The Value of Gold Family

Fees. It is never a fun subject to discuss, but they are something you’ll run into any time you choose to self-direct your IRA into privately held assets. Whether fees range on the higher end or the low end, knowing what to expect from the fee option you choose and understanding all your choices is important. This way, you can make the best decisions for your investment plan.   

Not all fee plans are created equal! Some options work better for others, considering factors like the number of assets or the value of an account, but one fee plan that has provided the most value to our clients is the Quest Gold Family plan. For the active investor that doesn’t want to deal with a fee for each transaction, the all-inclusive Gold Family Plan is the one people turn towards. Encompassing nearly all transactional fees except for a handful, the Gold Family plan makes it easy and inexpensive for an active family of investors to self-direct their investments. 

What is the Gold Family Plan?

At Quest, we offer different options for investors depending on the investments they plan to do. The third administrative fee option available with Quest Trust Company is the Gold Family plan, which allows up to 10 accounts (those belonging to you or your immediate family) to be covered by the single fee package. One of the great benefits of this option, is that clients don’t have to worry about most overhead fees that would be expected with most custodians.

By being on the Gold Family plan, many of the fees are already included in the flat annual fee. Fees like transaction fees, check fees, and account opening fees are just a few examples of expenses that would be included. Not having to worry about which fees are associated with each transaction makes the Gold Family plan highly sought after for those who plan to be active investors with their SDIRAs. 

The True Value of Gold Family

We all want to get the best deal, but there is more to “value” than just saving money! With the Gold Family plan, not only do you get benefit from the fee savings, you also get a special level of customer service designed specifically for our Gold Family members. 

The Gold Family Department was created to provide a “Gold Member Concierge” service, to ensure business is handled properly and in a timely manner for Gold Family member accounts, providing the highest level of value and exceptional customer service. Not only do these members have access to a select group of representatives available to assist with any questions, they also have a personal email they can send any requests or concerns too. 

Becoming Part of the Gold Family

Making the switch to the Gold Family option is quick and easy! If you would like to look over the fee structure in more detail to see the true value of this plan, you can access our Fee Schedule by clicking here!

For more information about getting started, you can always reach out to a Quest Trust IRA Specialists by emailing IRASpecilaists@QuestTrust.com.

What Is a SEP IRA and How Does It Work?

Have you talked to your friends lately about their retirement plans? Many people today have started investing and saving for retirement by utilizing IRAs. We all need to know how this works. 

Don’t be left out when it comes to understanding different accounts, funds, and prospects. You may be interested in a Simplified Employee Pension or a SEP IRA. If you do not know what this is, you are in luck. We are here to help! 

What is a SEP IRA?

Exactly what is a SEP IRA? If you are like most people, understanding how an IRA works may be a daunting task. You need experts who do this all the time and will help you gain knowledge to take care of your IRA or trust. 

In simple terms, a SEP IRA is a savings plan. As a self-employed individual, this is a plan you can set up for yourself or small business. You make tax-deductible contributions to your employees’ plans. Employers make contributions but employees make the decisions on how the IRA is managed.

A great thing about having a SEP IRA is that they have higher annual contribution limits than standard IRAs. Additionally, these accounts are easy to set up and the costs of administration are typically quite low.

Who Can Have a SEP IRA?

Not everyone can participate in a simplified employee pension. You have to be at least twenty-one years old and you have to work for your company for three years. That is the rule of the IRS. 

Individual companies can be less restrictive but not more restrictive than what the IRS allows.  Employers can decide to exclude certain types of employees from the program, such as union workers. 

Importance of Getting Started

Sometimes the hardest part of retirement is getting started. Many people fail to take this vital step and continue to put it off. The best way to add funds to your retirement is to open an account today. 

If you have a self-directed IRA set up, you might be more likely to contribute money to it. It is like a garden you plant and want to watch it grow. Like that garden, your retirement account takes time to grow. 

Why a SEP IRA Is a Good Option

When it comes to different types of IRAs, things can be confusing. By choosing a simplified employee pension employers can contribute more money. Since all employees have to receive the same contribution, a SEP IRA is mostly used by small companies with no or few employees. 

This type of plan lets employers contribute to their employees’ retirement as well as their own. It is a traditional IRA and follows the same general rules as other traditional IRAs. 

The Time Is Now

If you have been thinking about starting a SEP IRA, now is the time to take the plunge! The longer you wait the less money you will contribute. This means the results of your retirement could be much less than you need or want. 

Options for retirement can seem confusing but they don’t have to be. Contact a Quest IRA specialist today and let us show you how we can help!

How Solo 401(k)s Work

Since the creation of the Solo 401(k) in 2002, self-employed individuals and small business owners have been able to utilize these accounts to grow their retirement wealth exponentially. 

The Solo 401(k) is one of the most powerful IRA accounts to self-direct and has many financial benefits. These advantages include exemptions from certain Unrelated Business Income Tax (UBIT) and the ability to have checkbook control. 

While the Solo 401(k) may be very beneficial to some, it is critical that you understand all of the qualifications and maintenance required by a 401(k) before deciding to open the account at a financial custodian.

To establish a Solo 401(k), certain qualifications must be met. An individual must be either self-employed, a company owner that receives W-2 wages, or an individual with no common-law employees. Once these requirements have been met, you can start to take a look at whether a solo 401(k) is the best option for you. 

Benefits of a Solo 401(K)

Solo 401(k)s are powerful investments and wealth-building vehicles. Some of their advantages include:

Checkbook Control:

Maintaining this type of checking account allows for check writing authority by the trustee. Using a 401(k) is a great way to obtain checkbook control, without the dangers of the IRA LLC Checkbook Control model that has come under fire recently. 

Larger Contribution Limits:  

The business owner wears two hats in a Solo 401(k) plan: employer and employee. Contributions can be made to the plan in both capacities, allowing up to $57,000 in contributions for 2020. 

Loans to yourself: 

Unlike with your IRA, you can borrow money from your Individual 401(k). You are able to loan yourself the lesser of 50% of your account balance or a maximum of $50,000. Loans are based on a 5-year amortization at market rates.

Exemption from UDFI:  

One of the major benefits of real estate investing through your Individual 401(k) is the exemption from Unrelated Debt-Financed Income (UDFI) taxation.

Disadvantages of a Solo 401(K)

Conversely, there are some serious potential disadvantages that come along with maintaining a Solo 401(k). Some key dangers to be aware of while evaluating your need for a 401(k) include: 

Legitimizing:

In order to legitimize a newly established 401(k), the employer or employee must make a contribution for the tax year in which the account was established. See IRS Publication 560 for minimum funding requirements.

Reporting requirements:

The account holder has sole responsibility when it comes to tax reporting requirements. A 1099-R must be filed if any distributions are taken from the 401(k) and a 5500 or 5500EZ must be filed once the account value reaches $250,000+.

Dangerous responsibility:

Your transactions are not overseen by your custodian, allowing more room for potential trouble or prohibited transactions. 

Record keeping:

Careful record keeping must be kept for the multiple accounts held in the 401(k). Often time this bookkeeping is tedious, so it’s important to make sure good records are kept. 

In Summary

The Solo 401(k) is one of the most powerful retirement accounts you can have, and understanding how they work is the first step in deciding if it’s the right investment strategy for you. 

For all of your further Solo 401 (k) questions, please feel free to call a Solo 401(k) Specialist at 855-FUN-IRAS (855-386-4727). Click here to view our Solo 401k FAQ page.

Buying Real Estate in an IRA: Understanding Why and How

As Americans have become more interested and involved in their retirement options, Self-Directed IRAs and the opportunity to invest in non-traditional assets have been gaining popularity. One of the more common alternative investment opportunities inside of a Self-Directed IRA are Real Estate assets. 

Many people are looking to diversify their retirement portfolios with tangible assets like Real Estate, after dealing with the often uncertain public stock market. With Self-Directed IRAs, you have the option to invest in all sorts of Real Estate assets such as single-family homes, multifamily and commercial properties, mobile homes, land, and so much more.

Real Estate in an IRA

Holding Real Estate assets in your Self-Directed IRA has many benefits. Many investors enjoy the freedom and security that comes with knowing all of your ‘nest eggs’ so to speak, are not sitting in one basket. Diversifying your portfolio with tangible and non-tangible assets is a great way to give yourself financial security, no matter what the markets may look like in the future. 

Self-Directed IRAs also allow you to hold assets with notably high returns on investments. Real Estate investments have been shown to produce results that are double and sometimes even triple the original price. When these transactions are done inside of an IRA– a tax-exempt vehicle– investors have the potential to grow their Self-Directed IRAs to the millions. 

When you’re ready to start investing in Real Estate in your IRA, it is important to read up on the structuring rules and limitations of the IRS, in order to protect yourself and your investments. For example, when doing a Real Estate investment in a Self-Directed IRA, many people assume that an LLC or other 3rd party entity is needed, in addition to the IRA. While this method makes sense for some investors, it is often not the simplest way to structure a deal. 

First, know that an IRA has the ability to purchase an investment outright– there is no need for a middle entity. Second, if an intermediary entity is created, you will need to be aware of disqualified parties to your IRA.  The term “disqualified parties” refers to those individuals that the IRS has said cannot benefit from or enter into transactions with your IRA. 

For more information on how to keep your IRA working for you and protecting your retirement, visit IRS.gov, and check out the many educational resources available to you at questtrustcompany.com.  Click here for an article on IRA Prohibited Transactions.

How to Use a Self-Directed IRA to Buy a Real Estate Investment

The process of buying a Real Estate asset in your Self-Directed IRA is quite simple. Since these accounts are Self-Directed, your first step is to locate an investment of your choosing. Once you have selected the property you would like to purchase within your IRA and you have completed the due diligence on your investment, you can complete your investment documents and work with your custodian to get your deal funded. 

Unlike when you make a Real Estate purchase from your personal funds, with a Self-Directed IRA, you MUST draw up the offer/contract in the name of the IRA. For example, if the buyer is a Quest client, the buyer’s name on the offer/contract reads: Quest Trust Company FBO [CLIENT’S FULL NAME] [IRA/HSA/ESA] # [ACCOUNT NUMBER]. It is important to make sure the vesting is correct to show that the purchaser is the IRA and to protect your investment. When listing the buyer’s address, it works the same way. Since the IRA is held by the custodian, you would use the custodian’s address. 

Oftentimes, custodians will have internal forms that will need to be completed at the time of investment. These forms will require the client to sign, giving their approval on the funding. Once all the proper documents are signed, the custodian will work with the 3rd party closing agent to close your Real Estate purchase. Since the custodian is the legal entity in administration of your IRA, the client will not have to attend any closings. Click here for steps on purchasing Real Estate in your Quest Trust IRA.

Maintaining Real Estate in an IRA

Real Estate investments usually come with ongoing responsibilities, such as property taxes or maintenance, and you will want to know what to do when those situations arise. First, it is important to understand that your IRA owns the investment, and it will need to be the IRA that pays for any expenses that are incurred. You cannot pay for any expenses out of your own pocket, as this would be a prohibited transaction. When an expense needs to be paid, you can contact your IRA custodian and follow the steps that they provide to have the IRA pay that expense. 

This may seem like an extra step, but it’s extremely important to maintaining your investment security. Paying any expense out of pocket for your IRA’s Real Estate asset is a prohibited transaction. You never want to jeopardize your growth potential by engaging in a prohibited transaction, so following all of the IRS’s rules and guidelines is imperative. If there is ever a situation that you have questions about, call your custodian and they will be happy to provide you with the education to help you make the best decision for your account.

When deciding to do a Real Estate investment in your Self-Directed IRA, be sure to choose a custodian that is familiar with the investments you plan to do. Time is a crucial factor in investing, especially in Real Estate, so finding a company that works fast and has ample knowledge on your types of investments will save you from missing out on a great deal. 

If you ever have a question about purchasing Real Estate in your IRA, call a Quest Trust IRA Specialist at 855.386.4727 and we can answer any questions you may have!

Paying for Educational Expenses TAX FREE – Comparison of the Coverdell and 529 Plans

With the new school season just around the corner, you have probably already started working on your schools supplies lists. However, the beginning of the year isn’t just the only time you spend money for school. 

Materials for projects, electronics for homework, maybe even school uniforms and tuition are things that come at all times during the school season. Wouldn’t it be nice if the money used for purchases were exempt from federal income taxes? They can be, and there are investment plans that allow you to do this! 

The Coverdell Education Savings Account and 529 are similar education plans that allow you to save for college and other education, but their differences can determine which one is best for you. Some plans, like the Coverdell ESA, allow you to diversify your investment portfolio by doing alternative investments like self-directed real estate or notes, for example. 

In this article, we’ll cover the main differences and similarities so that you can get a feel for which account may best fit your needs.

The Coverdell and the 529 are both used for education, and this is the most common similarity. What does education cover? The good news is… that answer is very broad. Educational expenses can cover everything from school supplies like binders and notebooks, to college textbooks and internet if the school program requires it for the class! 

Another important similarity is that the account holder always maintains control of the distribution of funds, and the taxes grow tax-deferred until distribution. If used for qualified educational expenses, these distributions are completely tax-free! Non-qualified expenses that are withdrawn could be subject to federal tax and 10% penalty. 

What can you use these accounts for:

Their differences are where the two accounts are set apart. Though they are both great accounts that can be used for education, one account allows you to begin using it earlier than the other. 

The Coverdell ESA funds can be used for qualified expenses from pre-k all the way up to college, whereas in the past, the 529 plan funds can be used for qualified college expenses only. With the recent tax reform bill, you’re now able to use $10,000 from a 529 to pay for expenses K-12. This is usually something to consider if one was needing to use the funds sooner rather than later. 

How much can you contribute?

Another difference is the contribution limits. With a 529 plan, the limit varies by state, whereas the Coverdell remains the same across the board (for 2020, it is $2,000 per child, per year until the child reaches age 18). 

One unique characteristic of the Coverdell ESA, is that even though contributions must stop at age 18, the account can remain in that child’s name until age 30 or it can be passed along to another child who qualifies. 

In order to contribute to a Coverdell ESA, the adjusted gross income of the depositor must be less than $100,000 if single, or $220,000 if married and with a 529, there is no restriction.  

It is important to note that gift contributions can be made to a Coverdell. This means that if a contributor had an income over the limit, another person could contribute in his or her place. For example, if a child’s parents made too much, but had grandparents who were under the income limit, they would be able to contribute to the Coverdell if they wanted.

What can you invest in?

The biggest difference is who is in control of the investments. With a Coverdell, the account holder has the option to choose his or her own investment. Oftentimes, Coverdell accounts are seen involved in real estate investments and even private loan partnerships. 

With a 529 account, the state government controls the funds and invests them for you. Deciding whether you want to take control of the account or let the state take care of it will be important when picking which education account is best for you. 

Coverdell ESA and 529 are both beneficial accounts to have for school savings and qualified educational expenses. However, both come with their own freedoms and restrictions. 

It’s up to you to decide how much control you want to have over the account and how you anticipate your future spendings. If you ever want more information about the Coverdell ESA or have questions about which plan might be right for you, call an IRA specialist at 855-FUN-IRAS (855-386-4727).

Tapping Into Trillions: Using Self-Directed IRAs for Private Funding

Whether you’re a first time home buyer, an experienced fix and flipper, or an expert in rentals, one aspect will be present for almost everyone: funding. Investors will always need money for deals and sometimes the traditional bank loans aren’t possible for everyone. Others just prefer the flexibility of being able to work out a deal on their own terms. 

There’s plenty of options available, but private lending by using self-directed IRAs has proven time and time again to be an option many investors seek out when it comes to their real estate or other alternative investments. 

According to a recent study from the Investment Company Institute, $28 trillion dollars were in retirement assets, and of that, $9.2 trillion dollars was reported to be in IRAs alone. With that much money available for use in IRAs, it’s nearly impossible not to be curious about how to use those funds for private funding. 

For lenders and borrowers alike, private loans with self-directed IRAs have provided opportunities for successful deals and have given investors the ability to have options. Whether you’re looking to borrow private funding or loan out your own, here is everything you need to consider when getting involved in a private loan!

Why Private Lending?

As mentioned, sometimes a normal loan from a bank or hard money lender just doesn’t work for unique situations. Especially in a market like real estate where investors are seeking to get creative with their strategies, having an option like private financing is almost necessary. 

With a Self-Directed IRA, investors can choose to loan out their retirement funds on their terms, as decided and agreed upon with the person borrowing those funds. These agreements are usually more customizable than regulated bank loans, and typically the interest works out in favor for the investor, making it a great investment for a self-directed IRA. 

Private loans also give the investors the ability to collaborate when doing the loan. Maybe one investor doesn’t have the ability to loan out the full amount of funds a borrower is needing, but the flexibility of a private agreement makes it possible for two or multiple people to come together to supply the total amount to loan out. This flexibility also comes into play with timing, too. 

Private loans are ideal when needing to purchase property in a short period of time, whereas it sometimes can take a while when applying for a traditional loan. 

Considerations When Private Lending

Just as banks have a certain set of criteria when vetting someone for a loan, private lenders typically do, as well, although the requirements are usually different and much fewer.  Things that a private lender may consider when deciding to lend are the borrower’s credit scores, the investment loan to value ratios, the amount of time the investment may last, and if in the event the money was not paid back, is that investment something the investor would want to own. These are just a few considerations a lender may have. 

As a borrower, it is wise to have a success book (if applicable) and be able to properly present your investment. Usually, when seeking a private loan versus a traditional loan, there is a higher approval rate for borrowers. 

Borrowing from a bank can be time consuming and stressful, but private lending doesn’t have to be. Whether you’re a borrower looking for capital, or an investor with money looking for a good deal, private loans with a Self-Directed IRA have proven to be great investments that are flexible enough to work for everyone. 

If you have questions about how Self-Directed IRAs can be a source of private financing, feel free to give one of our IRA Specialists a call today at 855-FUN-IRAS.

Making Money Moves: Understanding IRA Transfers and Rollovers

When you leave your job, one of the things you will have to consider is what you will want to do with your old 401(k). A common option is to roll it over into an IRA at a custodian who can help invest your money in publicly traded investments. For some people, this is great. However, for those who want to take true control of the hard-earned money they have been saving and have the options to diversify their investment portfolio… they take a different route. Moving your old 401(k) into a Self-Directed IRA, like the accounts we have at Quest, allow investors the option to put their money in alternative investments and privately held assets. Even for those who may already be investing an IRA and do not have a 401(k) anymore, your investment options expand whenever you perform a rollover or transfer into truly self-directed IRA.

What Account Do I Move My Money To?

Moving your money between accounts might seem like a daunting task at first, but we’ve broken it down to explain the way retirement accounts move. One of the first couple of things you will want to ask yourself are “What type of self-directed account do I want to have?” and “What type of account do I currently have?” Asking yourself these two questions will help you make sure you move your funds to the correct self-directed accounts. Not all IRA accounts have the same tax benefits, and it is very important to remember what tax advantages each account has, that way you can always do your best to accurately move your funds to the correct account, keeping the taxes the same. This eliminates tax reporting you could create for yourself and ensures the smoothest movement from one custodian or entity to another.

So, what’s the actual difference between a rollover and a transfer?

How do you know when to initiate a transfer or when to do a rollover? These terms often get confused and misused, but they have very certain traits that define the type of movement they perform. It’s important to know the difference between the two, also. The most distinguishable difference is that an IRA transfer occurs when you move funds between like accounts or one IRA to another IRA, for example Traditional IRA to Traditional or Roth IRA to Roth IRA. If you want to move money between two different types of retirement accounts, for example a 401(k) to IRA, that’s would be considered a rollover. Rollovers between IRAs can be done, but certain rules are attached when this movement occurs.

IRA to IRA rollovers can occur, but it’s very important to be aware of the rules. Often times, custodian processing times can vary anywhere from a couple of days to weeks; this will depend on your current IRA custodian’s transfer procedures. If you don’t want to wait on a custodian to go through the transfer process, you do have the option to do what is called a “60 day rollover”, meaning you have 60 days from when you get the funds to put the funds back into an IRA account In this scenario, the funds are sent to you and you are responsible for putting them into a retirement account. Whatever portion is not rolled back into an IRA will generally be taxable and subject to a 10% penalty. You are limited to doing only 1 of these IRA to IRA rollovers per year, and if you exceed this number, the second rollover is then treated as an excess contribution.

There are other characteristics that define the two, and rollovers have certain rules that must be followed. This chart outlines the common characteristics of a Transfer vs a Rollover.

How do I initiate a transfer/rollover?

Now that you know the difference between the two and have decided which is going to be the best for you and your account, you can begin moving your funds. To initiate a transfer, you will want to complete your receiving custodian’s Transfer Form by printing and sending back a completed copy to the office. This will allow the receiving custodian to send this off on your behalf. Some custodians will require original forms, notary or medallion stamps, and statements of your current; others will simply accept a fax. Calling your self-directed custodian can help during this process if you are unsure of a custodians requirements. Once the form is sent, the last step is to simply wait for the funds to arrive back at your new account. It is helpful in the meantime or even before, to let your current custodian know you want to liquidate your assets that way your account is in a cash state. This can eliminate rejections that can sometimes occur when transfer requests are made. Typically, within a few days or weeks, the transfer will be complete.

If you are going to be initiating a rollover, you will need to be aware that there are usually more forms for this movement, often at the former employer or custodian. Distribution paperwork from the employer you are leaving or the IRA custodian you are moving from is customary. Contacting them to provide your account number and any delivery instructions on their distribution forms will need to be done in order for this movement to occur. The custodian receiving the funds may have an internal form (like the Rollover Form) that will need to be completed for the incoming funds, but it’s important to note that this form does not initiate the actual movement. That is done by the account holder initiating the distribution/rollover request from the previous/former custodian.

If you ever have any questions or need assistance, call us at 855-FUN-IRAS and a Quest representative can help with this process.

There’s no need to be intimidated when rolling over or transferring IRA funds. From beginning to end, the process is quite seamless once you understand the different types of movements and their processes. At Quest, we have a whole department focused on the portability of your funds and can help with a transfer or rollover question you might have. If you’re ready to start moving your funds over to a self-directed account to invest, let us know how we can help with the process or simply provide more education! For more information, visit www.questtrustcompany.com .

Here is a helpful portability chart to help you decide which accounts can be move between each other!

Check out this video on how to fund your Quest account today!

Can I Move My 401k Into a Self Directed IRA?

Did you know 45% of Americans fear they will run out of money during retirement?

If you have started taking more steps towards planning for retirement, then you are already ahead of the game. Those who want to be more in control of their money typically like to explore the options available, like a self-directed IRA.

What Is a Self-Directed IRA?

In short, a self-directed IRA has many similarities with other traditional IRAs. With a self-directed IRA, you can get tax advantages that will help you save for retirement. 

However, it’s essential to keep in mind the IRS will limit the types of investments you make. The IRS will allow your self-directed IRA to make investments in real estate, developmental land, mineral rights, cryptocurrency, and livestock. 

How Does a Self-Directed IRA Work?

If you plan to switch to a self-directed IRA, the first step is to pick a custodian from a brokerage or investment firm. The custodian’s job is to manage the IRA assets and coordinate the sale and purchase of the investments. 

Keep in mind the same rules of a traditional IRA apply to self-directed IRAs. For 2020, the maximum IRA contribution is capped at $6,000. However, those over the age of 50 can make an additional contribution of $1000 to catch up. 

Who Should Switch to a Self-Directed IRA?

If you’re wondering about switching to a self-directed IRA, it’s important to learn if it’s the right move for you. Those who decide to switch to a self-directed IRA do it for several reasons. 

You want to diversify your portfolio and plan to split your savings between a conventional IRA and a self-directed IRA.

You’re worried about your retirement investments after the 2008 financial crisis and want a safer investment. 

You’re an experienced investor in a specific type of investment, such as real estate. 

How to Set Up a Self-Directed IRA?

To qualify to set up a self-directed IRA, you need to fulfill specific requirements. For starters, you need to prove you earned taxable income during the current financial year. 

Some employers might offer their employees the option of enrolling in a self-directed IRA.

To set up a self-directed IRA, you can start by requesting the transferring of funds from the traditional IRA to the new one. Some people choose to transfer any profits they make into a self-directed IRA. Another way to do it is by deferring income directly to the account.

Can You Move Your Managed 401k?

The short answer is yes. However, you need to consider if it’s the right move for you. Remember to learn how a self-directed IRA works, who can benefit from one, and all pertinent details. 

A self-directed IRA could be a great move for you. Contact a Quest Trust Company IRA specialist today for a consultation.

How to Invest for Retirement

Are you looking to start saving money for retirement? There’s no time like the present to build a nest egg. With a few key tips in mind, you can put yourself on a path toward retiring comfortably.

Keep reading to learn about a good retirement investment strategy!

Start Your Retirement Investment Strategy Early

By investing early, you can take advantage of compound interest, which is interest earned from interest. In other words, the beauty of compound interest is that it helps your nest egg grow more quickly. So start investing early!

If you have even a few hundred or a few thousand dollars that you can stash into a retirement account, it’s worth doing that as early as possible. You could end up with a lot more money by the time you’re 65.

Invest For the Long Term 

Knowing how to invest for retirement means being patient. When you start to see returns on your investment after a few weeks, you may be tempted to withdraw money and start spending.

You might want to resist that temptation. You’ll make more money if you keep the money invested for as long as you can. Have enough money in your checking account that you can access for daily needs, but avoid touching the money you designate as retirement savings.

The More You Save, the More You Can Invest

Many experts recommend saving 20% of your monthly income each month. If you get a new job with a higher salary or find yourself with excess money to burn, stash it away — don’t spend it. The more money you can save, the more money you can invest in an account where it can grow.

Do the Research

Before you get started moving money around, put in some time to understand what you’re doing. Read up to know which IRA is a good choice, or what equities and bonds are best for your investment goals. Know what a brokerage account is, and also make sure that you talk with your significant other about retirement goals.

Randomly funneling money towards accounts that are not diversified is never a good idea. When in doubt, talk with a Quest Trust Company IRA specialist to make sure you’re clear about how your money can grow.

Take Advantage of Workplace Retirement Savings

If your company has a 401(k) matching program, make sure that you are enrolled. For example, if your company offers a 4% match, that means they will contribute 4% of your income if you do the same. That translates to 8% of your income going into a retirement account.

This is an easy way to start saving, and if you use it in conjunction with another account, you’ll be in good shape!

The Bottom Line

Make sure that investing is a priority in your life. If you want to have a comfortable retirement, it’s critical to get your money working for you. And with a little belt-tightening and a retirement investment strategy, you can do it!

When you’re ready to start learning how to invest for retirement, contact us to open a Quest account and we will be happy to help you!

Understanding Self-Directed Employer Plans and Which One Is Right For MY Business

Self-employment can be a blessing and a curse! On one hand, you control your own hours and you can proudly say that you are your own boss, but the privilege of being in charge also comes with responsibilities and the important matters always fall on your shoulders. The good news is that being self-employed in the world of IRAs is great! As a small business owner, you have plenty of employer plan options! From the common plans like the SEP IRA and the Simple IRA to the powerful Solo 401(k), there are plenty of options to save for retirement that fit each accountholder’s needs.

But how do you know which one is best for you?

As you begin researching all the accounts and their difference and similarities, you’ll want to examine exactly where you stand and what you’re aiming to accomplish. Take a moment and ask yourself…”How many people do I employ?”, “How much am I looking to contribute?”, and “How much management am I willing to put in?” There are no wrong answers, but they are all important factors to take into consideration when reviewing your options.

There are three main self-employed plans: The SEP IRA, the Simple IRA, and the Solo 401(k), all which are offered at Quest Trust Company. Each plan has something special to offer, so below we have listed the important information you should know about each one.

SEP IRA

The most common plan for self-employed individuals is the SEP IRA, or Simplified Employee Pension plan. Like the Traditional IRA, the plan allows for tax-deferred benefits for individuals who are self-employed, own a business, employ others, or earn freelance income. SEP IRA contributions are considered employer contributions, so the business makes them to you as the employee. SEP accounts are good accounts for business owners with one or just a few employees. Since you need to treat all employees the same as you, keep in mind that if you end up hiring people, qualified workers will receive the same percentage from your employer contribution as you do. With a 2020 contribution limit of up to $57,000 or up to 25% of your wages, this account is highly sought after for self-employed individuals who want to contribute a large portion to their retirement plan! Additionally, those contributions are tax-deductible, making this a great account for some!

SIMPLE IRA

The SIMPLE IRA is another plan, and there are many great similarities, and also differences, that make this another highly sought out self-directed employer plan. The taxes work the same way as a Traditional IRA account would, with the taxes being deferred, but contributions are able to be made by both employer and employee. Usually this plan is great for employers with about 100 or less employees. For contributions, the employer provides matching contributions up to 3% of the employee’s pay, not limited by any annual compensation limit OR make non-elective contributions equal to 2% of the employee’s compensation. One special characteristic that this plan has that the others don’t is it’s portability. When looking to move a SIMPLE IRA, employees must wait two years from the time they open the account before transferring those funds into another retirement plan. There may be a 25% early-distribution penalty if one were to withdraw money from a SIMPLE IRA during the two-year waiting period.

SOLO 401k

Lastly, one of the most powerful self-directed accounts is the Solo 401(k). Many people seek this account because of its many benefits, but it also has some downsides and things to be aware of. Something to note is that these plans are usually best suited to business owners who do not have any w-2 employees. As opposed to the other two plans, the Solo 401(k) boasts exemptions from certain UBIT tax, offers the ability to do loans to yourself, and even allows for checkbook control, arguably the most enticing. Additionally, the owner can make contributions as both employer and employee, allowing up to $57,000 in contributions, with a catch up contribution of $6,500 for those 50 or older. With so many positives, there will be negatives, too. One requirement is that the account holder has sole responsibility when it comes to tax reporting requirements; it’s important to make sure records are kept. Another important thing to note about the Solo 401(k) is that in order for it to be legitimized, the account holder must make a contribution in the year the account is opened. Once you have learned the benefits and dangers, deciding if the Solo 401(k) is right for you will be easy!

The main thing to understand and take away is that there is no one right employer plan. What works best for you may not be the most common, or the most well-known, but each employer plan has it’s unique benefits. And remember, one of the best things about employer plans is that you can use them for investing with your company, but if you want to create personal wealth for retirement, you can also have a Traditional IRA or a Roth IRA at the same time, allowing the best of both worlds! Once you have an idea of what you’re looking for, you’ll be able to measure which plan is the best fit for you, and if you ever need more information or help deciding which employer plan might be best for you, feel free to call a Quest Trust representative at 855-FUN-IRAs (855.386.47.27).

Want more information on how to invest with an employer plan? Check out this video about employer plans, who qualifies for them, and what it means for you and your small business.