Editor's note: If you plan to move to Florida and live off your pension… you may be in for a nasty surprise.
Your pension isn't really your money. It's in the hands of your employer. You have no say over how much goes into or out of your pension plan.
In today's edition of our weekend Masters Series – previously published in the December 27, 2012 issue of our free e-letter DailyWealth – Retirement Millionaire editor Dr. David Eifrig says there's an easy way to take back control of your own money.
With this special account, you can decide how to invest – and grow – your retirement funds entirely tax-free. Even better, there's no limit to how much you can make…
How to Take Control of Your Retirement Money
By Dr. David Eifrig, editor, Retirement Trader
Don't trust your employer to do what is best for your retirement.
In 2012, Hostess Brands – the bankrupt baked goods company – admitted to using workers' pensions to pay for company operations. Not only was Hostess misusing retirement funds, the company missed over $20 million in pension payments.
If you're over 40 years old, you may have a "pension," also known as a defined-benefits plan. It's a retirement account that your employer funds and controls. When you retire, your employer agrees to give you either a lump sum of money or monthly payments.
With a pension, you have zero control over what happens. You can't increase or decrease the amount that's being invested. Companies also hire managers who oversee where pension money is invested. And the fees they charge dilute returns. Plus, if you die right after you retire, your dependents might get nothing.
But there is a solution...
You can move money from your pension into a self-directed IRA.
This gives you total control of your money. You get to grow your money tax-free, just like a pension... but there's no limit on how much you can make.
A self-directed IRA is exactly what it sounds like... It puts you in charge of what you invest in. In addition to the conventional investments you can make in a typical IRA – like stocks, bonds, and covered calls (something I regularly recommend to my Retirement Trader readers) – a fully self-directed IRA allows you to invest in many other assets, including real estate, private stocks, businesses, and even precious metals.
You can invest in just about anything, as long as it's not employed for your personal benefit. This simply means you must avoid any conflicts of interest. You can't, for example, invest in companies you have a 50% interest in. But you can buy the house next door through your IRA and then rent it to a neighbor. You can also invest in a local small business (again, as long as it's not your own).
I use my self-directed IRA to generate income by selling stock options. When I use this account for options trading, I don't have to follow any accounting or tax requirements.
In fact, if you do all your trading inside a retirement account, you don't have to report any trades to the IRS. The goal is simply to maximize your total returns as quickly and as easily as you can... And get better returns than a pension could offer.
There are two ways to move your pension to an IRA...
One is to "roll over" the pension directly into an IRA. The broker or custodian you're opening an IRA with should have all the necessary forms for you to fill out. I have mine with Fidelity and TD Ameritrade.
You can also take a lump-sum payment on your pension and then move the funds into an IRA. If you do this within days of taking the lump sum, you'll avoid being taxed on the money and the 10% early withdrawal penalty. (If you can just roll over the pension directly, you don't risk incurring taxes and penalties.)
However you do it, don't wait. Why leave your pension – the money you're counting on for retirement – in someone else's hands?
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Editor's note: Dr. Eifrig has the ultimate way to take control of your retirement. In his new book High Income Retirement, Doc explains the income strategy he used in his Retirement Trader advisory to build the most impressive track record in the newsletter industry. He gives step-by-step instructions on how this technique works… and details the best ways to use it to safely generate extra income. Claim your copy of High Income Retirement – without signing up for an expensive trading service – here.