Three Employer-Sponsored Retirement Plan Options

If you want to supply your employees with retirement benefits, you have three major options. You can offer 401(k), SEP IRA or SIMPLE IRA plans. 

Each solution provides different advantages, so it’s wise to learn the details on all three options and carefully compare them before making a choice.

Contributions

The SIMPLE IRA limits total yearly employee deposits to $19,000 or $22,000 after the age of 50. Both 401(k)s and SEP IRAs permit substantially larger contributions. Total deposits are capped at $57,000. Staff members over 50 years old can add more money to their retirement accounts as a “catch up”.

Both 401(k)s and SIMPLE IRAs permit employees to contribute funds whereas SEP IRAs do not provide this option. The employer is fully responsible for funding an SEP program. Companies can deposit amounts equaling as much as one-quarter of workers’ wages in SEP or 401(k) accounts.

Complexity

Both types of IRAs are simpler to establish and maintain than 401(k) plans. This saves time while reducing administrative costs. 

The process of creating an SEP program involves several steps, such as:

  • Producing a legal document.
  • Supplying said document to staff members.
  • Opening separate accounts for individual employees. 

Pre-written, ready-to-use agreements are available.

Qualifications

A company must have no more than 100 staff members to use a SIMPLE IRA. On the other hand, a SEP IRA would be used for sole-proprietors or those with few employees or employees that may be seasonal. The solo 401(k) plan requires an individual to have NO employees in any companies they may own.

Employees must earn a minimum of $5,000 per year in order to enroll in the SIMPLE accounts. The income requirement for SEP IRAs is only $600 and contingencies for eligibility can be made. For example, being over the age of 21 and having worked for the company for at least 3 of the last 5 years.

Similarities

All three options have penalties for people who withdraw money at less than 59.5 years of age. This fee equals one-tenth of the withdrawn amount. Federal taxes are usually deducted from withdrawals, even after a worker reaches retirement age. Nonetheless, employer-sponsored retirement plans are treated favorably by the IRS.

Please contact us to speak with a knowledgeable IRA Specialist to set up accounts or learn more about the above-mentioned options.

We serve clients promptly, offer a wide range of employee retirement solutions and waive many of the fees that competitors charge.

References

https://www.investopedia.com/ask/answers/102714/what-are-main-differences-between-simplified-employee-pension-sep-ira-and-simple-ira.asp

https://twocents.lifehacker.com/the-sep-ira-limit-is-increasing-in-2019-1830310964

https://www.fool.com/investing/what-is-a-sep-ira.aspx

https://www.investopedia.com/ask/answers/10/why-employer-matches-401k.asp

How to Roll Over a 401k to Roth IRA

When you leave a job where you had a 401k retirement plan, you’ll need to determine what you want to do with your account. You have the option to rollover your account to an IRA or individual retirement account. Many people prefer a Roth IRA to a traditional IRA. 

With a traditional IRA, you don’t pay taxes on your contributions, but you will pay taxes on your distributions in retirement. 

With a Roth IRA, you’ll make your deposits after taxes, but then you won’t need to pay taxes when you make your distributions. Here’s how to roll over your 401k to a Roth IRA.

Decide on an Account

Many financial institutions have Roth IRA options, so you’ll need to decide which one is best for you. Look at providers to see the fees they charge, the types of investments they offer, and the level of customer service they offer to their clients. 

Ideally, you’ll want an account that won’t charge you unnecessary fees, and that offers an investment option you are knowledgeable about. 

Ask for a Direct Rollover

When transferring your 401k to a Roth IRA, make sure to ask your 401k plan to give you a direct rollover. This means they will transfer the funds directly to your new account, instead of writing you a check directly that you would need to deposit. You will need the account information for your new IRA in order to do this. Most of the time, this will trigger a taxable event. 

Most 401k’s or employer sponsored plan contain pre-tax money. The amount you move to a Roth IRA will become taxable income for the year in which you made the conversion. From there on our, your earnings will grow tax free and ideally your distributions in retirement will be too. 

Pick your Investments

Once you have transferred the funds to your new account, it’s time to pick your investments. Different Custodians offer different opportunities, for example you may move funds to a Brokerage firm that offers mutual funds, however if you locate a “Self-Directed” custodian, you could use retirement funds for alternative assets such as Real Estate. 

If you’re unsure of which investments to choose, talk to an advisor to see what they’d recommend.

If you’re planning on rolling over your 401k to a Roth IRA, consider using Quest Trust Company to set up your new account. Quest offers truly self-directed IRAs with flexible investment options, as well as short processing times of less than 48 hours and minimal fees. Contact a Quest IRA specialist today to rollover your 401k to a Roth IRA.

How does a Solo 401k Work?

Solo 401k plans are employer-sponsored retirement accounts that offer self employed individuals with no common law employees other than a spouse the opportunity to establish a Profit Sharing Plan. 

Many companies offer solo 401k accounts to their employees, but not many people understand exactly how they work. 

Here’s what you need to know about your solo 401k before you get started:

You are the Employer and Employee of the Account

Although your solo 401k is an employer plan, it allows the business owner to be the Trustee of the plan, granting them access to make fiduciary decisions.

The Trustee will work with a financial institution to set up the account, and they will determine where to hold the funds, how much you contribute to the plan, and what investment to partake in. 

Rollover of previous accounts into the Solo 401k

You may have pre-existing 401k plans or IRA’s that you may want to consolidate inside of your Solo 401k. As long as those funds are pre-tax they can be rolled into the plan.  

If you are looking for a Roth Solo 401k, you may conduct “in plan Roth conversions” to convert your pre-tax funds to Roth. 

You are not able to move Roth IRA’s or previous Roth 401k’s into your solo 401k. However, You are able to contribute to a separate Roth IRA if you have one while continuing to make contributions to your Solo 401k. 

Taxes Advantages

By Contributing to your solo 401k and possibly to another Traditional IRA, you may be eligible to receive a tax deduction. This all depends on your modified AGI (adjusted gross income) in determining if you are eligible or not. 

Keep in mind that Solo 401k accounts are retirement accounts and non-qualified distributions are subject to penalty and taxation. The Solo 401k does have an option to take a loan out but it is limited to 50% of the account balance and cannot exceed $50,000.

If you’re looking to set up a retirement account, contact the experts at Quest Trust Company today. We offer Self-Directed IRAs and Solo 401k plans for individuals looking to invest into alternative assets. Our financial experts can help you find an account that makes sense for your financial needs.

Characteristics of the best IRA custodian

The internal revenue service (IRS) decree holds that Individual Retirement Accounts (IRAs) should have a custodian. The custodian is a financial institution that holds the account’s investments just for preservation. The custodian also ensures that all the government and IRS regulations are honored accordingly. While custodians are very easy to find, the problem is how to make the best choice. First, you have to decide the type of IRA you need and the type of investments you need to make with it. 

Traditional vs. Roth IRA 

Both accounts allow the money to grow free of income tax. The difference between the two is: 

  • In Traditional IRA, a tax deduction is made on the contributions from that year; this defers any tax payments until withdrawals are made years later. 
  • Whereas for Roth IRA, there is no tax break on the amount of money invested. In a nutshell, there are no taxes owed on the amount earned. 

Self-directed IRA

Whether Traditional or Roth, as an investor, you can choose to have your custodian manage the investments for you entirely or be self-directed. 

A self-directed IRA allows for expanded investment options. Although the name self-directed makes it seem like the owner has all the control, that’s not how it is. A Self-directed IRA will allow you to move away from the traditional publicly traded assets and utilize your money for alternative assets: Real Estate, Private companies. 

With this in mind, an investor, whether self-directed or not, would want to get the best custodian. 

The following are characteristics of the best IRA custodian. 

An Experienced Custodian – The best custodian for your self-directed IRA is a financial institution with significant experience in offering that service. Also, a custodian that focuses its efforts on providing self-directed IRA custodial services is more likely to serve your needs.  

Smooth Account Set-up – The process of setting up an IRA with a traditional custodian should be as brief and quick as setting up a self-directed IRA. Quest Trust Company, for example, provides easy downloads for new account information packages and forms on its website. 

Low-fees – Cost is one of the essential factors in business because it determines the total amount of profit expected. The most common fees for a custodian are the annual account maintenance fees, commissions, and loads for the mutual funds. All custodians do not charge the same. For example, maintenance fees are not a must. And if you are thinking of investing in mutual funds, it would be better to look for a custodian offering no-loads. 

Wide Selection – It would be best to have a more excellent variety of investment options, especially the individual stocks and bonds. 

Customer Service – It is imperative to have a knowledgeable person answering your calls and emails. It is very frustrating to receive incomplete or confusing information about your accounts. Therefore, while looking for a custodian, always vet the customer service. 

No Restrictions – As an investor, you must get a custodian that doesn’t limit your investment options. 

Education – Even if you are an experienced investor, you can benefit from an IRA custodian who provides you with educational opportunities. It would be wise to look for custodians who have relevant educational materials on their websites, such as in-person courses, live webinars, and overall educational resources.

Consolidation Savvy – For people having multiple IRA accounts, most custodians advise consolidation of the accounts into one single fund. Therefore it will be advisable to get a custodian who thoroughly understands the rules regarding consolidation.

After considering all of these characteristics, you should be able to make an informed decision about choosing the best custodian to help you set up and maintain your Self-directed IRA. 

At Quest Trust Company, we offer self-directed IRA accounts that place the customer at the heart of the decision-making process. Contact us today to discover how our expert staff can ease the administrative burden and help you to make the investment that is right for you.

Important criteria to consider when hiring an IRA custodian

If you are considering setting up an IRA, it is essential that you discuss significant criteria with an IRA specialist to determine whether a potential custodian is right for you. 

Here is some advice to help you have the most productive discussion:

Qualification status 

  • To set up an IRA, you are required by law to use a qualified custodian. 
  • It is therefore essential to check that the potential IRA custodian is certified, and you should ask to see some evidence of this status.

Experience 

  • You may have determined that the potential IRA custodian has the correct qualifications, but you should also find out how much experience they have. 
  • Newly qualified custodians will not have the same expertise as custodians who have dealt with numerous clients over a long-term period. 
  • Ask the potential custodian about their previous work to help decide whether they are the best fit for you.

Options for investment 

  • Custodians will offer different options for investment, so you must decide whether you want to invest using stocks and bonds or use alternative assets. 
  • This decision will affect the IRA custodian that you can choose, as not all will be confident with alternative investments.

Insurance 

  • Any financial account which you open must be insured to protect your money. 
  • Every company has a different threshold for insurance, so you should make sure to ask how much money their insurance covers. 
  • This insurance should at least cover the value of money that you expect to have in your account, but for optimum security, it is preferable for this to be exceeded. 

Cost 

  • You must use a custodian that meets your budget. 
  • The initial quote that custodians provide can quickly escalate in the event of hidden fees, so you should try to use a custodian with an honest and reliable reputation. 
  • This decision can help to avoid receiving a bill that you are unable to repay. 

Quest Trust Company is an innovative financial institution that offers IRAs, 401Ks, and other investment savings accounts. If you are looking for a reliable IRA custodian, contact one of our IRA specialists today!  Our expertise enables us to offer several investment options, all for a minimal fee.

The Pros and Cons of Opening Multiple IRAs

IRAs incentivize retirement preparations with tax advantages for investors. Most people are at least passingly familiar with some of the major IRA options, like Roth and Traditional IRAs or Individual 401ks, and each type offers different flexibilities and advantages. And while the average portfolio may only be stocked with an IRA provided by an employer, many smart investors have more than one IRA. 

The usual sweet spot is one IRA from an employer, and one additional Roth or Traditional IRA. But is this the right choice for everyone? Let’s explore some of the advantages and disadvantages of opening multiple IRAs. 

PROS 

Tax Diversification 

  • Different types of IRAs are taxed differently. By diversifying your portfolio with different types of IRAs, you can strategically increase your control over your finances. 
  • For example, Traditional IRAs can provide immediate tax deductions. 
  • This immediate deduction is often a great incentive for increased contribution to your IRA, which in turn can increase your earnings. 
  • Traditional IRAs also taxes investors on income used to fund the IRA only when they start withdrawing in retirement; this means that overall Traditional IRAs delay taxation on the investor. 
  • In contrast, Roth IRAs do not provide immediate tax deductions on income funding the IRA, but investors pay no taxes later on qualified distributions. 
  • By opening multiple accounts, investors have more control over tax distribution and diversity for greater control over personal finances. 

Flexibility on Withdrawals

  • Similarly, different types of IRAs have different rules about withdrawals before retirement. 
  • Traditional IRAs allow penalty-free, pre-retirement distributions under specific circumstances and compel account owners to take mandatory minimum distributions after turning 70 1/2 years old. 
  • Roth IRAs are somewhat more liquid and allow distribution of contributions (not earnings) anytime for any reason without taxes or penalties.
  • Deciding which option is best becomes obsolete if you have diversified your retirement planning with both. 

Potentially More Insurance Coverage

  • Your IRAs are stored in a brokerage or bank that, should it ever fail, is insured through SIPC or FDIC. 
  • Each of these typically imposes a cap on their coverage, however, and having one account or multiples of one type of account may limit you to just that capped coverage. 
  • Alternatively, bolstering your investments in more than one type of IRA can double your insurance coverage as each IRA may be considered as separate entities and therefore separately insured. 

Investment Diversification

  • Adding more investment opportunities to your portfolio diversifies your investments. 
  • You can opt for some to be professionally managed, or set online stock trading through a brokerage firm. 
  • Ultimately, diversified investments are more stable investments. 

Simplified Estate Planning

  • Retirement planning can add to your estate planning as well.
  • When opening an IRA, naming beneficiaries is part of the process.
  • And while you can name more than one beneficiary on an IRA, opening multiple IRAs enables you to distribute your beneficiaries as well, and prevent disputes over your estate. 
  • As you can see, there are many advantages to opening multiple IRAs. But that doesn’t mean there aren’t downsides to weigh into your decision.

CONS 

More Accounts Means More Work

  • For starters, more IRAs require more management. 
  • That means more tax forms, privacy notices, and policy changes. 
  • There is also a limit to what you can contribute to your IRAs, even when you have multiple IRAs. 
  • That means that opening more IRAs requires that you properly account to make sure you don’t exceed your overall contribution limit. 
  • There are no limits to the number of IRAs you have, but there are still limits to what you can contribute.

What is a Self-Directed IRA?

Whether it’s a Traditional IRA or a Roth IRA, a Self-Directed IRA (SDIRA), gives you all the tax advantages of an IRA with the freedom and flexibility of a wider array of investment instruments. The opportunity to take control of your financial future with greater asset diversification is one reason to invest in a self-directed IRA.

  • Regular IRAs allow investments in stocks, bonds, mutual funds, ETFs, and CDs. 
  • With a self-directed IRA, your investment options increase to include real estate, tax lien certificates, private market securities, promissory notes, and other investment opportunities. 
  • Building wealth with the tax advantages of an IRA while diversifying your retirement investment fund allows you to seek higher returns than a regular IRA. 
  • Higher yields and less volatility are another advantage of an SDIRA.

There are restrictions on what is permissible within IRS guidelines for an SDIRA. 

  • For example, you cannot borrow money from your SDIRA, sell the property to it, or enter into deals with relatives for it. 
  • You should also know that your IRA custodian cannot provide investment advice. 
  • Your IRA custodian can and should advise you of all prohibited transactions for your SDIRA.

The annual contribution limits are the same as a regular IRA: for those below the age of 50, $6000, and those older than 50, $7000. With the current and future problems with pensions, health care, Social Security, and other government programs, it is more important than ever to have a solid foundation for your financial future.

Quest Trust Company IRA Specialists can answer your questions about an SDIRA. Consider the benefits of an SDIRA with Quest Trust Company as your custodian: 

  • While most companies have only one option for your SDIRA, Quest Trust Company offers seven. 
  • Quest, there is no minimum cash balance. 
  • Transaction processing can exceed over two weeks with some companies; Quest processes transactions within 24-48 hours.

Quest offers the following for FREE (Other companies charge a fee for all of the following items):

  1. Expedited Services
  2. Processing Incoming Wires
  3. Processing Incoming Checks
  4. Roth Conversions
  5. Re-Characterizations
  6. Change Account Type Fee
  7. Certified Mail Fee
  8. Paper Statement Fee
  9. Distribution Processing
  10. Required Minimum Cash Balance (No minimum cash balance)

Contact a Quest IRA Specialist today! And discover how a self-directed IRA will fit into your retirement investment strategy. At Quest Trust Company, we help you take control of your retirement. 

Four Advantages of Opening Multiple IRA accounts

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People who have set up IRA accounts know that the federal government sets a cap on how much individuals can contribute to these accounts each year. Not many realize, however, that there is no limit to the amount of accounts that can be set up. While there are some disadvantages to doing so, there are also some obvious advantages you should be aware of before you decide whether to do it.

1. A More Diverse Investment Portfolio

Setting up multiple IRAs can be used as a way to diversify your portfolio. However, in order for your portfolio to be truly diversified, make sure you use your IRA for different investments. Set up one IRA to focus on bonds and one for real estate. If you are someone that likes to be flexible in what you invest in then setting up multiple IRA accounts is an option you should consider.

2. Your Estate Planning Process Will Be Easier

Believe it or not, setting up multiple IRAs will take some of the guesswork out of your estate planning process. Setting up one account with multiple beneficiaries will generate less paperwork, but creating multiple accounts and assigning each different beneficiaries clarifies who gets what. When the time comes, the administrator of your estate has fewer disputes to deal with and more time to do their duties.

3. More of your investments are covered by insurance

Certain investment accounts (including some IRAs) do have insurance coverage, but only up to a certain amount – $250,000 for FDIC-insured accounts and $500,000 for SIPC-insured accounts. Having multiple IRAs allows you to spread out your retirement funds and ensures coverage for more of them in case something goes wrong.

4. Taxes

When setting up multiple IRA accounts, you can choose different types that give you various tax advantages. Some allow for tax deductions they are paid into. Others allow the taxes to be paid off in advance, so the money is tax-free when it is distributed. If you split whatever you were going to invest in one account, you can put half into the traditional IRA with tax deductions when you withdraw and half in the Roth IRA which has tax free earnings and withdraws.

In conclusion, if you’re considering opening an IRA account, ask your financial advisor any questions you may have before making a decision. Start taking control, at Quest Trust Company we give you the information you need about different types of investments. Contact a Quest IRA specialist today to discuss your options and determine the best one for you and your needs.

Things You MUST Know About Investing in Real Estate IRAs

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Are you thinking about using your self-directed IRA to invest in real estate?

No matter your experience level, investing with a self-directed IRA calls for a little self-education. Quest Trust Company is here to help you in the process, and make sure you understand everything you need to get started.

You Cannot Benefit from the Property Before Retirement

When purchasing real estate using self-directed IRA funds, there are certain rules that come along with the property. You cannot live in the property or benefit personally from it in any way. This includes you, your family, and any other disqualified person such as service providers of the IRA. You also cannot earn personal compensation, so if you are a real estate agent, commissions aren’t allowed on the purchase or sale of these properties.

Due Diligence is a Must

As the account owner, you are personally responsible for all investment choices. Quest Trust can’t provide any tax, legal, or investment advice, but you can talk to a tax professional or investment advisor before you purchase property using your self-directed IRA. Quest Trust can help you after any relevant discussions you have with outside sources.

Do Not Work on the Property From Your Own Pocket

While mowing the grass, fixing up the interior, or doing general maintenance on your self-directed IRA real estate investment may seem tempting, be sure not to pay for it from anything other than your IRA funds. There are rules and regulations which state that funds from your IRA must be capable of paying for the expenses of the property. So, with that, it is important to ensure that your IRA has these needed funds before purchasing a property.

Know the Tax Rules

Like all other expenses of the investment, property taxes must also be paid using IRA funds. It is important to fill out tax documents correctly in order to ensure the proper funds are being used.

Why Quest?

All of these points are important to keep in mind when investing in real estate via a self-directed IRA, and we urge you to do your research. As always, Quest Trust Company is here for you. We work diligently to foster relationships with our clients and put you first. Unlike other companies, we offer three administrative options, giving you the most flexibility over your investments. We work hard to process transactions within 24-48 hours and offer multiple services for free. Feel free to contact a Quest IRA Specialist with any questions.