The SAFE Choice When Choosing a Self-Directed IRA Provider

The last decade brought about a sweeping change to the world of investing. The genesis of this change occurred around 2007, when Americans faced the hardship of the financial crisis. Despite the struggles of many nationwide, Americans began seeking new opportunities to regain their financial stability. Though Self-Directed IRAs have been in existence since the 1970s, it’s apparent that there is a link between their dramatic increase in popularity and a change in mindset for the average American.

Self-Directed IRAs provide investors with the opportunity to use their knowledge and invest in private assets, such as real estate, promissory notes, private companies and more. As more Americans begin to realize that they have the ability to part ways with the traditional methods of investing and that they hold the keys to their metaphorical financial vehicle, it’s important to mention that not all Self-Directed IRA companies are created equal. The easiest way to identify the best Self-Directed IRA provider is by making the SAFE decision; an acronym that represents the provider’s Specialization, Account fees, Funding timeframe and Education.


The investment interests of an individual should be one factor that dictates their selection of a Self-Directed IRA provider. Choosing a provider that specializes in a specific investment type is important, especially as a portfolio begins to grow into advanced investments. Investors may experience a learning curve when doing a new or advanced investment, however the Self-Directed IRA provider should already be well-versed in the investment type. Choose a provider that can educate you on their internal process for funding your specific investment, not the other way around.

Account Fees

When comparing Self-Directed IRA providers, the second factor to consider is the account fees. It’s imperative to read the fine print and ensure that the company doesn’t have the tendency to ‘nickel-and-dime’ their clients. The company must charge fees for their business to remain operational, however arbitrarily charging clients for services that should be included appears to have become a widely accepted practice for many Self-Directed IRA providers. Conversely, simply because a Self-Directed IRA provider has low-priced account fees, doesn’t necessarily equate to that company being the best provider for you. The ultimate goal in determining whether the provider’s account fees meet your needs should be the value provided, not just in fees you’ll incur, but also including intangible factors such as highly experienced professionals and responsiveness to client needs.

Funding Timeframe

Arguably the most important factor and item that separates a Self-Directed IRA provider from the rest of the pack is their funding and processing time. In the real estate industry it certainly seems that the phrase “time is of the essence” regularly applies. When a Self-Directed IRA provider cannot fund investments in a timely manner, an investor may stand to experience prolonged delays or worse, jeopardize the investment altogether. However, even a client with a lengthier funding timeframe should not be required to allocate sometimes up to a month for the processing of a deal. Investors on their quest to find the best Self-Directed IRA provider should do their due diligence and determine the timeframe for the establishment of an account, funding of an investment or disbursement of funds to pay an investment related expense.


Good real estate investors continue to strengthen their skills by furthering their education, because the most educated investors usually become the best investors. As the saying goes, “knowledge is power.” However, the real estate industry is chock-full of clubs and gurus who aim to provide their take on the best methods for real estate investors. Seeking education isn’t difficult in this industry, however obtaining accurate, reputable and accessible education may prove to be a challenge. Gaining education from a Self-Directed IRA provider allows you to obtain unbiased information on many different topics. The best and most reputable provider will not only provide accurate education, but will also make it accessible to investors nationwide.

Quest Trust Company is the premier Self-Directed IRA provider, holding assets like real estate, promissory notes and private companies. With over 18,000 happy clients nationwide, Quest Trust Company prides itself in having account fees that provide clients with the best value for the outstanding level of service. Quest Trust Company processes everything from setting up an account to funding an investment in just 24-48 hours, and without the dreaded expedited funding fee either. Quest Trust Company aims to provide both clients and future clients alike with education on the need-to-know topics in the industry. Investors across the United States can take advantage of the free education provided by Quest Trust Company either by attending a class or seminar in their city or watching the weekly online webinars. Next time you’re reflecting on choosing the best Self-Directed IRA provider for your needs, remember to make the SAFE decision.

Setting up Your Future with an Inherited IRA

Whether you have just inherited an IRA from your spouse, parent, or grandparent, an IRA beneficiary can potentially stand to earn thousands, if not millions, on these investments. Inherited IRAs have a few more rules than an IRA you set up yourself, so you can’t just accept the money and forget about it until your own retirement. Depending on the type of IRA you inherit and what you decide to do with it, you may owe taxes on the money or be required to take a yearly required minimum distribution (RMD). Find out more about Inherited IRA rules and how to use them to grow your own retirement below.

What is an Inherited IRA?

When a family member dies and leaves an IRA to a beneficiary, one option for the money is to transfer it to an Inherited IRA. Inherited IRAs have the advantage of allowing immediate penalty-free access to money. However, any distributions on a traditional IRA are subject to taxation and may bump you up to a higher tax bracket since it counts as income. Distributions from an Inherited Roth IRA are not subject to tax as long as the original account holder had the account for at least five years. Any money left in the account will grow tax deferred in a Traditional IRA and tax free in a Roth IRA.

A caveat to Inherited IRAs is that you must take an annual RMD based on your own life expectancy starting by December 31st of the year after the year of death. Spouses are allowed to wait to take their first RMD until the original account holder would have turned 70 ½ if that point comes later than the year after death rule. If the account was a traditional IRA and the original account holder was 70 ½ or older at the time of death, you must ensure they took their required RMD for the year to avoid owing a 50% penalty on that RMD. Even though annual RMDs are required for both Inherited IRAs and Inherited Roth IRAs, you can substantially grow the original amount for your own retirement.

Inherited IRA Growth

If a middle aged beneficiary inherits an account of $20,000 with a 6% return and only takes out annual RMDs, the account can grow to about $31,000 by the time that person reaches retirement. If a 20-year old inherited the same account and took only annual RMDs, the account could grow to $83,500 by the time they reach retirement. Some people name grandchildren rather than children on their accounts so the money has more time to grow. If the account holder names children and grandchildren as beneficiaries, the children can opt to defer the amount to the grandchildren if they don’t want or need the funds. Spouses and non-spouses can also name their own beneficiaries on an Inherited IRA in the event they die before all the funds are distributed. The younger the beneficiary is and the more money they inherit, the more money that person will have at retirement.

Inherited IRAs can be a significant gift to a beneficiary if used wisely. While a beneficiary could distribute all of the funds to themselves in one lump sum, most financial advisors would suggest keeping it in an Inherited IRA to make the most out of the money. Inherited IRAs truly are a gift that keeps on giving.

Yearly Retirement Planning

Retirement planning doesn’t, and shouldn’t, just happen when you set up your accounts and when you’re ready to withdraw, but is a yearly process to keep up to date.  Neglecting opportunities to make the most out of your accounts could result in thousands of dollars worth of losses by the time you reach retirement age. Making the most out of your investments starts with these four yearly processes.

  • Contributions. It’s a no brainer that early and consistent contributions make for the most successful retirement accounts. You’ll want to learn the maximum contribution amounts you can make to a traditional IRA, Roth IRA, and a 401K, as well as your company’s maximum match contribution in order to fully take advantage of what each account offers. 401K contributions must be made by December 31st and IRA contributions by April 15th in order to count on your tax forms.
  • Required Minimum Distributions. If you are 70 ½ or older, you must take an RMD every year on a traditional IRA and 401K account. The RMD will be based on your life expectancy and how much you have in your account. All RMDs count as taxable income if you didn’t pay tax at the time of your contribution. Roth IRAs don’t require RMDs ever, unless you have an Inherited Roth IRA.If you acquired an Inherited IRA or Inherited Roth IRA this year and the original account holder already reached the 70 ½ mark, you will want to make sure they already paid their required RMD before December 31st of the year of death. Then, you will have to take an RMD every year on the account based on your own life expectancy. If the original account holder was younger than 70 ½ at the time of death, you can wait to take your first scheduled RMD until December 31st of the year after the year of death. All RMDs from Inherited IRAs are subject to income tax, while RMDs from Inherited Roth IRAs are not. If you miss an RMD for the calendar year, the IRS will charge you a 50% fee on the amount that should have been withdrawn.To avoid taxation on an RMD from a traditional IRA, you can donate the money directly to a charity. You are allowed to contribute up to $100,000 of an RMD to charity, and since the money is transferred directly to the charity from the account, it doesn’t count as taxable income.
  • Conversions. If converting some or all of your traditional IRA funds into a Roth IRA makes sense for you this year, the conversion must take place by December 31st to count on your tax forms. Remember, you are responsible for paying the tax on any amount converted since a traditional IRA is tax deferred and a Roth grows money tax free.
  • Review Estate Plans. Did you get divorced this year or have any births in the family? You’ll want to make sure to update your inheritance paperwork to ensure all select family members are accounted for. Technically you can do this any time of the year, but it’s easier to add on your end of the year checklist with everything else up for review.

When conducting a yearly review of your retirement accounts, close attention to deadlines is a must. Updating the processes above will not only set you up for tax season, but help maximize your retirement accounts for the future as well.

Roth Conversions — Who, Why, and How

There are many opportunities to help you maximize your retirement investment earnings. One technique many can take advantage of is converting assets from a traditional IRA to a Roth IRA. With a traditional IRA, your yearly contributions are tax deductable now, but you will have to pay income tax on all distributions later on. You will also be required to take a yearly distribution once you reach age 70 ½. With a Roth IRA, you have to pay income tax on your contributions now, but aren’t subject to a tax on withdrawals once you reach age 59 ½. While you aren’t required to take a yearly distribution for a Roth IRA, you still have to leave your funds in your account for at least five years before taking any distributions to avoid penalty, even if you’ve reached the 59 ½ mark. Depending on your income level now and what you expect your income level at retirement to be, a Roth conversion could make sense for you. Below are guidelines to help you decide if you should convert your traditional IRA funds to a Roth IRA.

Who qualifies?

The IRS recently lifted the income cap on Roth conversions, so even high income earners can convert their assets into a Roth. However, just because you can convert doesn’t mean you should. Because you will be taxed on any converted funds coming out of your traditional IRA and won’t be taxed later on distributions from a Roth, it generally makes more sense to convert if you are in a lower tax bracket now than what you expect to be at retirement. If you are in your peak earning years, the taxes you pay on your conversion will be higher than the taxes you would owe at retirement when you start your traditional IRA distributions. If you think you’ll be in the same tax bracket at retirement as you are now but think congress will raise the income tax by the time you reach retirement, it also may make sense to convert to a Roth now.

Why convert?

As explained above, one reason to convert is to save on taxes. Another reason why someone would want to convert is if they were planning on entrusting the IRA to children or grandchildren upon death. This way, the inheritors wouldn’t owe taxes on the funds and could withdraw any time as long as the account met the five year requirement.

Six things to keep in mind

  1. The deadline for converting your traditional IRA to a Roth IRA is December 31st. Don’t confuse this with the deadline to contribute to a Roth IRA, April 15th.
  2. If you need to take a minimum required distribution the year you convert, you must take the distribution before you move any funds.
  3. If you are younger than 59 ½ and use IRA funds to pay for the conversion tax, you will be subject to a 10% fee. It is suggested that you use another source to pay for the tax to avoid unnecessary penalty.
  4. Even though you may qualify for a Roth conversion, there are still income restrictions on direct contributions to the account.
  5. There are no restrictions on how much you can convert or how many times you can convert. If you are going to be in a lower tax bracket for a few years, you can make a conversion each year that doesn’t bump you up to the next tax bracket and save even more on taxes with this method.
  6. Any post-tax funds in your IRA aren’t eligible for conversion.

Converting IRA funds to a Roth IRA may be beneficial to you in the long run, but it is recommended that you talk with your financial advisor about your individual situation before making any final decisions.

What Can You Do With an Inherited IRA?

Nobody likes to talk about death, but planning ahead with your loved ones is a must when it comes to inherited money. Beneficiaries of IRAs have several options available to them once they receive an account, or their share of an account, but some decisions require quick action to prevent major loss of funds. Read on below to learn more about the three general options available to you when you inherit an IRA.

    1. Roll over into own account. If you are the spouse of the deceased, you can easily transfer the funds from the IRA or Roth IRA into your own account, and the money acts as if it was yours the whole time. You will still have the same penalties on early distributions and be required to pay tax from any distributions you take from a traditional IRA. While there are no required minimum distributions (RMDs) on a Roth IRA, the RMDs will be based off of your own life expectancy, and not the original owner’s, for a traditional IRA once you reach 70 ½.Keep in mind that you have only 60 days to transfer these funds into your own account if there are multiple beneficiaries listed to inherit the IRA. Non-spouse inheritors don’t have the option to transfer the funds into their own IRA, but have two other options available to them.
    1. Open an Inherited IRA. The main benefit to transferring funds into an Inherited IRA for spouses and non-spouses alike is that funds are accessible any time without incurring a penalty for early distribution. However, any distributions from a traditional Inherited IRA count as part of your gross income and will be subject to tax.Another quirk to Inherited IRAs and Inherited Roth IRAs is that you are required to take RMDs, but you have a few different paths to schedule your RMDs. If the original IRA owner was younger than 70 ½, you can either make the first RMD by December 31st of the year following the year of death, and then continue RMDs based on your own life expectancy, or distribute all the funds by December 31st of the fifth year after death. If you fail to take the first RMD by the deadline, it will default to the five year plan. A spouse also has the option to wait for the first RMD until after the original owner would have turned 70 ½.If the original owner of a traditional IRA was already 70 ½ at the time of death, the RMD they owed that year must be paid first before December 31st of the year of death. Then, you must take your first scheduled RMD by December 31st the year following death and continue a schedule based on your own life expectancy. If there are multiple beneficiaries to the account, all funds must be transferred into individual accounts by December 31st following the year of death for RMDs to reflect personal life expectancies; otherwise they will default to the life expectancy of the oldest beneficiary.
  1. Lump sum distribution. The least advised, but sometimes necessary, third option is to distribute all of the funds at once as a lump sum. You will avoid any early distribution fees with this method, but will owe income tax on distributions made from a traditional IRA. The extra income may also move you into a higher tax bracket. As long as the five-year holding period has been met for a Roth IRA, you won’t owe any taxes on your distribution.

An inherited IRA can be extremely useful in building your own retirement funds if managed properly, but an inheritor must be aware of the strict deadlines associated with these accounts to avoid unnecessary fees and penalties. The best way to ensure a smooth transition of funds is to double check any beneficiary paperwork before death. You don’t want simple mistakes to cost thousands in the long run.

IRA vs. 401K, What You Need to Know

You may just be starting to think about saving for retirement, or you may already be contributing to one or both of these types of accounts, but there are significant differences between IRAs and 401Ks that you should be aware of before deciding on which one you want to help build your savings. You may find that you qualify for one or both of these accounts and need help deciding which one to use for retirement, if not both. The biggest differences between IRA and 401K accounts are listed below.

  • Qualification. Anyone can contribute to a traditional IRA as long as they are younger than 70 ½ years old. A Roth IRA requires a person make less than $117,000-132,000 in income annually, or less than $184,000-194,000 if married and filing a joint tax return. A Roth IRA also has no age requirement. For a 401K, you must work for an employer who provides 401K plans to their employees. Based on just these facts, you may already qualify for one or all three options. Read on to find out which one is best for you and your needs.
  • Contributions. A traditional IRA and a Roth IRA allow you to contribute $5,500 per year, or $6,500 if you are 50 or older, to it as long as your income exceeds the maximum amount. If you earn less than $5,500 per year, you can only contribute up to the full amount of your income. A 401K on the other hand allows you to contribute up to $17,500, as long as your income equals or exceeds the amount you contribute. Your employer may also offer a matching incentive for a 401K that will help you save more money more quickly.If you can afford to contribute more than $458.33 per month to your retirement and your company offers a 401K option, it might make sense to save through this alternative to make up the difference. However, you’ll have to decide between this being your only account or if you want an IRA or Roth IRA to be the primary account and the 401K a backup for excess saving. If your employer match is generous enough, you may want a 401K as your only account if the free employer money exceeds the tax break you would receive with an IRA. Your goals for taxation will help you make your decision.
  • Taxation. With retirement funds, you can either choose to have a tax break now or waive the withdrawal taxation later, but unfortunately you can’t enjoy both. Traditional IRA contributions are tax deductible every year, but withdrawals later on will be subject to an income tax. Roth IRA contributions cannot be used for yearly tax deductions, but withdrawals are also exempt from taxation in the future. A 401K contribution is taken directly from the employee’s paycheck, either pre-tax or post-tax. If it’s post-tax, you don’t have to worry about paying taxes on the contribution that year, since you already paid income tax on it. The only other time you are taxed on a 401K is when you make a withdrawal.
  • Distributions. When it’s time to make a withdrawal, called a “distribution”, each account has different rules. To avoid unnecessary penalties from withdrawing too early, it’s best to wait until you’re at least 59 ½ before receiving your first distribution, no matter what account you have. Once you hit 70 ½, you will be required to take your first minimum required distribution with a traditional IRA and a 401K. If you don’t, you will incur significant penalties. Roth IRAs have no required distribution schedules.
  • Investments. With a 401K, your company will provide a preset list of investment accounts you can hold your retirement in, each one having a different level of risk associated. With IRAs and Roth IRAs, there are an infinite amount of accounts that you personally will be able to decide where to keep your funds; but some have restrictions or limitations, so you may not qualify for all of them.

As you can see, IRAs and 401Ks both have costs and benefits, and only you can decide which one, if not both, fit your personal situation. One option may earn you more money in the long run, or cost you less in taxation, so it’s critical to do your own research before deciding. No matter which option you choose, saving for retirement early and consistently is always the best strategy.

Exceptions to the IRA Early Withdrawal Penalty

You might have hit a rough patch financially, or need an extra boost for a big expense, and remember that you have more than enough in your retirement account to pull from for an emergency. The only problem is you haven’t turned 59 ½ yet, so any money withdrawn from your IRA will incur a 10% penalty. Ouch. Luckily, there are a few exceptions to this penalty rule, and you may qualify for at least one of them. Read on to find out when you can accept an early distribution without suffering a stiff penalty for doing so.

  • Education. The IRS allows early withdrawals from an IRA to pay for college tuition, fees, and supplies. They even allow the distribution to be used on room and board as long as the student is at least half-time. The person using the money for education must be you, your spouse, your child, your grandchild, or your parent. One thing to keep in mind when using this method is that any extra income from the IRA may affect your financial aid eligibility.
  • Medical. If you are unlucky enough to need an expensive medical procedure performed that costs more than 10% of your adjusted gross income, you are allowed an early withdrawal to help pay for the expense. The catch is that the expense must not be reimbursed in any way by your insurance company.Another medical related category you may use your IRA money for is toward health insurance if you have been out of work for at least 12 weeks and have been collecting unemployment. The health insurance must be for you, your spouse, and/or your children.
  • Home purchase. If you are a first-time home buyer or haven’t owned a home within the last two years, you may use money from an IRA to use toward buying a home, building or rebuilding a home, for settling, financing, and/or closing costs. The money can also be used by you, a spouse, a child, grandchild, or parent, and must be used within 120 days of withdrawal. A single person can withdraw $10,000 without penalty, and a married couple $20,000 from their combined IRAs.
  • Military. Anybody in the military reserves who has been called into active duty for at least 180 days may take an early withdrawal without penalty. However, they may not take the withdrawal before their orders were given or after their active duty status ends.
  • Disability. A work-ending physical or mental disability will qualify you for an early distribution as long as a physician confirms the disability will result in either death or a continued or indefinite duration. There are no requirements as to what the money may be used for.
  • Death. If an IRA holder suddenly dies, a spouse, child, or other named trustee may make an early withdrawal as long as they claim it as an inherited IRA and refrain from rolling over the account into their own IRA.
    Substantially Equal Periodic Payments. If you’re really in a financial bind and need to use your retirement money for an extended amount of time, the IRS will waive the 10% penalty as long as certain criteria are met. You must take the same amount of money out each time, in which the amount is determined by any one of three IRS methods, for a period of 5 years or until you turn 59 ½, whichever comes later. If you fail to meet these criteria, you may owe 10% on each withdrawal taken.

It’s best to leave IRA funds untouched until you reach age 59 ½ to ensure you have enough to live comfortably at retirement. However, extenuating life circumstances may cause adaptations to the plan. Although the above mentioned exemptions will save you from the 10% early withdrawal fee, you will still have to pay income tax on any funds received from a traditional IRA since all contributions were made tax deferred. With a Roth IRA, you are allowed to make tax-free withdrawals at any time as long as the account is at least five years old and you are withdrawing on contributions only, but not earnings. Remember to always fill out your tax forms correctly to let the IRS know the funds were used under an exempted reason, and always know the rules and limitations of your own IRA.

6 Mistakes People Make with Their IRA

Whether you barely know what “IRA” stands for, or you’ve been contributing to one for years, you could be making mistakes with your retirement fund that are costing you big time. When it’s time to withdraw from your account, you don’t want to discover that you could have been saving more or saving smarter after all of those years of hard work. The earlier you educate yourself on IRAs, the better off financially you’ll be at the time of your retirement, or you may even get to retire early! Below are six common mistakes people make regarding their IRA and how to avoid them before it’s too late.

Not starting soon enough. It makes sense that the earlier you start saving for retirement, the more money you will have at the end. However, few Americans start saving for retirement right out of college, let alone during their first job. After college many people have loans to pay back, rent, bills, and maybe even credit card debt they need to bring down. Retirement might be the last thing on their minds. The thing is, most people won’t even notice a 3-6% decrease in their monthly take-home pay, which can in fact yield substantial future rewards. Teenagers have the greatest advantage because not only are they getting a head start with their savings, but they also have the least amount of expenses their paychecks need to cover.

If you are already well into your 30s, or even 40s, and are becoming increasingly nervous about how far behind in your goal you’re slipping, there are still a few options to give your IRA a boost. Immediately deposit any bonuses, raises, or other extra sources of income into your account as if it never existed. You alone are responsible for your retirement funds, so always research different ways you can increase your bottom line. Some examples are explained in points below; and the more disciplined you are with these actions now, the more comfortable you will be in retirement.
Not saving enough. Few Americans reach the age of retirement and think, “Wow, I have saved so much money for retirement. I could live comfortably for decades!” Sadly, the opposite is often true, and many are forced to work longer than they planned or scramble to find another source of income just to survive. Not only do people start saving for retirement later than they should, but when they do start saving, they don’t contribute enough to meet their goals. In fact, the gap between what the average American actually has saved for retirement versus what they should have saved widens as age increases, suggesting it gets harder to save the older we get. With child related expenses and caring for aging parents, along with life’s typical bills, the average middle-aged couple may find it difficult to justify a partial pay decrease to use towards retirement. However, not contributing at least the maximum amount your company is willing to match (for your 401K) is basically refusing to take free money. If your budget can handle it (usually it can), always contribute your company’s maximum match to effectively double your funds. If you have enough to contribute to both a 401K and an IRA, do so.

Neglecting spousal contribution. You may think that if one spouse doesn’t work, they can’t contribute to retirement; but that’s not the case. As long as a couple is married, file jointly on their tax return, and earn enough money to make double contributions, the non-working spouse can use the working spouse’s income to make payments into their own IRA. Many couples don’t know they can double their funds this way. And, if the spouse ends up working at a later time, they can use the account they’ve already set up to contribute their personal income into.

Neglecting retirement education. From different types of IRAs to when withdrawals should be made, there are many facets of your retirement you need to learn before you make a mistake that can cost you thousands. Know the difference between a standard IRA and a Roth IRA, and which one you qualify for. You might even qualify for both! Learn how and when you can make penalty-free withdrawals and how much you need to be taking out annually once you reach 70 ½ years old. Not adhering to the rules can majorly reduce your hard-earned savings. Lastly, educate yourself and your family members on how the transition of your funds will occur if you were to die suddenly. If they wait too long, they may not have access to the money left to them. Again, you are responsible for your own finances, and learning more now can save you time and money later.

If you don’t have an IRA or 401K, get one immediately. The sooner you start the habit of saving for your retirement, the easier it will be to continue the trend, plus you’ll thank yourself for it later. If you have an IRA, be actively involved in growing it. Never stop researching ways to increase your funds. With a little work and smart decision making, anyone can set themselves up for a comfortable retirement.