5 things you should know about an IRA custodian

When setting up an IRA, whether it’s a traditional IRA or another type like a Roth IRA, you will need to have a custodian. The custodian acts as an asset holder for your IRA funds. There are a variety of organizations that can serve as IRA custodians, but investment groups and banks are some of the most common. The custodian is typically also in charge of managing your IRA investments, unless you have a fully self-directed IRA. Here are 5 key facts to know about IRA custodians.

They are required to report your IRA transactions to the IRS

To ensure that account holders pay their taxes accordingly, custodians are required to report transactions to the IRS. This is why it’s so important to follow IRA tax requirements, and to take tax requirements into consideration when choosing the type of account you want.

IRA custodians and administrators are different

If you are looking into self-directed IRAs, you may see the term ‘IRA administrator’. While administrators can manage certain aspects of your IRA account, they are not fully licensed custodians. If your IRA is managed by an administrator, they must have a relationship with a licensed custodian in order for the account to be legal.

Custodians are not responsible for investment gains

A common misconception is that IRA custodians are required to produce financial gains on your investments. While IRA custodians are required to act in your best interests, they are not required to actually make you money. It’s always important to be aware of the risks when investing.

Custodians have a contribution limit

The IRS has limits in place regarding how much you can contribute to an IRA per year. IRA custodians are required to enforce these limits or they could be disqualified.

Custodians can’t buy or sell without your permission

Even in a traditional IRA, where the custodian manages your funds for you, they still need your permission to invest. Be cautious when giving investing permission to your custodian – you should always be aware of where your money is going.

Quest Trust Company is an IRA custodian that offers truly self-directed IRAs. We give you more control over your investments, with fast processing and minimal fees. Contact a Quest IRA specialist today to learn more about our investment options.

Steps for setting up a self-directed IRA

The Internal Revenue Service is restrictive on the type of assets that you can own through the IRA. For instance, it prohibits ownership of alcoholic beverages, some precious metals, jewelry, collectibles, and life insurance. It does, however, allow investment in private stocks held in corporations or limited liability companies. The steps for setting up a self-directed IRA are as outlined below:

Identify a custodian

It’s important that you identify a third party administrator or a trustee who is willing to hold your assets under your self-directed IRA. The trustee(s) must have the authorization from the IRS to act in this capacity. The trustee must also be specialized in financial planning and be experienced in handling the Retirement Investment Fund.

Open an account with the trustee

Open an account with the chosen custodian and fund it with up to $5,000. Alternatively, you can execute a trustee-to-trustee rollover transfer. It’s a directive to your old IRA to move your assets to the new IRA under the new trustee. Your new custodian will give you the forms required to finalize this paperwork.

Identify the desired area of investment

With an account ready, you can now choose the type of business that you want to venture in, locally or internationally. You should not have any association with the business that you choose or have any control over it. Also, your spouse, ascendants, descendants, their spouses or any fiduciary that advises you on IRA should not have any links with your business venture. For instance, your lawyer or broker cannot persuade you to trade in shares in their limited liability companies. You have the freedom to decide the percentage of ownership that you want in a corporation, LLC or partnership. You can buy the whole establishment, or have a fraction of its shares.

Direct your custodian to purchase the interest.

You can then write to Quest IRA to purchase the interest you want, specifying the buying price, the counterparty as well as the percentage of interest (for an LLC or partnership) or the number of shares that you want to buy (for a corporation). After that, keenly verify the transaction to see if it’s successful.

What’s the difference between nondeductible and deductible IRAs?

When setting up your IRA account to save for retirement, there are a lot of new terms you might hear. One of the most important things you’ll need to decide is whether you want a deductible or nondeductible IRA. These terms refer to when taxes are applied to the money you save in your account. Here’s what you need to know about the differences between these two types of accounts.

Deductible IRA

With a deductible IRA, you can deduct all of your contributions on your tax return each year. This is a huge financial benefit because it essentially reduces the amount you pay in taxes so you can grow your wealth faster. Many people covet deductible IRAs because they can help them avoid tax burdens and save more money. However, not everyone qualifies for a deductible IRA – it depends on a variety of factors including your income, marital status, and any additional retirement plans you might have through your workplace.

Non-deductible IRA

With a non-deductible IRA, you can’t deduct your contributions to your account on your tax return. This means that you don’t get extra money back come tax time. Non-deductible IRAs are much easier to qualify for than deductible IRAs. Anyone can contribute to a non-deductible IRA if they earn taxable income and are under the age of 70.5.

Traditional IRAs

Deductible and non-deductible IRA plans are both forms of traditional IRAs. This means that the money that you put into the account isn’t taxed until you make a withdrawal from the account in retirement. Since the account isn’t taxable, it can grow very quickly through the investments you make. Both types of traditional IRAs enjoy this benefit – it’s just that deductible IRAs also enjoy the added benefit of a tax return each year, which gives you money back and essentially rewards you for contributing to the IRA.

If you want to know if you qualify for a tax deduction by contributing to a Traditional IRA, contact the experts at Quest Trust Company. We will help you find the retirement account that is the best fit for your needs.

How to Choose The Best Investment Firm For Your Roth IRA

A self-directed Roth IRA is one of the best ways to save money for your retirement through investing. Roth IRAs are different from traditional IRAs because you pay taxes on your contributions now, instead of later in life when you’re withdrawing them. You can then use the money to invest and grow your wealth. There are so many different investment firms that offer Roth IRAs, and it can be difficult to decide which is going to be the best option for you. Here’s what to look for in an investment firm for your Roth IRA.

Flexibility

Since the money you’re contributing to your Roth IRA account is yours, you should have control over where you’re investing it, while still getting the expertise of the professional team at your investment firm. Look for a Roth IRA that’s self-directed and offers several different options for investment. This will allow you to pick investments that are appropriate for your risk tolerance and align with your goals.

Efficiency

You don’t want your money to get stuck in processing for long periods of time, so it’s important to look for an investment firm that processes payments efficiently. Some investment firms take a few weeks to process payments, but this is changing as an increasing number of firms are trying to appeal to younger clients, who value efficiency. Look for a Roth IRA that can process contributions in just a few days – or less.

Minimal fees

Of course, there are always going to be some fees when you set up any sort of financial account. However, you don’t want your fees to eat into the money you’re saving for retirement. Many Roth IRA accounts charge fees for a variety of different types of processing, which can be very frustrating. Your ideal investment firm keeps processing fees to a minimum, so you can save more money for retirement.

Quest Trust Company is a financial institution with a modern approach to investments. We truly care about our clients and focus on making it easier to achieve your retirement goals. We share the investing expertise you need to prepare for a bright future.

The best options to invest your IRA contributions

When planning for the future, one of the many options for contributing towards your retirement is an IRA. Both traditional IRAs and Roth IRAs offer secure and tested options to save for retirement. But you may want to consider taking advantage of the investment possibilities these accounts have to offer.

Instead of leaving your contributions in a cash or money market account, invest it through a Self-Directed IRA. It’s possible to invest in private equity, oil and gas and even real estate, amongst other options. There are limits to each of these options, but also great potential benefits.

Real estate

With Self-Directed IRAs allowing you the freedom to invest in markets you already understand, real estate is a familiar investment opportunity. This familiarity may be one of the biggest benefits because it grants more confidence to investors and therefore opens up opportunities.

Another potential plus of purchasing real estate with a SDIRA is tax benefits. Your investment gains remain tax-deferred or tax-free even on withdrawal, in the case of a Roth IRA.

Of course, even with the familiarity a common investment like real estate offers, having a knowledgeable custodian of your IRA is still necessary to navigate the complexities of the IRS tax codes for these investments.

Private equity

Private equity is allowed as a penalty-free asset and keeps the same tax benefits of a traditional or Roth IRA.

Because the same public disclosure laws that govern public entities don’t govern private entities, the investor can use their knowledge and experience to choose which companies they would like to invest in, offering freedom of choice as well.

Oil and gas

A Self-Directed IRA can also be used for energy investments. Beyond just commodities, investments can be made in land being explored for gas and mineral extraction, as well as the mineral rights. Obviously, these investments have the potential to pay off in a big way.

You can also invest in alternative energy such as wind and solar, geothermal energy and hydroelectric energy. The benefits of these markets are that they are bound to grow in the future and over time.

Diversifying to grow your retirement account and choosing the right financial institution can pay off in a big way. Learn more from the trusted experts at Quest Trust Company and start making the most of your IRA by opening a Quest account today.

3 Ways IRA Rules Changed Over the Years

In 1974, Congress enacted ERISA (Employee Retirement Income Security Act) as a way to encourage and defend retirement saving. A key provision of this act, IRA (Individual Retirement Account) plans allow employees to set aside part of their paychecks in tax-deductible plans. Since 1974, the federal government has changed the rules related to IRA funds many times. Here are some of the changes you’ll want to keep in mind for retirement planning now and in years to come.

1. Maximum contribution limits

The federal government has historically raised the maximum annual contribution every few years. In 1974, this limit started at $1,500, and in 2019 the limit rose to $6,000, up from $5,500 in 2018. Prior to 2019, the last time the federal government raised the limit was in 2013, when the limit went up from $5,000 to $5,500. If you decide to pay the maximum amount each year, keep in mind that this amount will change every few years.

2. New plans such as Roth IRA

In 1997, Congress introduced the Roth IRA as an alternative to more traditional IRA types. The Roth IRA allows you to contribute to your retirement account with income that you’ve already paid taxes for, thus reducing your tax burden down the road, when you decide to retrieve your funds. Together with the innovative Roth IRA, federal law continues to consider a broad range of retirement account types over time. When planning your retirement, keep in mind that new plans may be available now or in the new future, and these plans may work better for you in the long run.

3. Tweaks to deposit and tax rules

Over time, federal guidelines have continued to find ways to make IRA contributions more useful to specific situations. Changes of this kind include the EGTRRA (Economic Growth and Tax Relief Reduction Act) which allows people over 50 to exceed the maximum contribution limit in order to make “Catch Up” payments. When planning for retirement, always look for a plan that suits your situation, and be aware that rules may change over time.

When it comes to retirement plans, IRA funds give you a great way to save money now and then access it when you know you’ll need it most. IRA plans have changed over the years and will doubtless continue to change, becoming more flexible, accessible and better suited to current retirement needs.

To find out more about IRA funds or plans, contact a Quest IRA specialist today at 855-FUN-IRAS.

Companies that offer the best Roth IRAs

There are many tax benefits to using a Roth IRA to save for retirement. Using a Roth IRA means you won’t have to worry about paying taxes on the withdrawals you make in retirement, which is a huge benefit when you’re going to be living on a fixed budget. There are so many different IRAs to choose from, so narrowing down the best Roth IRA for your needs can be overwhelming at first. Here are some of the companies that offer the best Roth IRAs.

Quest Trust Company

If you want to be completely in control of your investments, QTC’s IRAs are going to give you the options and flexibility you are looking for. They offer three administrative options to suit your financial preferences, and offer fast processing that takes less than 48 hours. The convenience and flexibility of these Roth IRA accounts really make them stand out from the competition.

Charles Schwab

Regardless of what type of investor you are, you’ll find something to love about Charles Schwab’s Roth IRA program. They don’t have any required account minimums, which makes it very easy to get started regardless of your financial status. However, they also give you access to the tools you need for active trading, and you can select thousands of stocks and mutual funds as well as commission-free ETFs.

Fundrise

This Roth IRA account is unique because it is designed for real estate investing instead of other, more traditional forms of investment. Fundrise creates REITs that pay contributors dividends and provide solid returns, making it an interesting new investment strategy if you’re looking for something different. The catch is that you need to be totally committed to the account for the long term.

Betterment

Many people are turning to the robo-adviser trend for their Roth IRAs because of the convenience factor that comes with doing everything online. If you want to set up a Roth IRA without any of the work, Betterment is one of the best choices. When you set up your portfolio, you tell Betterment your goals, and it automatically rebalances your accounts in line with your preferences over time.

These are just a few of the many Roth IRA accounts out there today. If you’re interested in flexibility and completely self-directed Roth IRA options, contact Quest Trust Company today to learn more.

Questions you should ask yourself before setting up a self-directed IRA

Whether or not you are experienced in the realm of personal financial investments, an Individual Retirement Account (IRA) is a sound method of planning for your retirement. A traditional IRA or one with the Roth option is available at most financial institutions, but some investors are looking for a higher level of control over their investments than is usually the case with an IRA.

An investment strategy that incorporates a self-directed IRA requires a high degree of commitment. There will be a greater burden on you to perform diligence and more awareness of the tax code so you can be aware of the kind of investments that are allowed. However, the higher level of control may reap dividends that will benefit you in the long run. While your financial situation may be unique, here are some general questions you should ask yourself before opening a self-directed IRA account.

1. What Is My Investment Plan?

Before making your first contribution you need to know how you plan to approach your investments. You may find yourself initially overwhelmed by the wide array of options and if you don’t have a plan to start you will regret it later.

2. What Are My Goals?

This goes far beyond knowing a dollar amount you want to target. What quality of life do you want to have in retirement?

3. What Is My Expected Date Of Exit From The Account?

It is crucial to know when you plan to retire. It will determine how aggressive you can be in your investments initially as well as when you will need to start to make more conservative moves or shift to investments that are easier to liquidate upon retirement.

4. What Is The Role Of My Provider?

Despite the status of a self-directed account, you may have other providers involved such as administrators, facilitators, and custodians. Ensure that you know what everyone’s role is in the investment process.

5. How Will My Custodian Protect My Personal Financial Information?

Not enough emphasis is placed on the preservation of this crucial information. Make sure that your custodian is upfront with you regarding their history of security as well as steps they are taking to improve it in step with the sophistication of bad actors.

6. Will My Self Directed Account Be A Roth Account?

This will depend greatly upon your individual tax situation. If you pay a high-income tax rate every year a traditional IRA may keep enough money in your pockets that you can invest more through the life of the IRA. However, if your income tax rate is more manageable, the Roth option may be preferable.

Once you have answered these questions you may find that they lead to bigger questions. A self-directed IRA is a lot to take on, and if you find you need more financial advice before you can make a decision please contact the Quest Trust Company for assistance with taking control of your retirement.

Options for your 401(k) after you leave your job

You may leave your job for greener pastures, start your own business or possibly even be made redundant. But what happens to your 401(k) contributions that are with your soon-to-be former employer? Well, several things can be done with the cash as allowed by the law. Here are some options for your 401(k) after you leave your job.

Move the funds to your new employer retirement package

Many employers give you a chance to roll over the funds to another qualified 401(k) plan. This is the best way to keep your funds safe and continue increasing your retirement nest. Moreover, this option does not have any tax consequences or penalties like some discussed below. Just ensure that you like the investment options offered by the new package.

Leave the cash with your former employer

Some employers allow you to leave your cash with them as long as it exceeds $5,000. The downside is you may not be informed of the investments that the cash is making. If you change jobs regularly and use this option, you may end up losing some money to investments that are not well handled. Therefore, only use this option if the benefits and opportunities provided by your former employer are unique.

Cash in the contributions

This is the least preferred method of dealing with your 401(K) contributions. First, you get a 20% tax cut on the cash and a further penalty of 10% if you are not yet 59 ½ years old. There can be other taxes eligible too, depending on your state. On top of this, you also lose the saving momentum.

Move cash to a Rollover IRA

A Rollover IRA is an excellent option if you change jobs often, giving you cash to invest in the future. This self-directed retirement account does not come with any tax consequences, and the options for investment which are available to you include mutual funds, bonds, stocks, ETFs and property, among others. On the downside, it is possible to make a wrong move and lose your contributions, which is why you will need advice from an IRA specialist.

As experts in 401(k) management and self-directed IRAs, Quest Trust is here to assist you in choosing the best options for your 401(k) contributions after you leave your job. We can also help you change your 401(k) account type and process your account transactions. Contact us today for more advice.

How can you qualify for a Roth IRA?

Navigating your financial future can be a daunting task, and most of us would instead not think about it if we didn’t have to. However, thinking about your retirement does not have to be hard or stressful.

A Roth IRA can take away some of the guesswork, but how can you contribute? Quest is here to help you understand what you need to do to qualify as well as learn about the best wealth-building investment options available. Moreover, with our genuinely self-directed IRA accounts, you are the one in control. Here are some things to help you get started:

Qualifying for a Roth IRA:

The IRS has enacted guidelines and restrictions on who can contribute to an account. Your income must fit specific criteria set by the IRS to open a Roth IRA. Also, it all depends on how you decide to file your taxes. It’s important to note that any income you choose to invest should come from work you performed yourself. It cannot come from any other investments.

The current Roth IRA income limits for 2019:

Single or head of household: You need to earn less than $122,000 (for the year of 2019) to contribute to your Roth IRA

Married and filing jointly or a qualified widow(er): You need to earn less than $193,000 (your combined income) to contribute to your Roth IRA.

Married but filing separately: Your income needs to be less than $10,000 to contribute to a Roth IRA, and in this case, there may be better retirement investment options for you. Also if you’re married but filing separately, you can use the limits as if you were presenting as “single.” However, only if you have not lived with your spouse in the past year.

If you have earned income in 2019 that falls under what’s outlined here, you can contribute to a Roth IRA account. However, how much you can contribute also depends on your age.

If you’re 49 or younger: You can contribute $6,000 (for 2019).

If you’re married: Each person can contribute $6,000, even if only one person has a paying job. There are also a few other key differences, so be sure to ask a Quest IRA specialist about spousal Roth IRAs.

If you’re 50 or older: You have the same contribution limit of $6,000, but in addition to this, you are also allowed to contribute an additional $1,000 to “catch up” for a total of $7,000. Please note: this is also true for spousal accounts if your spouse is also 50 or older.

If you cannot contribute due to the limitations listed above, please give us a call to discuss your options!

Here at Quest Trust Company, we are committed to helping you navigate your financial future. Please reach out to a Quest IRA specialist today for more information about Roth IRAs and how you can open an account. Also, be sure to check out our other blog posts for more information on Roth IRAs.