Author Topic: How to wind down IRA Account?  (Read 4086 times)

pplinvestor

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How to wind down IRA Account?
« on: June 28, 2013, 09:49:47 PM »
I invested $10K in IRA account since $10K is minimum required to avoid $100/Yr account maintenance fee.  Now, I am getting less and less happy with Lending Club.....a lot higher default rate in my account than advertised, lower interest rate, no capability to ask questions and borrowers don't answer any way, fewer and fewer quality loans, misleading payment plan, service fee not fraction-ed (you can pay up to 2% fee when each payment is $0.5), etc, etc.
But how shall I wind down the account?  I recall to avoid $100/yr fee for the IRA account, one has to invest $10K in notes, not just leave $10K cash in the account.  500 notes won't be paid off at the same time.  So potentially, it can drag a few years before all notes are paid or defaulted.  That means I'll end up to pay $100/yr for several years to wind down the IRA account.  Anyone has good suggestion?

rawraw

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Re: Re: How to wind down IRA Account?
« Reply #1 on: June 28, 2013, 11:45:41 PM »
I invested $10K in IRA account since $10K is minimum required to avoid $100/Yr account maintenance fee.  Now, I am getting less and less happy with Lending Club.....a lot higher default rate in my account than advertised, lower interest rate, no capability to ask questions and borrowers don't answer any way, fewer and fewer quality loans, misleading payment plan, service fee not fraction-ed (you can pay up to 2% fee when each payment is $0.5), etc, etc.
But how shall I wind down the account?  I recall to avoid $100/yr fee for the IRA account, one has to invest $10K in notes, not just leave $10K cash in the account.  500 notes won't be paid off at the same time.  So potentially, it can drag a few years before all notes are paid or defaulted.  That means I'll end up to pay $100/yr for several years to wind down the IRA account.  Anyone has good suggestion?

The extra fee you pay gets refunded

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GS

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Re: How to wind down IRA Account?
« Reply #2 on: June 29, 2013, 04:32:25 PM »
I'm not sure how LC applies the $100 fee, but I'd assume you'd have to wind it down in a year to avoid the fee or to get charged only once.  There is probably a transfer out fee, too, for the IRA custodian. 

I'd sell as many notes as I can on Folio for about 10 months, then I'd open a taxable account and buy the rest of the notes out the IRA myself at par +1%  to avoid IRS self dealing problems that were discussed here.  You'd have to eat the 1% on the remaining notes, but it's probably less than $100.
« Last Edit: June 29, 2013, 08:12:12 PM by GS »

pplinvestor

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Re: How to wind down IRA Account?
« Reply #3 on: June 29, 2013, 06:45:13 PM »
GS,
Thank you for your idea.
I guess I must pay some fee = tuition for the lesson of planning exit strategy before investing.

Rob L

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Re: How to wind down IRA Account?
« Reply #4 on: June 30, 2013, 12:15:31 AM »
Good news / bad news. It appears that SIDRA does not charge for ACH direct distributions or transfers, but there is a $150 charge to close an account:
http://www.sdiraservices.com/files/forms/IRA_Fee_Schedule_-_eff_10.01.2012_-_SECURE.pdf

Nothing but bad news for the SDIRA $100 annual fee though, I'm afraid you will have to pay it each year (from the LC website):

Quote
Lending Club’s preferred IRA custodian is Self Directed IRA Services, Inc., a subsidiary of Horizon Bank. Self Directed IRA Services, Inc. charges an annual account fee of $100 at account opening and then annually on the anniversary of account opening.

Lending Club will pay the $100 annual account fee at account opening on your behalf if you have an initial minimum balance of $5,000 or more that you invest in Lending Club Notes and maintain this minimum invested balance for the first 12 months. For subsequent years, Lending Club will pay the annual account fee of $100 annually on the anniversary of account opening on your behalf if you maintain an invested balance of $10,000 or more in Lending Club Notes after the first year.

I think GS is right; cashing out through Foliofn, transferring the cash back to the IRA you started with, and closing your SDIRA account, all before the anniversary of your account opening, seems the best approach. I would hesitate about self selling into a taxable account simply because of all the stories I've read here about the difficulties of keeping track of gains, losses etc. for income tax purposes. Might be a headache you don't want to have. Just discount the lousy leftover notes enough to sell on Foliofn and be done with them. I guess the catch is that I don't think you can sell notes in default on Foliofn. You need to sell any notes headed towards default at whatever discount it takes since you don't have the luxury of time to see how things are going to work out. I'm in over my head here with these Foliofn speculations. Hope you get some responses from experienced Foliofn users on the best strategies to handle your situation. There's a thread or two on the blog here that addresses the subject that might be helpful.

Good Luck!

p2p2p2p2p

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Re: How to wind down IRA Account?
« Reply #5 on: June 30, 2013, 03:48:35 PM »
An investment that will take an extended period of time to wind down is not the best choice for an IRA account. That's why the industry calls IRA accounts "Sticky Money". Its like a roach motel- you can get in but you cant get out. A lesson for the future, and a profitable lesson no less. You should be thankful