How the Self-Directed IRA Works | Adam Bergman, IRA Financial

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Before we dig in, please note, the views expressed by the guests in this video are their own and do not necessarily represent the views of Augment. This content is for informational purposes only and should not be considered professional or financial advice. Welcome to the Augment Exchange. I'm your host, Max Melmatt. Today we're sitting down with Adam Bergman, founder of IRA Financial. Adam was an eighth-year tax associate in New York City when a client wanted to use their IRA to invest in a hedge fund.

Partner handed him the research, and the answer blew him away. The tax code never says what a retirement account can invest in, only what it can't. Just three things. He opened one himself. But the process was clunky and expensive, so he left law and bootstrapped IRA Financial with his wife and their savings. 16 years later, the firm serves close to 30,000 clients and about 8 billion in assets. There's a sign behind Adam that reads, In Roth we trust, and he means it. We get into his son's battle with Lyme and the lesson that came out of it.

Cookie cutter way does not fit everyone, in medicine or in money. We break down the three most common structures, the self-directed IRA, the checkbook LLC, and the solo 401k, and why the self-employed can actually put away $72,000 a year instead of $7,500 a year. We finish with the backdoor Roth, Trump accounts, and his advice for anyone building something. Adam has written nine books and is a wealth of knowledge. And even though Adam is a tax attorney, this podcast is not intended to be tax advice.

You should consult with qualified professionals on your unique circumstances. I truly enjoyed this conversation. I hope you do too. Awesome. Adam, appreciate you taking the time. Thank you. Thanks so much for having me, Max. Super excited. Yeah, it should be fun. So so I had a a certain way I wanted to start, and then I read your LinkedIn post earlier this week about your sons and your family's battle with with Lyme's disease and kind of how that impacted how you think about retirement investing.

and I think there there are times where people will say, this thing happened and here's what it taught me about B2B sales and it cannot really hit it. I think you you actually really hit it with your story and it's really stuck with me. So I'm curious if you'd be open to kind of sharing a little bit more, kind of unpacking that. Yeah, absolutely. Happy to dive into it. So it's interesting because you know, as a as someone with a a tax background, I was a lawyer in New York.

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Tax lawyer worked at big firms and I I found the alternative asset retirement space. You know, haphazardly had a client that wanted to use his IRA to invest in a hedge fund and never really knew that you can do alternative assets in retirement accounts. So started IRA financial and you know, fast forward sixteen years, you know, definitely, you know, have helped thousands of clients, like well versed that alternative assets are a very important and meaningful part of people's retirement investment strategy. It's almost crucial. But two years ago, my my son, he he got li he he got

bit by a tick in the in the forest at camp in Pennsylvania. And you know, we didn't know what was wrong with him. It took us about six months to figure out why he just was like really sluggish and weak and pain, fever, bouts of fever, just like really worrisome. And found out after going to multiple doctors that he tested positive for Lyme. And then something called Babesia and Bartonella, which are kind of like subsets of Lyme disease. And you know, we did what most people do, right? We listened to our doctors. We did the traditional

medicine row. We did tons of antibiotics. And my son just kept getting worse and worse and worse to the point of last September he stopped going to school. He basically was stuck in his room for three months. lost, he went down to ninety-six pounds. he was in bad shape. And we didn't understand. We're we're doing everything the doctors told us to do. Take more antibiotics. They would give us more and more. And then finally, like we we got some help for some some dear friends who said, Listen, I think

You should probably talk to a functional doctor. There's probably like an alternative way of going about this. And we got in in touch with someone who's like well known in in kind of the more functional medical space and and told us that, hey, you you you probably might your son probably has all this like kind of junk in his body, like toxicity. And it turned out he was right, like mold and different types of toxicity that you and I, our bodies would be able to clean out. But because of the Lyme disease and then the antibiotics in his body, his body was fighting three different wars.

And it couldn't win. It was losing all three because it didn't have enough power and the toxicity was not allowing the antibiotics to work. So he was just regressing. So, anyways, through functional medicine, we got him off a all antibiotics. We put them on herbs, vi like literally just herbs, Chinese herbs. And we did a bunch of plasma exchanges where he basically had blood transfusions for s every month for six months to basically take all the junk out of his body and put new clean blood in.

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That's all. No antibiotics, no medicine. And he's cured. he's he went to school this week. Other than running, he's a very, very strong cross-country runner. he hasn't tr he hasn't really ran a lot because he still wants to get stronger, but he's a normal kid. He he walks, he plays, you know, hangs out. he's laughing, smiling, having a great time with his friends, going out at night. It's a miracle. and then I kind of looked at all this and I said, Well, I should have realized this because

I've always preached alternative assets where a lot of my traditional friends and family that are like more focused on Wall Street and and traditional investments were always like, no, alternative assets, they're too risky. Like th you shouldn't do those things. Those things are you you just end up losing money. And I know it's not true because I'm for myself, the three strongest investments I ever did in my life were, you know, Bitcoin, real estate, and a few private investments that basically like 10x plus my money in all three cases. And, you know.

I'm at the point with my Roth IRA, I never have to work ever again. not because I bought stocks, but because of my alts. So I knew that wasn't the truth. And I should have I should have been smarter in terms of like incorporating my retirement strategies with medicine. But you know, with with medicine, Max, you just kind of listen to the doctors. Maybe with financial advisors were not as you know, as focused on listening and more open to kind of try different stuff. But

It it showed that there's different ways to get stuff done and and the cookie cutter way doesn't work for everyone. Yeah, no, it's it was a awesome story. Really glad he's back healthy and really want to spend some time kind of unpacking what it looks like. And I know your your background kind of as a tax and ERISA attorney, and then you discovered the the IRA path and kind of the tax code saying.

Not what you could invest in, but what you can't invest in. And I'm curious if you can kind of walk us through how you discovered the structures, what what that story was like, what that journey was like for you. Yeah, absolutely. you know, as as I mentioned, I was an eighth year associate in New York City, big law firms. I also have a master's in tax law. I'm pretty, you know, educated, maybe not the smartest guy, but I'm definitely educated. And I had no idea that you could do alternative assets. And I had a client that wanted to use his IRA to invest in the hedge fund. I remember being

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Asked to do the research by the partner I was working with. And I was just like totally blown away that you could do this. And I remember going online and there were a bunch of companies, you know, it's back in 2008 that were doing it, but they were charging like astronomical cost, really very poor technology. It was like very cumbersome. I actually opened an account myself because I actually wanted to buy real estate with a former employer 401k.

with some friends, we did a deal. And I at that point had no money except some money in my retirement account. So I did that deal and I went through the process and I was like, this should be so much easier. This is incredible that I can do this. And that real estate deal ended up like six X in over four years. But once I went through the process, I realized that this industry is just so interesting. And from a tax lawyer, I couldn't believe that when IRAs were created in 1974. So

IRAs and 401ks were created by ERISA in 1974. And in the tax code, there's two sections that address retirement accounts, section 408 and 4975. And those two sections don't tell you what you can do, only what you cannot do. And like you, Max, there's only three things you can't do. Okay, you can't do life insurance, you could in a 401k, not an IRM. You can't buy collectibles like art. And thirdly, under 4975, you can't do anything that directly or indirectly.

personally benefits you. So personally benefits you, your lineal descendants, your parents, your children, your spouse, daughter, son-in-law, or any entities controlled 50% or more by such persons, right? So you can't buy a house and live in it. Can't take your IRA, invest in a company you own 80%. Although there are ways that I can tell you how to do that, but not in an IRA. there through a 401k, there's some some different structures. you can't take your IRA, go to Hawaii or buy yourself a Porsche. Otherwise you can do it.

Right. So you can do real estate, private investments, hedge funds, venture capital, private equity, hard money loans, Bitcoin, gold, you know, you name it. Other than those three things, you can do it. And, you know, literally in 1974, when Congress created ERISA and created IRA's informum case, they could have limited retirement accounts to traditionals, right? The five twenty nine plan for education is limited to ETFs and mutual funds. They didn't because they understand the power of diversification.

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Right. They understand that pension plans, Calpers, for example, needs alts in order to generate the liquidity premium, the alpha they need to beat inflation and to generate the returns needed to cover their expenses and costs associated with their plan. Just like Americans, we need alpha. If we're just putting money in the markets, we're not going to get enough money. We're not going to be able to supercharge the retirement to beat inflation to have a a a strong nest egg. It's not going to happen. And we're going to get beaten by the system.

The only way to to do this and be successful and generate seven figure retirement accounts, with by the way, we all can do it. Not zero sum. We all can have seven figure IRAs. You've got to diversify and you've got to get into alts because otherwise we're just owning 10 stocks. Yeah. Yeah. And and curious from that personal investment, the work you did for a client, at what point did you say, okay, this needs to be better and I can do it? and what at what point did you like?

Build a team. What did the what did the early days look like for you? Max, man, I can I made a lot of mistakes. You know, being a first-time CEO, I made a I can I should teach a class somewhere in university or business school. Like all the things you should not do with a first-time CEO, I did them. And worse. But yeah, I realized quick. so by the end of 2008, I left law. So within within five months, I left my job. And it took me about a year to kind of get my savings, get my structure together.

I bootstrapped did IRA financial. I started it with my wife and our savings. We had no no money other than some retirement savings and some personal savings. And I was able to start the money back, the start the company back in 08 for for not a significant amount of money. It was actually I did it better or worse, like pretty pretty inexpensively. And that got me into some trouble because I wasn't able to hire a lot of talent. And my wife and I were

kind of doing everything at once. So kind of limited our growth in the first few years. But yeah, we we took it from zero to now we have almost thirty thousand customers, eight billion in assets. Sixteen years, like give or take. If I had to do it all over again, the one thing I would do and if you're listening to this podcast, you're starting a business or you have started a business, spend your money on talent. People matter, okay? Not everyone's created equal. It's just sorry. It's just a a fact. And

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And not that someone who runs a business is better than someone who's a fireman, just different skills, right? Just different skills. And I was a lawyer and I I had different skills than probably someone who I have more of a business background. And I made mistakes just because I kind of focused my business as a lawyer. I was an eight trained lawyer for eight years. I looked at things differently than, you know, someone who maybe had a more of a business background, business experience.

Some positive, but I've made a lot of mistakes. So I would have hired, if I had to do all over again, Max, I would hire, I would have spent my money more on talent, on people than anything else. Interesting. Interesting. And at what point did you go kind of from a manual process to tech enabled, automated? And now the experience is pretty clean and easy. But whatever. It time. I mean, it took time. It was it was definitely a transition. I mean, even when we started, I started the company around 2010, February 2010.

It was still like early into the iPhone world. So there wasn't a lot of like tech automation apps, just kind of user interface where it's it's simple. It was better than what our competitors were doing, but it the it was still clunky and there's still a lot of friction. And I think we we've definitely developed our you know, our procedures and and used technology. And we keep doing it now with AI, where there's just less and less friction. We're able to push out

products and and new features much easier and and our our infrastructure is way stronger. But it's definitely like any business, it's total transition, right? If you look at, you know, Facebook where it was in 20, you know, twelve or thirteen and where it is today, like it it's obviously transformed, just like any tech enabled business. So you gotta be ready to transform, whether it's AI, whether it's a new type of technology, you're gonna have to be on your toes and ready and embrace it.

Awesome. I and I'm hoping to to now get some some free advice. go go deep a little bit in kind of what the different structures are, how they work, how people can participate, the pitfalls along the way. But kind of before we we go step by step, just taking a step back for people who don't know the IRA, the self directed four one K, the different structures, can you walk us through what they are, how they work, like who's eligible for what? Yeah, absolutely. So well

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We'll do a little history lesson. So again, IRAs were created in 1974. There was no distinction between an IRA and a self-directed IRA, right? The word self-directed IRA, you're not going to find the tax code. It doesn't exist. What it is, is an IRA that is allowed to invest in all available alternative, all available asset options. Traditional like stock, but also alternative, right? The Schwabs, the Fidelis, the Vanguards, once IRAs and 401ks were created back in 74.

They focus their business model on traditional investments, stocks, mutual funds, bonds. Why? But they sell. That's what they make money. I would have done the same if I was the CEO of Vanguard in 1974. I would have on Bogle, I would have said, okay, I'm only going to sell stocks and mutual funds because that's how I make money. I don't make money when my clients will buy real estate in Texas. Like that's not gonna help me. So unfortunately for for Americans, I say unfortunately because we have not been able to diversify.

We've missed out a lot of incredible investment opportunities that the ultra rich have been doing. Is you know, most Americans, ninety-five percent plus of Americans are really focused on just buying mutual funds, ETFs, and stocks, which which is great. I'm all in favor of that, but you need to complement that with alts. So self-directed IRA is just a word. You can call it the Adam Bergman IRA. Doesn't matter. All it means is an IRA that is allowed to do alternative assets non publicly traded. So in 1974, when

IRAs created and Vanguard and Schwab started selling stocks. Our industry, the self-directed IRA industry, was also bored. It was just very, very, very niche. Meaning at that point, people were simply just doing a little gold. In real estate, there were only a few banks that were doing that. There were, there were no companies like IRA Financial. It was just very, very few isolated banks that were providing these alternative asset options to clients. Again, mostly gold and

real estate. And the industry's developed as alternative assets, as the private investment world has expanded and matured and got more mainstream because, you know, mainstream Americans realize that that's what the ultra wealthy are doing. They're investing in private businesses. They're investing in private equity and hedge funds and venture capital. That's where they're making their money, right? They're not making their money just buying and selling stock. Right. You could look at a few years ago, you know, Josh Kushner debunked the LA Lakers, right? What does he own? Thrive Capital.

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What is It's a private equity fund. Okay. People are making money in private businesses. By the time companies are public, most of the value has been eroded and all the rich people already got rich. that's just, you know, we'll see with SpaceX. That's just where the money is. We'll see with anthropic as well, and eventually open AI. So the money's made pre-IPO. That's just a fact. So the word self-directed RA is just there to give Americans diversification. So again, there's only three things you can't do: life insurance collectibles.

And anything involving a disqualified person. So anything self-dealing. So there's a whole universe of investments to do. And the self-tracking IRA just lets you do it and essentially have your IRA d directly invest into that alternative asset and lock in the tax-free gains. Because when you buy stocks, property, gold, private investment through a retirement account, you don't pay tax. But okay, so so in curious the

Self-directed IRA, what it can invest in, what it can't invest in. I I think have a decent grasp. But there's the self-directed IRA, there's the checkbook IRA, there's the solo 401k, there's the 401k. What's what's the difference? What what can you do and can you not do in each of those? Okay. So the same rules apply to all three. You can't do those three things. Otherwise, you can do it. So let's go through each structure. The self-directed IRA is the most common, and essentially it is

A simple procedure, right? Instead of buying stock at Vanguard, let's say you have a piece of property you want to buy or you want to invest in your friend's business private, how do you do it? Okay, Vanguard Schwa Fidelity won't let you do it. We know it's legal. So you find a company like IRA Financial, you open an account, takes minutes. you then provide us your retirement account info. Let's say you want to move over 75,000 from your Vanguard account. IRA Financial will initiate that transfer tax-free. Anytime you move retirement money.

Between custodians, between banks, financial institutions, it's always tax-free. Okay. IRA is 401k. It's always tax-free as long as it goes institution to institution. So that money that's 75K in our example will go tax-free from Fidelia or Vanguard Schwab to IRA Financial. And then you will tell IRA Financial, hey, send the money to John Doe's company X or real estate property Y. We will do that. And title will be held in the name of the IRA, for example, IRA Financial Trust Company for the benefit of the John Doe IRA.

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IRA financial handle all the reporting. So you don't have to worry about anything, any IRS reporting, tax filings. We also provide consultations. So you don't have to worry about ribbon transactions or getting to any kind of issues you don't understand. That's what we do. You get to focus on what you do best, which is make investments. And there's nothing else to do. It is super simple, easy. it's inexpensive. You can open one of these and transact for less than 500 bucks a year. We have flat fees. We don't charge assets under management or asset.

Custody evaluation fee. So to me, that that's a a major issue. So you're not gonna have any problems with that. It's super simple and easy. So that's the self-record IRA. Most common, say 65-70% of our clients are just doing the basic self-record IRA. Who should do that? I think if if you're doing like a lockup investment, like a private company, private equity, venture capital, you don't need limited liability protection. you just need something simple and easy, simple vehicle to make the alternative asset investments and you know.

Access your capital in your retirement account, great option. And you can do the self-directed IRA in a Roth IRA, which is an after tax account, traditional IRA, a pre tax account. We even offer self-directed SEP IRAs, which is like a company IRA, self-dricket simple IRA, company IRA. You can do a self-dricket health savings account. You can also do a self directed Coverdale account, which is a small education account of up to $2,000. So you have, if you want to do alts, it doesn't have to just be in a regular IRA.

Be a Roth, SEP, simple, Coverdale, and HSA. That's one. The second vehicle, which is now becoming even more popular and gaining a lot of ground on the self-record IRA, is the self-record IRA LLC, also known as checkbook control. The difference between the self-record IRA and the self-record IRA LC is just the word LLC. What that means is we all know what an LLC is, a limited liability company, it's a pass-through entity, but gives you limited liability protection. So

All that's different here is instead of the IRA investing directly into John Doe's business, there's an LLC that's imposed between the IRA and the business. So the IRA will send 75 grand to the LC, which the IRA owns 100% of or whatever percentage, depending on if there are other investors. And then you manage it as the individual where is that's where the name checkbook control comes from, because you have the checkbook as the manager. You can open a bank account or you know, IRA Financial, we can open the bank account for you.

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And you have checkbook control, and now you can call it like wire control or Zell or Venmo control. So if you need to pay a contractor, you can write him or her a check or send them a Venmo. And then the LLC buys the property instead of the IRA. So what does that do? That gives you limited liability protection. What is that? That protects your assets outside of the LC if you have other IRA money. Also gives you some privacy. So this way people don't know you're using your IRA because the LC is called you know XYZ L C.

and it gives you a little more speed because you can send a V Zell or a Venmo or do a wire to pay a contractor versus having to go through IRA Financial, even though we do it relatively quick, it's still much easier, right? If your toilet breaks your Airbnb that your IRA owns, it's easier to send the the contract the the plumber a few hundred bucks through ACH or Venmo or Zell than, you know, waiting the next day to have Ira Financial send the money. So

You get all they got the speed, the limited liability protection, and the and the flexibility and the privacy. Who should do those? Generally like real estate investors, someone who wants privacy, someone that's doing a little more risky stuff. Not necessary if you're just doing a investment into a private business. not crucial to do it. Some people want it because they want a little more control. They want that maybe one LC that has multiple investments, right? Maybe that LC will do real estate.

Maybe also in private business, maybe gold and Bitcoin. So you just have one vehicle that you can do everything and have a little more control as the manager. There's no right or wrong. Okay. I have clients that do LLCs for private businesses and I have clients that do a regular self record I rate for real estate. No right or wrong. It's really whatever you want. There is a establishment fee for the L C, generally around nine under a thousand dollars, which includes the state filing fee, the operating agreement, the articles. And then each year it's a couple hundred bucks to

Depending on the state, right? To to pay for state filing fees, not a huge cost. So if cost is no option, a lot of clients are now transitioning to the LLC just because they want more control. But again, there's no right or wrong. And this is something we we talk to our clients about, try to put them in the right position. So those are the two the self directed IRA and the checkbook control. And then the third most popular is something called the self directed solo 401k, which is for a self employed person.

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Okay, so an IRA is an individual retirement account. A solo 401k has to be adopted by a business, just like a SEP IRA. Now, who can adopt a solo 401k? Anyone who has a business. Either you're self-employed, so just you, you have an LLC, a partnership, a C Corp, but you have no full-time employees, which means a thousand hours a year, or two consecutive years of 500 hours or more of non-owner employees.

Right. So if it's me and my wife, a spouse doesn't count as an employee. So me and my wife could have a business. As long as we don't have any full-time employees, we can set up a solo K, even if there's two owners. Or let's say I I do I work at Apple full-time, but I do a side gig of consulting. Even though I have an Apple 41K, I can still do my own solo K. So why would you want to do a solo K? Well, it's a great plan. I probably put every single one of my clients in a solo K if I could. The problem is not everyone's self-employed. So what's the advantage?

IRAs in 2026, you can put away seventy five hundred, you're under fifty, eighty six hundred if you're over fifty. Solar K can go up to seventy-two K if you're under fifty, eighty K if you're over fifty. And there's a catch up if you're between age sixteen and sixty-three, where you can get to eighty three two five eighty-three thousand two hundred fifty dollars. You're tenx the contribution limit. Why is that set that as if you're self employed, you could put away 10x when you can if you're not?

It's the business 401k rules. They have different contribution rules. So if you look at a SEPI array, a SEPI array is also it's matched up at 72K. There's no catch up if you're over 50, whereas a 401k does. But here's the thing with a SEP IRA. A SEP IRA is a pure profit sharing plan. So that means you can put away either 20% of your comp up to 72K if you're self-employed, self-employed sole proprietor or single member LC, or 25% of your W2, if you're C or S Corp, up to 72K. But that's a percentage.

So if I made 100K, I can only put away, if I'm self-employed, $20,000, right? In a SEP IRA, 20% of $100. If I had a solo K, I'm under $50, I can do an employee deferral of $24,500 plus a 20% profit sharing, which would get me to $44,000. And then if I have extra money I want to play with, I can do a what's called a backdoor Roth to top me up to $72,000. So there are a lot more.

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Flexible retirement options in a solo. And I always tell people like there's actually an advantage to be self-employed than working at like Anthropic or Google because you can max out your retirement. you can save a lot more, and you can also invest through a solo K in Alts because you're the trustee of your plan. So you can do all the same things in an IRA, but you got one big advantage. With an IRA, if you use leverage to buy real estate.

Okay, so if you borrow money to buy real estate in IRA, number one, the loan has to be non-recourse, which means you can't personally guarantee it. Number two, there's a tax called UBIT, unrelated business income tax, that gets triggered if your IRA invests in a fund that uses leverage or a real estate deal that uses leverage, or invested in a business that's passed through, not a C Corp, an LC that generates more than a thousand dollars of income. Okay. A 401k has an exemption.

For any 401k that buys real estate using leverage. Under section 514 C9, Congress wanted to give pension plans the ability to buy real estate. So pension plans are 401ks. So they created this exception, basically for the large institutions like CalPers, so they can invest in real estate. And they said, hey, since every real estate deal is leverage, right? You you can't buy real estate without leverage in commercial world from an investment grade standpoint, we're gonna let you use

Your retirement account, your 401k to invest in real estate with leverage, we're not going to use that UBI tax will not be triggered, whereas it would be triggered in IRA. Now, the UBIT tax is significant. It goes up to 37% at a very low income threshold of around $15,000. So here's an example. I put in 100K IRA cash and I go borrow from a bank 100K at a non-recourse basis, because I can't personally guarantee it, because that would be prohibited under 4975.

And so I got a fifty fifty debt to equity ratio. And now let's say I have twenty thousand dollars in net profits after expenses, depreciation, deductions, and the like. Since I have fifty fifty debt to equity ratio, fifty percent of my twenty thousand bucks would be subject to this U bid tax, which again could travel as high as thirty seven percent at a very at a fifteen K threshold. So very high tax. Whereas if I did that same investment in a solo four one K, no tax. Zero tax. Interesting.

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But that only applies to real estate acquisition and deadness. It does not apply if your 40K invests in a private business through an LLC, you still have to deal with U Bit. So if you're investing in private companies, now a lot of small private companies, some of them are LLCs. The large ones are C corps, right? The the large ones that are going to go public are C Corps. You don't to deal with U Bit. But the smaller ones, like your friend's opening a restaurant, probably gonna be an LC. So something you wanna be aware of. And there are ways to get around it or

reduce your U bid exposure, which we can help with, but something to be aware of. Absolutely. And and so for our offerings, it's mainly via an SPV, which is a Delaware LLC. But because we're investing in private companies, I'm under the impression there's no U bit issue because we're not really getting dividends. It's so there's no income at the S P V level. Does that work or is there an issue there? Well at the S P I assume you have to number you have to

Find out and I assume most of the companies you're investing are corporations, not LLCs. They're probably ninety-nine point nine percent because most most of these companies are gonna go public or are C corps already. Yeah. because also because these investors don't want losses or or pat phantom income to pass through without distributions. So for you guys, it's not an issue, but for more for smaller scale investors that want to invest in a local business, it may be an LC. so it's something to worry to to kind of think about and we we can help structure around that. But

Yeah, for for companies that are gonna go public, unicorns, big companies, they're all C Corps. Gotcha. Gotcha. Okay. And and there's so you had also touched on the backdoor Roth I see behind you in in Roth we trust. so can you just the traditional IRA and before we started recording, I had said, Hey I I wanted to go with the Roth, but then the income limits I couldn't execute on it. And you'd said, Well, no, you could do a backdoor Roth.

Can you and I kind of saved it for now so that the world can get educated here? What what does that look like? What's what's a backdoor of Roth? How do you do it? And how do you avoid any like tax issues if people are scared of that? Yeah, yeah. So before 2010, there was income limitations for doing Roth conversions. So if you made more than $100,000 before 2010, you couldn't convert a pre-tax IRA to Roth. Why would you want to do that? Because once your money goes to Roth and you're 59.5 and your Roth has been open at least five years.

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You can pull everything out of the Roth tax-free, right? That's why my sign here is in Roth we trust, because it's the best legal tax shelter out there. Like all my money's in Roth. It's literally like having you know tax-free money. There's nothing better. As a tax lawyer, like that's the ultimate, right? Get all your money in Roth, wait till you're 59 and half, and you can live off your money tax-free forever. Okay. And if you die, you can pass it to your spouse. Your spouse can use it for their life. And then if your spouse dies,

God forbid, and there's money in the Roth, your kids have 10 years to use it tax-free. So it's a legacy gift. You can use it while you're alive. It's the best legal tax shelter. Like every American should have all their money in Roth. Now, the problem, first problem is to get your money in Roth, you have to pay income tax. So if you convert 100K from pre-tax to Roth, you have to pay ordinary income on it. But you can do it over many years. You don't have to pay it. Like I converted all my money from pre-tax to Roth over like 10 years. And now all my money's in Roth. All my contributions to my formal care Roth. I do a Roth IRA every year.

So let's go back to the backdoor. Before 2010, you could not do backdoors because you couldn't convert if you made more than 100K. What happens in 2008, financial crisis, the government needs money. And how do you get money? A good way to get money is you make people, you accelerate tax payments by doing, allowing people to do Roth conversions. So they said, you know what? We'll let you do Roth conversions irrespective of income. And guess what? We're gonna let you two years to pay the tax. And I remember I was starting IRA Financial when all this was happening, so I remember this like vividly.

They they they allowed you to pay the tax over two years to accelerate and encourage people to do conversions so they can get more tax money because the c the government was, you know, tapped out. People were losing their jobs. So th those rules haven't changed. So now anyone can do a Roth conversion, right? Elon Musk can convert his pre-tax IRA or former kid to Roth. Okay. So what's a backdoor Roth? Roth IRAs have income limitations. it's around two hundred and fifty two thousand now. If you're married filed jointly, you make more than around two hundred and fifty two thousand. You can't

Do a Roth IRA. Okay. So Elon Musk cannot do a Roth IRA. But remember I just said anyone could convert without income limits. So the trick now is since 2010, you make an IRA contribution to a traditional IRA, but you don't take a tax deduction. You just put in 75 or 8,600 bucks or less, whatever you want. And then a second later, you just move the money to a Roth. And since the money's after tax and you're just moving it to the Roth, you're going after tax to after tax.

speaker-0 (33:27.416)
There's no tax. Okay. And since there's no income limitations for doing an after-tax IRA contribution, anyone could do it. The way to get into the Roth is you just do the after-tax IRA contribution and then immediately convert to Roth. You don't want to stay in the after-tax IRA world because you're in no man's land. Because once you're 59 and a half, you have to pay tax on all the money you pull out. And you didn't get a tax deduction for putting the money in. So you're in no man's land. Traditional IRA, at least you get a tax deduction for what you put in.

Once you're fifty nine and half, you pull the money out, you get you you have to pay tax. But with an after tax IRA contribution, you get no tax deduction and no tax free compounded growth and no tax free distributions. So you're in no man's land. So that's why you make the after tax IRA contribution and then you convert it to Roth. Now the one wrinkle is if you have other pre-tax IRA money out there, let's say you have a traditional IRA at Vanguard for, I don't know, five thousand bucks. And you you make a million dollars a year and you're like, I I want to do a Roth IRA. And you put

$5,000 into the backdoor IRA. Unfortunately, because you have a pre-tax IRA out there, the government doesn't just let you convert the five to the Roth. They basically make you do this pro rata formula where you add all your IRAs together. So five and five in that example, you have 10. And now 50% of the 5,000 is tax-free and 50% subject to tax. But if you have no other pre-tax IRAs, let's say all your money's in 401k and

You have no pre-tax IRAs or only Roth IRAs. You can keep doing backdoor Roth IRAs every year. Okay. So so let's say, for example, there there was somebody who had an IRA, they'd had their employer 401ks, they then put that into their own IRA with like a Schwab or Fidelity or Vanguard. And then they wanted to take the funds that are in their like self-directed brokerage IRA account and

Transfer that over to be able to invest in alternatives and then to put that into a Roth. How does that work? I I initiate the basically the transfer from, let's say, a Schwab or Fidelity into IRA financial, into the traditional account, and then able to move that to the Roth. And I have a tax consequence. But like, yeah, what walk me through that a little bit?

speaker-0 (35:51.338)
Yeah, so you have two options. So you can do the conversion of where it is now at Fidelity or Schwab. You can convert it at IRA Financial. Or what I would do is I would wait to make the investment into a private alternative asset that's a liquid and then convert it in kind. And then we can get you discounted valuation. So we work with business you know, valuation companies that because the assets are liquid, we can get you probably a thirty to forty percent, maybe more, generally thirty to fifty percent discount.

on the on the value. So let's say you rolled over 100K and you bought into a private business that you now own.00001% of, right? and it's a liquid. You you can't control when there's liquidity on it. You don't could be a year or six months or 10 years. You can get a someone to value that asset at less, probably a lot less than you paid for it. Right. And there's all kinds of tax court cases based off family partnership rules.

And and discounting valuations for estate tax planning purposes that people now apply to Roth conversions. And I've done hundreds of these over the years. I've done a few for myself. So I probably get you a four, let's say a 40% discount on the 100K. So now you're only converting 60,000 instead of a hundred. And that's kind of the way to do it. And then what tax do I pay on that 60? You have to pay ordinary income tax. That's the one catch. So the way people do it is the way I do it is you look at your tax bracket, right? Let's say you're at the

I don't know, 30% tax bracket, just keep it simple. And and let's say you there's another 50K until you get to a higher tax bracket. So you maybe you you convert that 50K so you don't trigger a higher tax bracket. And maybe the next year you do more. or some people have NOLs, net operating losses, some people have deductions, some people have low income that year for whatever reason, and you can kind of determine what's the best, most opportune time to do your conversion.

Interesting. Okay. So one more one more question here. let's say you had a loss in the same year, but you can't use your that loss. It would have to be an equal, like an LLC or an equal structure. Yeah. Capital losses only could offset ordinary income up to $3,000 a year. So it'd have to be it'd have to be a ordinary loss, business loss that can be used or and what's called as an NOL net operating loss.

speaker-0 (38:12.6)
That you can carry forward or back and and use it to offset any potential gains or income, including Roth conversions. Interesting. Okay. And one other devil's advocate question. Yeah. The Roth structure, let's say somebody's thirty years old today. What happens if the laws change or the rules change on the the tax advantages of Roth? Where traditionally you get that tax right off today.

Roth it would what do you think? Is there any chance that we see that change or so yeah, double click on that? So the first risk of the Roth conversion I always say is like this Silicon Valley Bank, Enron, Lehman Brothers, right? You do a Roth conversion tomorrow on Silicon Valley Bank stock and tomorrow it's bankrupt. And now you just sent Uncle Sam all this money. So you you know, there's risk, but you you do the conversions, hopefully you you win more than you lose. Nothing's guaranteed, right? Even if you buy it. I own Silicon Valley.

Bank bonds, believe it not. Okay. Thought that was a pretty safe, you know, top 20 bank in the country. I lost. Okay. So I hate when people say, ultra so risky. I'm like, I've had a lot of losses in the stock market, lots. Okay. And no one, you know, told me about the risk there. So that's number one. Number two, you could the rules change? You know, people a lot of people don't realize this. I I have a mentor who has been in the retirement industry like since the s seventies. Literally, he started his company like right at Arissa in 74.

And he told me he was Adam, and he's actually a big pre-tax IRA, and I fight with him all the time because I'm a big Rothher. And he goes, Adam, did you know that in nine before 1981, Social Security was not taxed? Guess what? The government needed money, they just said, We're taxing social security, tough luck. So they changed the rules on all of us. Could they do the rule the same with a Roth? I don't know. I mean, possibly. We see now Senator Wyden and Senator Warren are trying to limit Roth IRAs maybe to 10 billion. Okay. That may not

hurt most of us. Like well, I'll be happy to get a ten billion dollar Roth IRA, maybe one day, but legislation could happen. Could they change it? Now it's codified. They'd have to change it. It's in the tax code. They'd have to change it. Not so easy. I I don't think it's likely. I I wouldn't bet on it. So to me it's I'd be more focused on what you're converting and the risk reward proposition than if the government changed the rules. Makes sense. Makes sense. If they did change the rules, you're gonna have a lot of unhappy voters. Yeah.

speaker-0 (40:39.32)
Yeah, no, absolutely. I I agree with that. And I think one of the most famous Roth IRAs is the the story of Peter Thiel. Yeah, put a couple thousand dollars in with a company called Facebook. And and that's put it into sixteen hundred bucks for PayPal. They turned that into about twenty eight million dollars in a few years. And then he took five hundred grand from the twenty eight million. It was the first investment of Facebook and turned that into like four hundred million, all tax free in a Roth.

speaker-1 (40:52.19)
it was PayPal. okay.

speaker-0 (41:07.158)
And he he did that with Palantir. And now his Roth, no one knows because he actually controls the trust company that operates his Roth IRA, but people believe it's five billion plus with a B. So I have I listen, I have multiple clients that have hundred million plus Roth IRAs. And I have hundreds of clients with more than ten million. Yeah. That's amazing. That's amazing. And guess guess what? There's just what do they do? Same stuff we all can do. Private business. Okay. Most of it is real estate.

They invested in pre IPO companies that went public. That's eighty percent of it. And the rest are basically have been lucky in real estate and Bitcoin. Interesting. Okay. So we have, I think, at least an understanding of the different structures, the different approach, the investment process. All right. I'm I'm sold. I open my account. I fund my account, either funding it directly or pulling assets in from an existing account. What does it look like? Now I want to go make the investment. What do

What do I do? What is IRA financial or what does the IRA custodian do? How does that work? Yeah. So IRA Financial sent essentially we unlock your money. So you have an account with us, you move the money to us. You simply tell us where to send it. So you give us a a subscription doc, a private investment document, an operating agreement. If you're using the self-record IRA, not the LC. You're using the self-record IRA, you tell us we sign since we're the custody, the custodian, the trustee of your IRA, we wire the money to

the seller of the real estate or the the promoter or the general partner of the fund, you're done. Okay. The only thing you need to do each year is give us a value. If you don't know the value, don't provide it. We'll we'll just go with what you use because obviously in a lot of private investment situations like private business stock, there unless there's some type of raise or liquidity event, like no one knows what the value is. So it's just going to remain what you paid for it. And that's fine. In the case of an IRL C it's easier because

IRA financial simply fund your LLC. So we'll wire the 100K or whatever you invested or sent us. And then you, as the manager of the LC, can wire the money to the fund or the real estate deal or buy gold or buy Bitcoin. And you have more control. So those are the two ways. And if it's a solo 4K, it's kind of like the LLC. You're the trustee of the plan. So you have your own bank account and you can control the money and allocate it as you see fit.

speaker-0 (43:28.896)
And investing in an IRA is literally the same as investing personally. That's what people like don't understand. I I was just talking with with a reporter from the Wall Street Journal. We were kind of going through the whole process. And she's just like, Well, I don't understand. Like, if you're making the IRA investment, like, isn't there all this risk? I'm like, no, other than the primitive transaction, three things, like, there's no risk. And plus, we vet the deals, we make sure we have the clients complete three or four basic questions just to make sure and using AI.

review the docs that there's nothing fishy in terms of prohibitive transaction. Obviously we can't diligence the deal. We're not, you know, we're not the IRS, we're not the the accountant or the investment banker. We we can't determine if your deal is gonna be successful, but we can help you determine and navigate to prohibitive transaction rules. And that's it. You fund the deal with an IRA personally, same thing. Interesting. And and where do you see, where do you see people hesitate? Where do you see the process break down? Where do you see the most issues?

As people go to do this for the first time. The biggest issue, well, number one is the education, right? It's the first thing, Max, is just like, my God, you can do this. And and that's why, like the interesting thing about the self-dreck and IRA world is clients come to us with deals, right? It's it's unique, right? In a lot of other instances, people are looking for deals. Okay. But when they come to IRA Financial, they have a deal, right? They want to invest in a private company. Okay. So they come to us. Why? Because they need to unlock their capital. And their capital

Listen, there's $19 trillion in IRAs. Most Americans are smart. The best way to save is a retirement account. Well, I either get a deduction or not, but you get compounding growth, right? Rule 72, assuming no taxes, your money grows every, you know, doubles every eight years, assuming a 9% rate of return. So the best way to save is an IRA or 401k. That's where most people's wealth is tied into. So when you have a deal, right?

I see Max we we meet at a bar and you're like, hey, I'm doing this thing, you want to invest in in my company? I we have all these great companies. And I say, Yeah, let's do it. My next thing is okay, where am I getting the money from? And that's when people are like, I have you know, 220 grand in an IRA that's sitting there doing not much, like I'll use a hundred from there and make my deal. So they come to us, and the biggest, other than the education is like, what's a self track IRA? How does this work? The biggest, you know, delay is just like the movement of money.

speaker-0 (45:49.76)
Not because we make it hard, it's because the traditional institutions, the Vanguards, the Schwabs, the e-trades, some of them are still in the dinosaur age. There are some institutions, I won't name names, that still require a fax to send them a fax to transact. So you have to fax them a transfer form, or they won't release max money. That's wild.

That's wild. So you guys You guys keep a fax machine in the office just for some of the okay. Yeah, it's crazy. So that that's the biggest delay is the movement of money. otherwise it's a piece of cake. Okay. Okay. And now that's making the investment. You talked a little bit about UBIT, and then there's the section 4975. like, do you have clients that have issues and they make investments that like what what is the issue that they have?

post investment or if they have a tax bill that they weren't expecting. Like what's what's the hair? What's the problem? Usually if there's a primitive transaction, we'll find it before because we we ask the clients to on on our app website before we fund the investment to just answer a couple of things which will tell us what's going on. So we've never had client had any primitive transaction, ever got into any hot water with the IRS in sixteen years. Nor nor wish nor should we because we know exactly what our clients would do it. The only thing that pops up

generally not with us, but I I see it with clients that come to us with other c firms is U Bit. Okay. Unrelated business income tax where they made a deal, they invested in a private company, and now there's some income and someone tells them about U Bit or they did a real estate deal with leverage. No one told them about U Bit. And they come to us because they read a blog or they they read one of my books or see a video and they're like, What do we do? And again, we'll help them. The good news with U Bit is

Most real estate and most business startups, there's losses up front, right? So you can use those losses to offset future U Bit gains. Plus, in some settings, there's something called a tax distribution that the operating agreement has a provision that contains language that if there is phantom income, meaning you owe tax on income like U Bit, the company will give you the money to pay the tax. So it's not the best, but we have ways to work around it.

speaker-0 (48:10.51)
Something called a C Corp blocker, where you put a C corporation between the IRA and the investment. So you pay twenty-one percent instead of thirty-seven percent. There's ways through there's some structures, some funds have what's called foreign blockers that we can minimize the taxes zero in certain private equity. harder for real estate because it's something called FERCTA, foreign investment, real property tax act, but possible private equity, venture capital, harder for real estate and hedge funds, but we there and there's some other ways.

Interesting. Okay. And and so what the accounts are, the opening of the account, the making the investment. Now I have my assets in the account. let's say fast forward thirty years, thirty-five years, now seventy-three years old and I need to take distributions, but the assets that I'm holding are illiquid in the account. Yeah. How do you how do you manage that or or what's the best approach to avoid

That that issue. Okay. So the things to think about. Number one, Roth IRAs have no RMDs. So that's the good thing. traditional IRAs have RMDs. So we always tell clients, and we we see this because of their age. So we know when clients hit 70, for example, we start notifying them and and hopefully you're setting up consults with them saying, you should give yourself two years, three years to say, okay, do I have enough cash to cover my RMD? Now the RMD is generally about 3%.

of the IRA value. Now you can satisfy an RMD with any IRA. So if I have four IRAs, three at Vanguard, the Schwab and Fidelity, and one at IRA financial, total's a million bucks. And each one doesn't have to satisfy the three percent. You the three percent of the total can come from any IRA. So as long as you got some cash and you can also make contributions, assuming you have income of up to eighty six hundred bucks, that can potentially help you cover

your RMD as well. So this is the kind of stuff we plan for. Once you hit around 70, give your give yourself some time. None of our clients put all their money in a piece of land, right? Like people that use alts, they're no one's putting 100% of their retirement money in alts. Like that's the stuff that you know some of the the the reporters and people scare people about alts, but like people use alts to supplement what they're doing in the traditional marketplace, right? No one is putting all their money in Bitcoin or gold or in a private investment. No.

speaker-0 (50:33.56)
Then maybe they're putting anywhere from five to thirty percent of their money. Like for me, my IRA is 50-50. I have 50% stocks and ETFs and 50% alts. My pri my non-retire money is like 80-20, 80% equities, fixed income, and 20% alts. Why? Because I need the money. I I want to pay my mortgage. my my wife needs to spend money. I gotta make sure I have some money left for her. And my kids like to spend money on basketball, football cards. I better have some money. But my retirement account.

I can't use the money for the next 20 years, anyways. So that's where I am a little more aggressive and I'm more of a strategic long term thinker. And that's where I think you want to get your illiquidity premium. You want to get paid for being illiquid. The best way to do it is in retirement account because you can't touch the money anyways. So you might as well get a premium or be locked up because you can't touch it anyways. And that's what the smart people, whether it's Peter Thiel, whether it's the hundreds of clients I have that are doing.

alternative assets in retirement accounts. So if I was investing in a unicorn private equity company, like I would be doing that in a Roth IRA one hundred percent. I would not be doing it with my personal money because I may need that money. I would want to be locked up and I want to be taking more aggressive positions in my Roth IRA. Interesting. And so so that fifty fifty balance and that's huge. So if you need to take that RMD, you don't do it from the illiquid bucket, you do it from the liquid bucket.

Exactly. But no no one's putting all their IRA in in alts. No one's done that. That makes sense. That makes sense. I think my my ratio is quite quite a bit higher into alts in the non-retirement piece after this. I I will be transitioning that. but okay, so let's say you you've been in this space you're you're sixteen years with IRA financial. You've

been around for a lot more than 16 years. What's the biggest issue that you have with our current retirement system, the way the rules work? And if you had a magic wand and you could you could change the rules, you could change the laws, you could change technology, whatever it may be, what what would you change about the way the system operates? Okay. Two two things. So first of all, I think the system's great. I think it's rigged in our favor. The problem's not the system, the problem's with us.

speaker-0 (52:51.852)
We're not taught about the system. You know, I always give the example. I went to law, I went to call university, I went to law school. I have a master's in tax law and I worked at some of the largest law firms in the world. No one told me about this stuff. Like I was my dad just told me, max out your 401k, Adam. You can party in New York and and spend a lot of money, but like just whatever you max your 401k out. That's your job. But I was lucky and my dad was was smart and he was a saver. my

Not everyone's as lucky as I am. I never knew about alternative assets and retirement account, didn't know what a Roth IRA is. So that's number one. We gotta fix this. We gotta be teaching kids in in senior year simple stuff, what an IRA is, what a Roth is, max out of 401k, why you should do it, why you should save. Very simple. It doesn't have to be a whole year course. It could be a a three hour course. That's number one. Number two is I I think the importance of starting early. Okay.

A lot of people are like, I'm in my twenties. I'd rather go on vacation. what's the extra three, four grand gonna do now? I'll worry about it in five years. I'm only in my twenties. Wrong. I mean, the most important thing is saving early because you get the the compounding returns and you get the time value to really supercharge your retirement account. So starting early and what I would the other thing I would do is like I'm a big fan of the Trump account. I I've done it for my kids. That's an account if you're between

If you're just born or between eighteen, the big thing right now is you can't save because you don't have income, right? Someone who's seven years old can't save in an IRA, Roth IRA, because have no income. So then what the Trump account does is basically says you don't need income. Family can contribute up to five K and and invest in in you know, equities. It's a great account. I would have just done it with a Roth IRA. I would have just taken the income limits out of the Roth IRA and just said, anyone

Who's born today until they're 18, their family can contribute. And we'll leave it in a Roth because the Roth obviously has more value. But Trump did in the pre-tax, so he was able to pay for the account because ultimately tax will be owed on those accounts when there's distributions. But the Trump account is a is a great, great, great, great account. it's not a political statement. It's just it's a great account because it takes advantage of of compound returns and it's going to educate people and really if if if someone just

speaker-0 (55:09.858)
takes the thousand dollar seed money if they're born today and and just if their family could add in just a thousand dollars a year for eighteen years, I mean, they'll have a million plus when they when they hit, you know, retirement age. that is not even if you're able to add more to it. So it's the only thing Democrats and Republicans agree on is the retirement system. The problem is Americans aren't educated about it. We're smart, we're busy, but we're not focused on on on the system. And

The other problem is we're used now to immediate wins, right? Even my kids, I see it. It's like, well, what can I get today, Dad? Like I wanna I wanna rip cards. I wanna open cards. Like I don't wanna wait a week to get the cards in the mail. Like, give me the cards today. The thing with the retirement system, you you you have to wait. You're not gonna get rich tomorrow. You won't. You're not gonna buy a Ferrari tomorrow. Three things we gotta do. That's it. We gotta start as early as we can. We gotta be consistent.

We got to trust the process, be patient. And then I I would add a fourth is I think you got to diversify. I think if you put all your money in the SP five hundred and leave it there for 50 years, you'll do fine. You'll get you'll get eight to ten percent. Nothing wrong with that. But if you really want to supercharge your retirement account, you have to diversify the alts. you just have to. Love it. Love it. And it reminds me almost of the the marshmallow test. you had one marshmallow now, you wait a little bit and you can have a couple.

In this case, you wait a little bit longer, you can have a multiple of it. the whole bag. Yeah, no. So I I guess the the other thing I wanted to kind of just touch on both personally and and curious. So the the Trump accounts, that's kind of a new change and makes a ton of sense. So so after this, I I've got some work to do for for our little guy as well. But the the rule change about a year ago with four one Ks, what actually happened? What does that mean? And how does that impact what you guys do at IRA Financial?

Yeah, so what Trump administration came up with an executive order basically asking the Department of Labor to look at allowing 401ks to allow private investments like alts. And that's the DOL is working on that. There's some safe harbors proposed. The big issue with alts in a 401k, we know it's legal, right? I t I told you on this podcast that there's only three things you can't do with an IRA or four one K. You could invest in a private fund, a private company. What's stopping you? Lawyers.

speaker-0 (57:32.706)
Okay, what's going on in the ERISA world in the 401k world is there's a group of very litigious litigators that are suing big businesses, big corporations that are offering 401ks with high fees. And these are mutual funds. Okay, these are not very high fees when you think about alts. But what's going on is big companies are scared to offer alts because they're worried they're getting sued because they're the fiduciary of the plant assets and they're worried that these lawyers are going to come out.

And say, well, you shouldn't allow your employees to buy this private fund. The fees are too high. It's too risky. You should have forced them to only buy, you know, safe, conservative stuff, even though the returns are lower. And because the entry into court, in order to get through summary judgment, which is which is known in the legal world, is so simple. It's so easy to get through summary judgment. Summary judgment is basically the court basically stops the litigation if if there is a matter of law, but because it's more factual.

They're able to pass through summary judgment. And once you pass summary judgment, now the legal fees add up. And that's where these companies start settling with these litigators. So it's just lawyers. It's the only reason big companies don't offer private investments. So will that change? The safe harbors basically, under the the new proposed DOL rules, basically say this: if you do certain things in the offerings, disclosure, making sure you're picking the right funds, things like that.

You can satisfy the safe harbor and it's gonna be very hard for the litigators to sue the companies. But that's what's going on. It's really just a litigation game, and that's hurting Americans because we're losing out because we're only able to invest in certain investment strategies, mainly, you know, mutual funds, ETFs, not even not even individual stocks in a four care. Yeah. Yeah. Absolutely. Okay. Just looking forward a little bit, call it three, five years from now. I think it's tough to go ten years from now.

Yeah. What does this industry look like? What what is needed to kind of get the the adoption? I mean, you see the biggest, most intelligent, most sophisticated investors allocating a decent percentage of their portfolio to alts, utilizing the right structures to make those investments in a tax efficient manner. That hasn't quite hit the masses yet. And and to your point, like what why not teach this in high school? What is needed and what does this look like in a few years where

speaker-0 (59:57.632)
Everybody knows what these terms mean. Everybody uses these products efficiently, or or is this not for everybody? Yeah, I don't number one, I think the credit investor rules have to change. So right now, if you have less than $300,000 married followed jointly, less than a million dollars in net worth, excluding a primary residence, you can't and do a lot of these deals. Okay. That that those rules aren't fair. They're totally arbitrary, right? I always use this example. Like my friend graduates from Harvard Business School. He's brilliant or she's brilliant. She's making two seventy-five.

And she doesn't have a million dollars in net worth, she's not a credit investor. I mean, she went to Harvard University business school, like she's smarter than all of us. What do you mean she's not accredited? She's wor yeah, so it's arbitrary. That that hurts. I think, listen, I think some of this alt stuff is probably not for everyone. If you're in your twenties and you're just starting to build up and you have thirty thousand dollars in your IRA for one K, you know, I think you sh you should keep going. I I don't think there's a lot you can do in the alt world yet. I think

It's something you you kind of lean into and you build up to get into. Sometimes in life, just like when you graduate college, you kinda just buy a house. You it takes time to save. To get the opportunity to invest in alts, I think it there's there's a stage to it. Now, could you put a thousand bucks, five hundred bucks into Bitcoin? Sure. But to do, you know, to buy real estate or to do any meaningful investment into a private company, five hundred bucks, a thousand bucks, like it's generally not gonna work. I mean

We're on we're not all Peter Thiels, like it's just not really an option. And that was also in 1999. So, you know, thousand three thousand bucks in ninety-nine is not two thousand bucks today. So I don't think it's for everyone. I think generally, if you look at my client base, it's for someone that has at least 150,000 investable assets, retirement assets. The good news is, you know, you keep saving and eventually you'll get there. So we haven't got to the point of mainstream adoption for Alst, but

that's okay. what I look is I look at even forget about 16 years ago. I look at you know, pre-COVID, and we're way further than we were pre-COVID. And this is a marathon. Like we're still in mile number you know, seven or eight. Like we're not even in mile number fifteen. So there's a lot of room to grow. People are getting more comfortable with doing different stuff. AI. Okay. AI is going to give people knowledge. So you're not going to be

speaker-0 (01:02:23.094)
N it's not gonna need this fancy RIA or this fancy super smart advisor to tell you if it's a good real estate deal or private equity deal. You're gonna be able to put into Claude, AI, Gemini, and say, What should I know here? What's the economics? Is this good? Is this can I make money? What do I need to know? What are my risks for? It's like it's available to all of us. That's gonna help. So you're gonna see the self-directed world, I think, continue to expand. My kids are not gonna be paying

One point to an advisor to manage their money. No chance. Okay. They're smarter than than we are. They're going to do it themselves. They're going to have AI bots. They're going to be able to buy fixed income. They're going to be able to buy equities, mutual funds, ETFs. They're also going to get advised properly by their bot on alts, and they're going to be able to see everything on one screen, which is what at IRA Financial, we're the only company in the country right now that you can buy stocks. We have a partnership with Interactive Brokers, Zero Commission stocks.

By cryptos through our partnership with BitStap and Robinhood. And you can do alts like private business, real estate, all one platform, one flat fee on your own. No problem. So that's the future. I wish there were more and more people doing it, but it every day there's more and more adoption. It's just kind of a a marathon. It's not gonna just happen overnight. Yeah, that makes sense. And and you touched on the piece about your kids and kind of forward looking. I've gotten some great advice. I was lucky.

With with my dad and then I guess your dad saying, Hey, max out your four on one K. What else? What other advice do you have or the what's the best advice you received or that you'd look to to pass on to the next generation? I got a lot of different things I've learned. But from a retirement account standpoint, yeah, max out your four and one K, also add a Roth I rate to it. So max your four on K. Now with the backdoor Roth, add a Roth I rate to it. that that's my one two punch.

And after that, if you have leftovers, I would be going into you know a health savings account. Now, if you have a high deductible plat, but most of us do. And then obviously like the 529. And if you have a young child, especially under the age of 10, Trump accounts a great way to start packing away some cash if you got some extra investable assets. and even, you know, grandparents, friends could could make birthday gifts to the 520 to the Trump account.

speaker-0 (01:04:45.422)
It's great way to start boosting their retirement. Once they get into their 30s, 40s, they're they're gonna have you know sizable money that they can do some stuff with, some good investing with. And so you're about to touch 529 versus Trump account. You're just what's the what are the differences there? Why why is a Trump account better, or do you use both? Yeah, I use both because five twenty nine is really exclusive for education. Whereas the Trump account, once you hit 18, it it moves into an IRA automatically. So then the IRA could

Be used for anything, right? Once you're at 59 and half, you can pull the money out and use it for whatever you want. and you can also convert it. Like the play I do with the Trump account, what I'm gonna do is my kids are 16 and 12. once they had 18, I'll convert it to Roth at a low value, and then they'll have Roth IRAs that they have their whole life. interesting. And and and hopefully they keep contributing to it. And I've heard the the move basically to invest in an illiquid asset.

have evaluation get done that's reasonable, defensible, and then make the conversion in kind. So that that makes a ton of sense. Okay. So I think you you've written nine books on investing in retirement accounts. You have a YouTube channel. You've done a few podcasts. You're you're definitely kind of preaching in kind of what you've done yourself though. It's not like you're saying, hey, do this, do as I I say, not as I do. You're actually living it, breathing it.

As as you've done it and you've kind of probably paid some tuition both as a business owner and an investor, what would you say when you were just starting to just anything you would have done differently, any any pitfalls along the way? As an investor, I what I would have done differently if as an investor is I definitely I I mapped up my phone, K. Thank like you thank God I did that. I probably

And I also also do in Roth IRAs, but from an investment decision standpoint, I think I was too conservative young at a young in my twenties and thirties. Okay. And not just on alts, but even like when I was allocating my 401ks, I should have been super aggressive. when you're young, you have an opportunity to make up for some, you know, downfalls in investment strategies. so I would have been a little more aggressive in my allocations and and I would have gone into alts. I wish I knew about this.

speaker-0 (01:07:06.796)
I got into real estate in my eye right in 2010. I probably wish I would have done it a little bit earlier, but I was lucky because I actually found out about the self-recked Iris space when I was 35 years old. So I kinda kind of count myself as pretty fortunate, but I would have been more aggressive early on because you gotta be aggressive early. Once you hit your sixties and seventies, that's when you need more cash flow and you you want to be a little bit more conservative. But

When you're in twenties and thirties, you you want to be aggressive, pedal the metal, maxing out and also, you know, b looking reward versus risk propositions and kind of double downing on that. That's amazing. So as a tax and ERISA attorney, you still didn't discover it until you were thirty five years old. Yeah. so that's good. I found my and then that's lo I I I consider that early, because considering like I have clients that I speak to every day that are like in their sixties, never heard of this stuff. Yeah, yeah, for sure. So I think

The only other piece that I know when I said advice, you you went to the retirement piece. Just general human advice. I think you're you're a pretty wise guy, not wise guy in that sense. You're you're pretty wise gentleman. so what what would you say words of wisdom from from Adam Bergman? Well, it's I got a lot. I don't my my wife, my kids never listen to me, so it kind of like just stays in my head. But okay, I'll give I'll give you guys I've told people this, this is the best business advice I ever got. So

and I think this applies to anyone. after my fifth year as a lawyer, I knew I didn't want to be a lawyer anymore, but I didn't know what I wanted to do. Cause you know, my first five years were fun, but after a while it was like the same stuff over and over. Kind of like this this isn't for me. I don't know if I can do this the rest of my life. but I had no idea what I wanted to do. I wanted to be an entrepreneur, I wanted to start a business. No idea. And I was struggling. I I started a bunch of different businesses with friends, kind of like never went anywhere.

And then I I was able to meet one of my friends. His dad was like a major software entrepreneur. And I I remember I sat down, talked to him, and I was like, I'm so frustrated. I want to do something. I don't know what to do. I've tried talked to business brokers. I have I'm online. I've I've started some stuff. Like, I don't know what to do. And he said, Okay, this is my advice to you. What do you know, Adam? I Well, I'm a tax lawyer. I don't know really much, but I know tax law. He goes, Okay.

speaker-0 (01:09:29.678)
Number one, you gotta find a business that is involved and somehow peripherally involved in your expert area. Why? Because if you go into the table business or the coffee business or the cup business, there's a hundred people that know more than me, than you right away. And so you're gonna have an uphill mountain to climb. It's gonna be awfully tough. You could succeed, it's gonna be hard. If you go into an area where you have pedigree, immediately you're going to succeed and you're going to have an advantage over your competitors. So now I was like, okay, that makes sense. So now

at least I had some focus and now I is able to f try to look for a business involving tax. And and then, you know, six months later this kind of like fell in my lap where I was like, my God, this is a business that involves tax, involves something I that makes sense to me, the tax code, something entrepreneurial, something I can do and help. And it kind of like put it all together. But if I didn't have that kind of message grained in my head, you know, maybe this opportunity kind of like just flies over my head. I don't even like take advantage of it. So I think you gotta look

At what you want to do, you gotta build experience, expertise. AI can help with that. But I think building a plan and and being strategic, long-term thinking. Take if I knew how hard it was to do this, I'd probably still be a lawyer. And I'm just being perfectly blunt and honest with your your viewers. 10 years. Okay. Expect to work your butt off for 10 years to make money. Okay. 10 long, hard, hard, hard years.

It doesn't happen. Maybe one out of a million that you get a in two years you gotta create the AI valuation, you're rich. That doesn't happen to me and you. Okay. Yeah. Expect ten years to bust your behind and work your butt off. I didn't take a salary for two years. I used my wife and up used up all our savings. I was only started to take a real salary ten years later. I was making I was making less than I was making as a lawyer.

For the first 12 years of my business. Okay. I was not living great. we didn't go on vacations. My, you know, I was lucky because my kids were young. So they didn't need much. They're in diapers, right? Like you didn't have to go anywhere. It was life was kind of easy. the school is wasn't expensive. They're in like elementary school. But it's hard. Start as early as you can, get experience, get a path, and give yourself 10 years. Don't say, How am I going to get rich in two years or six months? Like,

speaker-0 (01:11:54.722)
That's never gonna happen. Never, ever, ever, ever, ever do you stop thinking about that? Say, I'm giving myself 10 years to succeed. I love it. I love it. And that was a bit of advice actually from my dad when I was first going to get a job out of school. And I dropped out of finance. thought the world was corrupt. It was post 2008, thought everybody on Wall Street was a terrible guy, and then ended up getting offered a role as like executive assistant chauffeur.

For somebody who lived on Wall Street, worked on Wall Street, built electronic trading firms and systems. And I had this kind of moral dilemma sitting there talking with my dad. And he he basically said, Look, you can't change anything if you don't know how it works and you don't know anything about anything at this point. Go give it 10 years. Go dig in. if you learn something in the process, you make some money in the process, but the only way that you're actually going to change it or execute.

is giving it 10 years of long hard work. so it's interesting that you you pick that number. But no, no, this has been awesome. Like I really appreciate you taking the time. I really appreciate what you guys do. I see a tremendous amount of value even from this conversation. I've gotten some value. I have some next steps and things that I need to do. so really appreciate and I guess final question, anybody listening, what can they do to help IRA financial? Where can they find you? What do you guys do? How how can somebody reach out or be helpful to you?

Yeah, I mean, just visit our website, ariafinancial dot com, check us out on YouTube. I mean, we're helpful to people that need us. Like we don't push products. We basically will help people get capital if they want to make investments. And when I say capital, it's like how do you tap in efficiently tax economically to your retirement accounts, which is a huge source of capital for most Americans who are ignoring the opportunity, the tax advantage of using it to make investments. So we're here to help. We don't

push products, we have flat fees, we're totally neutral to our clients. We partner with our clients because as you make more money, we're happy. We don't make any more money. We just want to give, you know, great service and make sure all our clients are taken care of. And so there's no cost to call us and talk to us. Like we have a great team of tax professionals that will try to, you know, get you in the right product and and try to get you situated so you can make tax efficient investments. Awesome. Love it. I really, really appreciate the time.

speaker-0 (01:14:23.372)
Yeah, thanks so much, Adam. Thank you. Thank you for listening. If you enjoyed this conversation, please feel free to share. If you have any feedback or guess you'd like to hear from, please feel free to reach out. And please note that this conversation is for informational purposes only. None of the information provided represents investment advice, an offer, or the solicitation of an offer to buy or sell any security. All views are subject to change.

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