Ohio National and Constellation

[Allen Trent]

Let's have a little fun:

Why can't you borrow against an IRA? (Besides the fact that it will invalidate your IRA if you did it and make the entire IRA taxable that year.)

What is the principle behind not being able to borrow against your IRA?

Under the Cares Act, you can take an IRA distribution & pay it back. You can take a loan from a 401k & pay it back. You can borrow 1x per year for 60 days as long as you roll over to another IRA.

But I get your point that you can't just take loans from an IRA or use as collateral. I have never seen the IRS state a principle as to why, so I can only make guesses that it is because they took a tax deduction for contribution, tax deferred the gains & the reasons for those 2 tax benefits was the money was intended to be used to live on in retirement & lessen the reliance on Govt programs

 

[DHK]

& the reasons for those 2 tax benefits was the money was intended to be used to live on in retirement & lessen the reliance on Govt programs

Well, they want their money back... and then some. Loans against these plans would negate that, so the wrote that into the rules.

Too bad that Congress didn't have a rule about borrowing against the Social Security trust funds. So hypocritical...




Well, some GOOD news... is that I got permission to go ahead and get registered with an outside RIA firm to offer AUM services! Until this week, I would've felt obligated to go with the Ohio National broker dealer (name omitted because they've responded here before and I don't want to attract any undue attention), but I just didn't want broker/dealer registrations and compliance. RIA was what I wanted.

I asked and got my permission... so I've already submitted that paperwork for an RIA I've had my eye on for some time. Looking forward to that expansion of my services!

 

[Allen Trent]

Loans against these plans would negate that, so the wrote that into the rules

It doesn't negate it, it postpones it. Just like a 401k doesn't negate any money from going from taxable to never taxed. If repaid, it will eventually come out for income, RMD or death. If not repaid & job loss, it is reported if not immediately repaid.

PS congrats on RIA

 

[DHK]

Loans against an IRA would invalidate the IRA making the whole thing taxable that year. It's a prohibited transaction.

I expound on the prohibited transaction here:
https://www.dynamicadvancedwealth.com/post/roth-ira-on-steroids

 

[DHK]

PS congrats on RIA

Thank you! It's been a long time in coming and finally I'm taking advantage of this period of 'uncertainty' to build even more of the kind of practice I've always wanted!

 

[Tahoe Ray]

Well, some GOOD news... is that I got permission to go ahead and get registered with an outside RIA firm to offer AUM services!

Congrats on that, David. It always helps when you manage ALL of a client's assets. Big win!

 

[Allen Trent]

Loans against an IRA would invalidate the IRA making the whole thing taxable that year. It's a prohibited transaction.

I expound on the prohibited transaction here:
https://www.dynamicadvancedwealth.com/post/roth-ira-on-steroids

I completely understand that it is a prohibited transaction, but with the stroke of a pen last year they made loans from an IRA permissable within the parameters.

The basis of this thread within the post was in regard to the possibility that our govt can & does slice & dice definitions of what they exempt from current taxation & what they target as new sources of tax revenue or put in their sights as loopholes for the wealthy. I hope for all they don't, but the examples I gave for MEC show they do count some loans as taxable & the examples I gave for 401k loans & Cares Act IRA loans show exemptions from the prohibited transactions

 

[marindependent]

Its too bad that Ohio National is deMutualizing!

 

[walthamny]

DHK,

You should have looked into starting your own RIA at your experience level. Working under another RIA is fine and they will give software support. However, you can accomplish all of that for somewhere around 5k to 10K and keep everything for yourself. I run my own RIA after suffering under NYL. Once you get close to 10 million AUM, you are all set. 20 is even better. At this time, most custodians have no minimums for RIA's. You can also start a simple basic RIA for about 3k and outsource everything to a TAMP like Betterment or Assetmark. They will do everything and you can collect whatever fee you select.

Also for any folks who are worried about what to do with ONL whole life polices with large cash values when the future dividend is cut or disappears, if you are a RIA, you can 1035 the cash value in to no surrender fee deferred annuities and collect your AUM fee. I use Nationwide Annuities for RIA's but there are other carriers. SO start planning for becoming a RIA as an option. If you don't want to change anything and stay on the insurance side only, outsource them to me. I don't mind revenue sharing.

 

[DHK]

I appreciate the kind words. I'll probably start my own in about a year, primarily for planning fees, etc.

We'll see what Ohio National does about the previously sold policies and the new policies they're looking to offer. I'm *told* that they want to keep offering whole life insurance... so we'll see what they'll do.