The N54(a) Retirement Account Revealed – Retirement Boosting Loophole
You’ve probably seen the teasers. The N54(a) Retirement Account. Is it something you or your financial advisor missed? Is it something they neglected to teach your accountant about? Simply put, no. So what is this little know government loophole being dubbed the N54(a) Retirement Account?
As it turns out, its a fictitious label to grab your attention. However it does relate to something real. And something that has been around for quite some time. You may have already come across it in your financial planning.
You may be thinking its some sort of 401(k) plan, while there are similarities that’s not what it is. The main function of a 401(k) plan is to stash away your income before its taxed allowing you to invest your full income and hopefully benefit from any profits that investment creates. However, what ever interest or dividends gained in your 401(k) remains in your account until such time as you start to access it. (Read more about 401(k) plans here http://www.irs.gov/taxtopics/tc424.html)
“How a little-known government loophole called the ‘N54(a) Retirement Account’”
Because the the N54(a) Retirement account says it actually pays out pretax income, this leaves out the 401(k) plan.
So lets take a closer look at the teaser:
“You see, an “N54(a) Retirement Account” is similar to your 401(k) in that it lets you collect regular income payments for retirement…
“But that’s where the similarities STOP.
Because unlike a 401(k), which requires you to wait until you reach age 59&1/2; to start collecting income…
With an “N54(a) Retirement Account” you can withdraw funds at any age… starting immediately.
And while you can’t contribute to a 401(k) unless you’re working…
You can add money to your “N54(a) Retirement Account” at any time, regardless of your current, or past, employment status – even if you’re already retired.
“These are just a few of the reasons that an “N54(a) Retirement Account” is a far superior way to pay for retirement than a 401(k) account.
“But I haven’t even gotten to the best part…
“What really distinguishes an ‘N54(a) Retirement Account’ from a 401(k) – or any other income investment for that matter – is the size of the income checks.
“These checks typically pay out 3 to 5 times more income than you can get from an ordinary 401(k).”
Judging from the content above this leads us to believe this is nothing more than a BDC investment or Business Development Company (read more about BDC’s here). BDC’s are thought of as high yield securities traded on public exchanges. A good one can actually pay out handsomely. However, just like any investment, finding that good one takes some time, knowledge, and possibly expertise. BDC’s do pay out income, and you are taxed on that income. Talk to your accountant of financial advisor or accountant on how to best shield this income if your portfolio has any BDC’s in it.
“This could replace or supplement your 401(k) or IRA account – and completely fund your retirement, starting today.
When it comes down to it, BDC’s may or may not be the way to go. Your retirement account, obviously, should not be made up of just one type of investment. And just because BDC’s generally could pay out nicely over time, this doesn’t mean you have to invest in them. While its almost to lace your retirement account with dividend paying investments, there isn’t one particular one that is better than the other. Your retirement account should be planned out with investment goals that will meet your foreseeable needs, and be planned for emergency.
Back to BDC’s, what is the real attraction here? You’ve probably seen or read about how private equity firms, like hedge funds or venture capital groups make insane amounts of money by investing in promising start ups or similar. After all, the “next big thing” that actually became big probably received a cash infusion from an private equity firm. Unlike your salaried paid broker working for your big Wall Street firm, if your just the average Joe investor, you won’t have access to anything like this. This is where the BDC comes in.
BDC’s are similar to these private equity firms in the fact that they too seek out and invest in these promising, small companies that just need a kick start to succeed. But this investment comes at a steep price, in the form of high interest rates. The ROI can be quite high for these companies and this can be passed along to you too.
Think back about a decade ago, the search engine market was just starting to heat up Yahoo was in control. Then some crazy kids came up with a better search engine algorithm that returned better search results that everyone loved. Google was on the scene. It didn’t take long for Google to dominate and grow at record pace. Anyone who was in early on this investment probably saw some obscene returns. Guess what? A BDC gave them money in the beginning. Do you think that those who were invested in the BDC were happy?
“It lets you collect up to 5 times more income than a 401(k) account – and could pay you $5,000 to $25,000 in extra income every year… starting with as little as $50.
While BDC’s invest in high risk, high return companies, they do spread their risk over many investments. Nevertheless, you wouldn’t want divert a large portion of your investment portfolio this way. However, a good BDC is something to consider as part of your diversity.
Something to consider is that when the credit markets are very tight and banks are gun shy to lend out money, many start up companies turn to BDC’s for capital, so you can consider it part of a cyclical game. Keep an eye on bank business lending, the rates and how tight that market is, then you may be able to gauge the BDC markets a bit better.
“Below you’ll find out how to set up your own “N54(a) Retirement Account” and start receiving checks immediately… no matter what your age, income or employment status.”
Below is a list of 10 BDC companies as an example:
Latest Stock Price
Latest Dividend Declared
Ex Dividend Date
|Horizon Tech Finance|
|Solar Capital Ltd|
|Fifth Street Finance|
|Blackrock Kelso Capital|
*Please keep in mind this data will be out dated from the time this article was written.
As mentioned before, dividend paying stocks are an excellent way to build your portfolio. A properly structured retirement account can mean a satisfying life after work. The problem is, there are so many ways to invest your money. Creating the right blend of investments can be tricky. If your into doing your own research and double checking your investments, a great place to do this is Dividend Stocks Online. It’s extremely affordable for the information you get and a great way to keep up on the performance of high yield dividend paying stocks. Check ‘em out if this interests you.