5 Tips for Finding an Ideal Self-Directed IRA Account Custodian

Money.

You work hard for it and you are careful about who you trust with it. You have decided to open a self-directed IRA account.

Who is the best person to handle your investments? What questions should you be asking? How can you find them?

Keep reading for five tips on how to choose the right IRA custodian to handle your investment account: 

1. Customer Service

Finding an IRA custodian that provides excellent customer service is vital for your business relationship as they handle your investments for years to come. Their availability in communication is an area to focus on when evaluating their customer service. If you have a question or want to make a change, you never want to question whether they will be available to provide assistance. 

An IRA custodian that provides a high level of customer service will walk you through the information and make sure that you understand everything about each investment.

2. Look at Cost and Fees

When searching for an IRA custodian, it is important to consider the cost and fees that are associated with the service. On our website, we have a general fee schedule that breaks down the fees. 

You are already entrusting the custodian with your investments, so you should be aware of what they are gaining in return. 

3. Experience

Knowledge is a powerful thing, especially when money is involved. You want to look for an IRA custodian that has experience working in the investment areas that you are interested in. For example, if you are looking to invest in real estate, you are going to want a custodian that is familiar with the terminology of real estate. You may be new to this but you want to make sure that they are guiding you with previous experience to make the best financial choices with your investments. 

Knowing which areas you would like to invest in prior to starting your search will help narrow down which person would be best to work with.

4. Frequency of Transactions

Depending on your investment strategy, you could be holding on to assets for a long period of time or potentially trade several within a week. Working with an IRA custodian that can properly handle multiple transactions and has the systems in place complete those transactions is important. 

Simply put, you want to be sure that the IRA custodian that you pick can handle the workload and is flexible to changes within your investment strategy. 

5. Ask Questions to an IRA Custodian

Think of it as an interview. Once you have found someone that you think you would like to work with, ask them questions prior to committing to a partnership. 

Asking about what investment areas they specialize in and how accessible they are for future communication will help you see if they are a match for you. 

Call Us Today!

Please contact a Quest IRA specialist today and we can help answer any questions you may have. We look forward to working with you and serving as your IRA custodian for years to come!

How the CARES Act Relates to Retirement Accounts

The COVID-19 crisis fundamentally changed society in many ways and spread through the world like a wildfire. While much of the United States stayed home in isolation, the federal government passed the Coronavirus Aid, Relief and Economic Security Act to help relieve the burden on families, businesses, and local governments.

The CARES Act is expansive and contains many provisions, but what does that mean for the financial wellbeing of your family? We’ll examine some aspects of the Act that impact your family finances and the pros and cons of taking advantage of these temporary measures.

You’ll be able to make educated decisions and determine which are best for you.

CARES Act and Individual Retirement Accounts

With the country in isolation, many people were left with jobs temporarily suspended or laid off from work. The CARES Act allows people having a hardship to remove up to $100,000 from their IRA without the usual 10 percent penalty.

The money is considered taxable for that year. You can pay the amount back into the account over the next three years. If you have a 401(k), then you can take an increased loan amount of $100,000 or all your 401(k) if the amount is less than that. Before the legislation, the maximum loan amount was $50,000.

Federal Tax Deadline Extended

Coronavirus hit the country in the prime of tax season, leaving many people either unable to have their taxes done or without the income to pay off their tax debts. Many of the accountants and tax preparation companies shut down because of the coronavirus.

The government understood that this would be a problem and extended the tax filing deadline from April 15 to July 15, 2020. It allows an extension of an IRA holder to contribute for the 2019 tax year.

Take Advantage if You Can

If your family is financially disrupted because of the COVID-19 epidemic, then take advantage of the CARES Act stipulations. You don’t need to take the full amount from your 401(k) or IRA unless it is needed.

These are still designed for your retirement, so if you do take money out try to have it repaid so it doesn’t negatively impact your portfolio or your retirement plans. You’ve spent years building it up, so keep your future safe.If you want more information on the CARES Act or IRAs, then contact a Quest IRA specialist.

3 tips for reducing taxes on your retirement income

Minimizing taxes for future retirement income is not always easy, but it is very important for putting together an effective retirement plan. For example, although many retirees expect to pay lower tax rates on their IRA or Individual 401k after they have left the workforce, their tax rates may still go up due to social security taxes and medicare taxes. 

Follow these three steps to reduce taxes on your retirement income and get the most out of retirement savings:

1. Learn about income tax advantages

Despite what many people think, certain types of income are taxed differently from others. A few examples include:

  • Capital gains
  • Real Estate investments
  • Earned income
  • Unearned income

If you buy a physical asset such as gold or an investment property, your tax rates for capital gains will be much lower than it would be for an ordinary earned income. 

Also, if you sell a home you’ve lived in for the past five years, you may qualify to have a large portion of your capital gains excluded from your taxes (double the amount if you are filing jointly as a married couple) by completing a 1031 exchange.

2. Create a budget to keep your expenses low

In order to reduce your taxes, you will want to stay in low tax brackets as much as you possibly can. One of the best ways to do this is to keep your expenses low so you won’t have to withdraw much from your retirement accounts. 

Create a budget to manage your annual spending and withdrawal habits, and if possible, move to a region with lower taxes and a lower cost of living.

3. Convert your traditional IRA or 401k into a Roth IRA

Another strategy is to convert your current retirement account into a Roth IRA. By doing this and paying taxes up-front when your marginal tax bracket is still low, you will reduce the amount of tax you will eventually pay in the future and you will be eligible for tax-free distributions after retirement.

Contact a Quest IRA Specialist today to learn more ways you can reduce taxes on your retirement or register for one of our events.

How Real Estate Syndication Works

Real estate syndication is a strategy that investors can use to pool their resources and invest in large real estate projects. 

If you’re looking to invest in large real estate projects but don’t have the funds to get a project started on your own, syndication is a great strategy that you can use to get your foot in the door. 

Here’s what you need to know about real estate syndication:

What is real estate syndication?

Syndication is the process of pooling resources with other investors to invest in a large property or real estate project, such as an apartment complex or a commercial retail development. 

Syndication is not only the process of pooling financial resources, but also intellectual resources in order to make smart decisions about the properties you invest in. In a syndicated relationship, one party invests the money, while another party invests time and labor to find the property and run the day to day operations. 

The party investing the labor in the property is called the sponsor. Sponsors still invest some money, but the amount is much lower than what the investors put in. However, they still get a fair share of the profit. Syndicated partnerships are usually structured as an LLC.

Why get involved in real estate syndication?

Syndication has become much easier in recent years, as investors and sponsors can easily connect online. Crowdfunding has made real estate syndication much more accessible for the average person, because you can contribute relatively small amounts of money to a real estate project that is interesting to you, and reap the benefits accordingly. 

If you have a property that you are interested in, syndication is one of the best ways to get the project off the ground quickly. 

Real estate is a great investment, as it can serve as an excellent source of passive income for a very long time, and doesn’t fluctuate financially the same way that many other types of investments do.

Interested in real estate investing? Talk to the expert team at Quest Trust Company. Quest offers flexible investment account options designed to meet the needs of modern investors.

Questions you should ask before opening multiple IRA accounts

Image Credit: 401kcalculator.org

Many people wonder if you can open multiple IRA accounts, and the short answer is yes, it is something that is legally allowed. However, just because it is legal doesn’t necessarily mean that it’s something you should do.

There are many important things to take into consideration when opening multiple IRA accounts. Here are the key questions you should ask yourself before setting up multiple IRAs.

Do you need the tax benefits of both a traditional and Roth IRA account?

  • This is the main reason why people opt to open multiple IRA accounts. Traditional IRA accounts give you tax breaks for deposits during the year, but Roth IRAs give you tax breaks in the year that you withdraw them. 
  • There are advantages and disadvantages to using both types of IRAs. You might opt to use a traditional IRA for a personal benefit today (such as a tax deduction). 
  • On the other hand, use a Roth IRA for a long-term investments to capture the benefit when you truly retire and withdraw tax free money. 

Are you willing to manage the paperwork for two IRAs?

  • While multiple IRAs can come with tax benefits, they can also come with a lot of extra paperwork. 
  • This means higher chances of making mistakes with your paperwork or taxes, or missing important deadlines that could negatively affect your account’s growth. 
  • Before you get set up with multiple IRAs, be realistic with yourself and decide if you are willing to spend the extra time and energy to manage two accounts.

Do you have a good financial institution on your side?

When opening any financial account, it’s important to work with providers who are going to meet your needs.

Is their staff friendly, knowledgeable, and available to help when you have problems? Do they offer the investment options that you need? Doing your research before choosing an account provider is crucial.

After pondering all the pros and cons of opening multiple IRA accounts vs. one IRA account, you will be ready to make the best choice for you and your financial future. 

If you are interested in opening an IRA account, contact Quest Trust Company today! QTC offers completely self-directed IRAs with flexible investment options and fast processing times. This gives you more control over the way you manage your money and plan for the future.

Three Employer-Sponsored Retirement Plan Options

Image credit: InvestmentZen

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

Avoiding the Conflicts of Interest of 401(k)s with a Self-Directed IRA

401(k)s with a Self-Directed IRAIn recent weeks there has been new talk about introducing stronger investor protections and providing increased opportunities within the area of retirement savings. One of the biggest areas of concern has been a new focus on how individual investors fare in their employer-sponsored 401(k) plans.

Surprisingly, under current law there is no legal obligation for a 401(k) plan provider to put the interests of plan participants before their own. This type of duty is known as a “fiduciary” duty, and without this protection retirement savers may be fighting an uphill battle in trying to build their nest eggs.

Perhaps the biggest conflict is the limited choices that you are provided with a 401(k). For example, you might assume that the 401(k) provider selects the available investments based on their quality or suitability for the 401(k) plan participants. But in fact, in most cases, the fund company provides a fee to the 401(k) provider in order to be listed. And in many cases, the fund company can charge additional fees to the plan participants (often in the form of so-called “12b‑1” fees).

These types of fees, which relate to marketing and preferential treatment within the fund, do not benefit the 401(k) plan participants in any way, and essentially represent an extra charge that lowers their overall return. This is permitted under current law because 401(k) plan providers do not owe a legal “fiduciary” duty to the plan participants.

In contrast, a self-directed IRA custodian such as Quest Trust Company cannot market any specific investment funds or opportunities to the account holders. Self-directed IRA account owners make all the investment choices, and have the widest possible range of investment opportunities available to them. Rather than being limited to a handful of mutual fund choices (with the potentially inflated fees we discussed above), a self-directed IRA account holder can choose whatever fund or other investment asset is legally permitted under the IRS regulations.

You’re only given one choice when it comes to 401(k) plans – the one that your employer offers, or none at all.

Within the plan that your employer chooses to provide, you’re likely to note a significant limitation in your investment choices. For example, you may only have a single choice when it comes to a particular type of neutral fund or investment philosophy. And forget about being able to select individual stocks yourself; that won’t be available in an employer-provided 401(k).

A self-directed IRA is better because you have the maximum freedom in choosing where you want your retirement funds to be invested.

Finally, with a 401(k) plan, you are essentially locked into the choices and account custodian that your employer provides. There’s no incentive for your plan provider to offer the best service or even to offer a range of fee options, because they know you can’t take your 401(k) business elsewhere. The plan they provide is your only 401(k) option, and you generally can’t move your funds to a different retirement investment vehicle.

But when you do change jobs, you’ll certainly want to use that as an opportunity to roll any 401(k) account you have into a new self-directed IRA.

Using A Self-Directed IRA To Move Beyond Stocks And Mutual Funds

Setting up a new self-directed IRA with a custodian such as Quest Trust Company can be one of the best ways to retirement planning efforts to a host of new investing options. With a self-directed IRA you be able to move beyond investments in stocks and mutual funds, and explore asset classes that might be a much better fit to your investing personality and needs.

First things first – there’s not necessarily anything wrong with incorporating stocks and mutual funds into your retirement portfolio. These types of investments can be a great cornerstone for many individuals’ retirement portfolios.

The potential issues arise in that there are other individuals who want additional options – options to target other investing markets and potentially secure a much higher level of return for themselves. Let’s take a closer look at the self-directed IRA.

Real Estate. There are a variety of methods through which you can invest in real estate with your self-directed IRA. The most accessible type of real estate investment is probably the single family home. These may be the easiest real estate investments to manage yourself (assuming that you don’t want to incur the expenses of an outside professional).

But you can also use your self-directed IRA to invest in multifamily properties, farmland, commercial real estate, undeveloped land, or any other type of real estate interests that a non-retirement account investor has available to them.

Private Investments. The IRS rules governing IRAs also authorize account holders to invest in non-public assets such as private equity and private debt instruments. Depending on the nature of the investment, you may need to meet the definition of a “qualified investor”, but even non-qualified individuals can still make other types of nonpublic investments, including loans and mortgages.

One of the biggest challenges may simply be acquainting yourself with being able to find these types of opportunities. This is one area of investing in which the Internet can provide you with a great deal of useful information. A number of different private investment exchanges and clearing houses have come online in the past few years, and these can help you find suitable private investment opportunities for your self-directed IRA.

Precious Metals. In seeking to diversify beyond stocks and mutual funds, retirement savers often seek out investment asset classes that have a low correlation to the stock market – meaning that their prices do not frequently move in the same direction or to the same extent as publicly traded stocks. Precious metals can be a great way to gain this type of investment exposure.

Direct physical investments in precious metals are authorized with a self-directed IRA, provided that you have a third-party custodian actually hold the physical metals on your behalf. Among those who use their self-directed IRAs to invest in precious metals, the most common types of metals are gold, silver, platinum and palladium.

These types of non-stock investments are sometimes unfamiliar to retirement savers, so always be sure to do your research and understand the risks of any investment fully before committing any funds.

Steps For Rolling Over Existing Accounts Into A Self-Directed IRA

As people work their way through one or more careers, and have several (if not dozens) of jobs, they can easily accumulate multiple retirement accounts. They generally come in the form of 401(k) accounts at past employers, traditional IRAs, Roth IRAs, and perhaps even employer pension plans (although this last type of benefit is becoming increasingly rare).

Unfortunately, it can often become quite an administrative burden to manage so many different accounts. For some individuals it can be challenging enough trying to come up with the time to review the monthly or quarterly statements from a single retirement account. Trying to do so for a half-dozen or more accounts can quickly become nearly impossible.

The best way to clear up this administrative nightmare is to roll over all of your existing accounts, including accounts from prior employers, into a single self-directed IRA. Here are the steps for doing so.

1. Identify Your Target Account.
If you don’t currently have a self-directed IRA, then you’ll need to set one up before you go any further. Requesting a rollover from a prior 401(k) or a current IRA, but not having a target account in place, can result in the other plan administrator sending you a check for your account balance. If you don’t deposit this check quickly enough, the IRS may consider it a taxable distribution, and the cost to you could be significant.

The better path forward is to have your self-directed IRA already in place, and request that your current custodian or plan administrator send your rollover proceeds directly to the new account.

2. Contact Your Prior and Current Account Administrators. Once you have a self-directed IRA set up, it’s time to contact each of your current and prior account custodians and administrators. When attempting a rollover of a 401(k) from a prior employer, you may need to begin the process by contacting the employer first; and if you don’t know where to begin, start with the HR or benefits department.

Have all the information regarding your new account ready to give the prior administrators, and be prepared to follow-up if the rollover doesn’t occur within the timeframe they specify. Some plans will give you the choice of liquidating your account and doing a rollover of the proceeds, or rolling over the investment positions themselves, while other plans will automatically liquidate your investments and do a rollover of cash. If you have the choice, make sure to do your research on what’s best for you.

3. Consider Your Next Investment Steps. As you may already know, self-directed IRAs provide significantly more investment options than traditional IRAs or 401(k)s, so it might seem a little overwhelming. You can use a self-directed IRA to invest in real estate, certain types of precious metals, private companies, private mortgages, and many other investment classes that almost certainly weren’t available with your prior retirement plans.

Exploring investment possibilities while the rollovers are occurring will give you the confidence to proceed with your retirement investing plan once the rollover funds are in your new account.

Types of alternative investments to consider for your self-directed IRA

Having the flexibility to consider alternative types of investments is one of a self-directed IRA’s most attractive features. IRA custodians such as Quest Trust Company allow individual savers to invest in the full range of investments that are legally permitted, rather than just the publically traded stocks and bonds that other IRA custodians limit their customers to.
>purchase investment-grade
But even within the range of permissible investments, some types of alternative investments aren’t quite as widely known as the others.

Other types of real estate. When you think of using your self-directed IRA to invest in real estate, you may generally think of investing in residential and commercial properties. But you can also use your self-directed IRA to invest in farmland, industrial properties and even undeveloped pieces of land.

Tax liens. Another type of alternative investment relating to real estate is tax liens. A tax lien is a lien (a secured debt that’s similar to a mortgage) that a local government entity places on a piece of residential or commercial real estate when the owner does not pay his or her taxes. The local governments often sell these liens to investors who earn above-market interest rates until the property owner pays his or her taxes.

Mortgage loans. You can participate in the real estate market without ever buying a piece of property. The IRA rules permit you to make private mortgage loans, which means that you can take the role in a real estate transaction that a bank or finance company would normally fill. If you decide to pursue this investment opportunity, you’ll want to make sure that you have adequate legal advisers to assist you. These types of transactions are highly technical and you’ll want to be comfortable that your funds are adequately secured by the underlying property.

Precious metals. Self-directed IRAs can be used to purchase investment-grade precious metals. This can be an attractive option if you are looking for a reliable inflation hedge in your portfolio. But hobbyists take note: The authorization to use IRA funds to invest in precious metals does not include investments in collectible coins.

Franchises. One reason that franchises are a particularly suitable investment for self-directed IRAs is that the total investment amount is relatively clear at the outset (unlike investing in some other types of businesses, where there can be unexpected needs for additional capital).

Whenever you’re considering investing in some of these lesser known assets, there are a few basic caveats to keep in mind. First, make sure that you understand and plan for any illiquidity that’s inherent with the investment. Second, be sure to understand the prohibitions on self-dealing and follow them. Finally — and this guidance should apply to any investment you make, whether in your self-directed IRA or otherwise — make sure to conduct an appropriate level of due diligence before committing any of your funds. If you don’t understand the investment you’re considering, then you probably shouldn’t be investing in it.

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Quest Trust Company helps change people’s lives and financial future through self-directed IRA investment education. Quest Trust Company helps people invest in what they know best and build their financial future on their own terms.