Helping clients generate cashflow in retirement plans.

• Author: Wagner, James R.

More than ever, investors are looking to generate cashflow in their retirement plans. To tap into this opportunity, CPAs can introduce investors to nontraditional investment options, by fulling the seven easy steps presented below.

1. CPAs need to focus on one segment of the retirement plan marketplace. IRAs are a good place to begin, as they are the fastest growing segment of that market. The increase in IRAs is due to (1) employees being able to withdraw funds from employer-sponsored retirement plans (while still employed) and roll them into IRAs for greater investment choices and (2) the large number of baby boomers expected to retire in the next few years. An estimated $1.3 trillion will flaw from qualified retirement plans into IRAs; thus, the majority of qualified plan participants will he looking for advice at the time of rollover.

2. Tax advisers should determine method of compensation--through either planning or consulting fees. It may also he possible to receive referral fees from investment companies in which clients invest.

3. CPAs should investigate alternative investment options, by contacting local private lenders, mortgage brokers and reel estate brokers or researching the Internet. For example, the California Department of Real Estate has an excellent publication, "Trust Deed Investments: What You Should Know" (available at www.dre.ca.gov/trust.htm).

4. Which transactions are prohibited inside an IRA? The Sec. 4975 prohibited transaction rules are intended to (1) ensure that IRA assets are invested to benefit the plan and (2) prevent a serf-serving use of such assets. Although the definition of a prohibited transaction is complex, basically, under Sec. 4975(c), an IRA may not, directly or indirectly, sell, exchange or lease any property to an IRA accountholder or a disqualified person (as defined in Sec. 4975(e)(2)) (i.e., the IRA holder and his or her spouse, ancestors, lineal descendants and their spouses; investment advisers and managers; any corporation, partnership, trust or estate in which the IRA holder has at least a 50% interest; and anyone providing services to the IRA, such as the trustee or custodian).

5. Tax...