something a little bit more complex, that's where they would bring their tax accountant, CPA, or other professional into the equation.

48:41In terms of closing on like rental properties or maybe doing a fix and flip property investment, oftentimes we do see folks will form an LLC where their IRA will be the owner of the LLC, and then that LLC acquires the property. So you would want to factor in some additional fees for that. Those types of LLCs are generally going to range between$1 ,000 to$1 ,600 to$1 ,700. Keep in mind, it's not a go online to one of these online LLC formation companies and set up an LLC. When you create an LLC for your IRA, it has to be a specially crafted operating agreement. You have to have language in there specific to the prohibited transaction rules under 49.75.

49:22And if you don't do it properly, you could create implications for yourself. Okay. So if I want to take$250 ,000, I'll say I have a million bucks in my 401k. If I want to take$250 ,000 out of it and move that into a self-directed IRA or a solo 401k, I'm looking at a couple hundred bucks for the self-directed IRA, and maybe up to$1 ,300 to$1 ,700 for this solo 401k. Just a formula thing. I'm going to pay that every year in a recurring fee in most cases. Then I'm going to have a transaction fee related that the custodian or the provider will then charge to help me facilitate that transactions. And I will likely have to pay other specialists, perhaps including that custodian, some fees to set up the LLC and form the operating agreement with that to make sure that they adhere to the rules that are specific to self-directed IRAs or solo 401ks, self-directed solo 401ks.

50:19And so those can be certainly added expenses that will go into buying that rental property and should be known to folks. And I will be prohibited from providing many types of services to that property for the life of that investment. So those are real, real considerations. People need to go in eyes wide open if they're going to use this tool. You absolutely hit the nail on the head, Scott. I always relate this akin to when you start getting into real estate and and I can speak from experience and you're an entrepreneur and you're starting businesses. is. And I know, Scott, you've done this over the years, and I'm sure Mindy, you as well.

50:59And what happens is eventually you get to a point where you have maybe partnership LLCs and you have extra tax returns like 1065 partnership returns that have to be filed. So the best way to think about it is your self-directed IRA, it's like a separate entity and you have to maintain that entity. And there's some extra costs associated with the maintenance of that entity. And you always want to analyze. I'm glad you brought it up, Scott, because it's important to analyze the benefits and the burdens, if you will. What are the benefits with the self-directed IRA, Roth IRA, solo 401k? Well, we talked a lot about the tax advantages.

51:35And then of course, there's the ability to diversify. So you brought up, well, what if someone has a lot of money in a retirement account? That may be all of their wealth that they have. Instead of paying a bunch of taxes to take the money out to invest in real estate, they can do it inside of their self-directed IRA and invest in a hard asset. A lot of people want to invest in these types of real estate transactions because they want their money to be diversified beyond the traditional public markets. And that's the self-directed IRA or solo 401k allows them to do that. So is it beneficial? And then look at the burden.

52:08I'll give you a quick example. I have a client when we talk about UBIT, this is a good example. I have a client in 2021 that invested in a real estate partnership. It was an apartment building syndication, value add deal,$100 ,000 with their self-directed IRA. They didn't use a solo 401k, it was an IRA. And the property sold in 2023 and they had about 231 flow back into their self-directed IRA. So their capital gain was about$164 ,000. Now the property was only 70 % leveraged. So they didn't have to pay taxes on 100 % of the profit. That's the beauty of UBIT is you don't pay taxes on 100 % of the profit, just the percentage that's debt financed.

52:50So they were 70 % leveraged. They paid taxes on 70 % of the profit, which came out to be about$23 ,000 in UBIT tax. So some people look at that, they're like, wow, that is a lot of money in taxes to be paid for from the IRA, 23 ,000. But when you net it out, they made$140 ,000 in their IRA, which all will continue to grow tax-exempt. Their annualized return was still a 47 % annualized return. So that's a good example of, hey, are the burdens worth the benefit? Was the extra$300 to file the 990T tax return worth it? Yes. Was the extra$500 to$600 in annual maintenance fees to equity trust worth it?

53:37I would argue that it was worth it. Love it. Yeah. And what I think is awesome about this conversation here, and again, we didn't even get to my two through six discussion topics here, right? With like, hey, here's where this and how do we think about syndications in here? We kind of lightly sprinkled that in with great examples here. But I think what I hope we accomplished here for folks that are listening, this is a very dense conversation. It's very technical. There's a lot of complex topics here. You got to know it before you go into this and understand what you're doing is I think we just discussed the self-directed IRA for what it is, right?

54:10It's warts and all. This is a great tool for a lot of people out there to potentially access those funds in there. It's not free. There's no free lunch in investing anywhere for it, but it's way better for your example than just taking the funds out and paying the 10 % penalty and your marginal taxes for so many people. There's a lot of really good use cases for this tool. And again, I think that it's something that we're going to be exploring a lot over the course of this year in the context of this middle-class trap dilemma for this. And so I love it. I think you've done a really fantastic job here of describing it for what it is and where it can be used and highlighting really good examples here.

54:48You obviously do this all day long, every day, and are ready for everything I can throw at you in terms of questions. Yeah. And Scott, you brought up some really good points around, hey, for somebody that wants path of lease resistance, for somebody that they don't want to bother with some of the burdens of UBIT tax and trying to understand it and some of the complexities, we find some people, they just want to simply use their self-directed IRAs to make a loan secured by real estate. For example, I have a client that recently made a$193 ,000 loan on a fix and flip deal. He's just a passive lender.

55:21And he actually partnered his Roth, his traditional and his HSA, because you'll learn you can partner multiple accounts together. So he made$193 ,000 loan and all the interest income is flowing back into those accounts tax-free. So interest income, that's passive income. That's going back into your accounts tax-free. Or I think you brought up a private credit fund. So sometimes people don't want to invest in real estate syndications where there's actual real estate with debt because they have UBIT. So they look to invest in different types of funds. For example, like a private credit fund where they have interest income and that interest income passes through on the K-1 as interest income into the IRA and they don't have to worry about UBIT tax.

56:04So that goes into every investor is different. They can self direct their account and make all of their own decisions. They determine how they want to invest, where they want to invest. And ultimately, they're the manager of their self-directed IRA. They're their own wealth manager. Can you use an example of that person who went into an apartment value add deal with 70 % leverage and how that generated taxable income on 70 % of the gain, but it was still a huge win overall. And so the tax consequences, the tax concern is real, but it's also like you only get the tax consequence if you win on there and on a percentage of that gain, as I think John's argument.

56:42Is that right, John? That's correct. Yep. One last question I had. You said you have a certain number of transactions that you can do before your IRA becomes running a business. Is there a specific number? Yeah. So in terms of if your IRA was, and let's say you, on behalf of your IRA, you're using your IRA to flip houses. If you flip too many houses and that number is not clearly defined within the tax code or within any IRS guidance. The IRS says that if there is a trade or business that's regularly carried on, that's in your IRA, if you will, and you're not paying corporate tax, then you have unrelated business income tax, which isn't necessarily a bad thing.

57:28Maybe you do four flips and you pay 37 % tax, but the rest is all tax-free in your Roth IRA. The rule of thumb that people use in the industry is they don't do more than two short-term flips in their IRA. In a year. A year, correct, a year. And if they're an active real estate investor, generally they're going to limit that to one. So there's no clearly defined guidelines on this. We always encourage folks to talk to their own CPA about what do they feel most comfortable with. But again, that's the rule of thumb that's used. Rental properties are different. That's passive income. So I mentioned a client of mine that has 14 rental properties between their Roth and their spouse's Roth or private money lending, lending money secured by real estate.

58:09So that's passive income. It's just the short term flipping that someone needs to be wise of. And then, of course, there's some really advanced strategies such as a blocker corporation where you set up an LLC taxes as a corporation. So you pay a more favorable 21 percent corporate tax instead of the higher 37 percent UBIT tax. But that's a whole nother podcast in of itself. We're definitely going to have to come back and discuss a lot of advanced strategies. I want to think through, how can I use the HSA to subsidize healthcare costs in early retirement or traditional retirement using a self-directed IRA and some of these strategies?

58:47I've been on a kick about debt funds here, which I think are a very niche product, small use case, small portion of one's net worth, but particularly attractive with these tools in order to provide certain, can you mix and match that with the Roth conversion ladder or a 72T rule inside of a self-directed IRA? I think there's a lot of advanced and complex topics here that begin to solve this problem of all my wealth is in my 401k and I'm gonna have$7 million at traditional retirement age in real inflation adjusted$20,$25 if I just keep leaving it in there and let it compound. I want my 40s. How do I access it?

59:27And I think the answer is in this with more discussions like this one here that get into these more advanced concepts and the world of alternatives. And a quick one, Scott, if you contribute directly to a Roth IRA,$7 ,000, and then you make$10 ,000, you can take out that original$7 ,000 at any time you want tax and penalty free. You referenced 72T withdrawals. That's a strategy. Higher education, being able to distribute and be exempt from the 10 % premature withdrawal penalty. So yeah, there are ways to look at it. And of course, like I tell everybody, worst case scenario, if you take money out of your IRA, which you can do anytime you want, you just have a 10 % premature withdrawal penalty and ordinary income taxes.

1:00:06But hey, if you did really, really well in that IRA, it might be worth it to do that in order to be able to enjoy some of the benefits now. Well, thank you so much for the partnership and thank you for bringing this incredible depth of knowledge here. I can tell I'm not the first person to ask any of these questions to you to the point where you've literally memorized which pages, almost all of the pages that the source material from the IRS tax code is on there. We found one that you weren't sure quite which page it was on. Right back at you guys, I've been dialed into your podcast and it's so interesting.

1:00:38Almost all of my friends growing up are now in real estate, including myself now. And a good, probably 75 % of them are part of the BiggerPockets community. And that wasn't because I turned them onto the community. They found it on their own. So when they found out I was working with bigger pockets and passive pockets, they were like, really? I've been doing that for years. That's actually how I got involved in real estate. One of my best friends, he read the Robert Kiyosaki, Rich Dad, Poor Dad book. And then he got dialed into bigger pockets. And he's got 10 to 11 properties now. He's invested in some real estate syndications.

1:01:18And he's got two kids. He's over 40 or about 40. And he's on his way to creating a lot of wealth. And that's a big thank you to you guys. Awesome. Well, thank you so much, John, for coming on. We can't wait to get another one on here talking about some of these more advanced strategies now that we've covered the basics. That was the basics of investing in a rental property with a self-directed IRA. Happy to do it. All right, Scott. That was John Bowens. And that was a lot. And while I think this is a really great episode, John was throwing so much information at us. I know I'm going to have to go back and listen to it again so I can pause and take notes because I can't pause him when he's talking.

1:02:02And then by the time I take a note, I'm like, oh, crud. He just said 15 more things that I want to research. So I'm super excited for all of these rabbit holes. Thanks a lot, John. I've got so many rabbit holes to dive down. But what did you think of the show, Scott? I love it, right? This is not like an entry-level topic. So there's no way to discuss the material without using the language that is appropriate to self-directed IRAs and the specific language that is listed in the IRS tax code. So he didn't shy away from it. We didn't shy away from it. It's going to take you probably three or four listens to this one to really digest all the material.

1:02:35And you're still going to understand about 80 % of it. But you really got to know what you're doing if you're going to use these tools. This is not a tool you should use if you don't understand it, right? It's just an option. You should know at the highest level, there's an option for you to take money inside of a 401k, a Roth, or even an HSA and set up a self-directed account and invest in real estate. There's some problems with that. They can be overcomable and they can even be worthwhile for the investor. But you really got to know what you're doing and you got to dive into the complexity of it.

1:03:07And if the complexity scares you, stay away. But if it doesn't, there's an opportunity here to potentially begin solving some of the problems with the middle class draft. What did John say? When there's complexity, that's where opportunity lies. I'm a big fan of some personally, but if I was sitting there in the middle class trap with a million and a half in a 401k, I'd be really seriously interested in exploring the complexity here and seeing how that can actually free up some of that capital earlier in life. I like a little bit of complexity and a little bit of risk, depending on what account I'm more than a little bit of risk because there's so much opportunity for growth.

1:03:41But yeah, you know what makes money so fantastic, Scott? Is it's personal. You can do your own thing. I can do my own thing. And the only people that your money has to work for and your plans for your money has to work for is you and your partner and your family. And for me and my family, it's a little bit different, but that's okay. Absolutely. Well, should we get out of here, Mindy? We should. Scott, that wraps up this episode of the Bigger Pockets Money podcast. You are Scott Trench. I am Mindy Jensen saying see you soon, Silvermoon.