How To Maximize Your Investments Funds With Partnering

It’s no secret that people choose self-directed IRAs because of the many benefits they offer, like reducing taxes and providing options for alternative investments. They are also very powerful accounts for real estate investors, as they allow the possibility for utilizing creative investment strategies. 

What is Partnering? 

One of the great features of self-directed IRAs is that they don’t have to be used only on their own. Self-directed IRAs can work together by using a beneficial strategy called “partnering”. This term is used when one entity (or more) and an IRA come together to put up the funds for an investment. 

In this strategy, all parties have a vested percentage of ownership in the deal. When doing this, the percentage of ownership is decided at the beginning of the investment and must remain the same throughout the life of the investment. This means that any profit the investment receives is returned based on this percentage of ownership. Additionally, the IRA would be responsible for its percentage of any expense associated with the investment, too. 

Who does Partnering work for?

Partnering is a great strategy for a variety of people. For investors who are just getting started, partnering allows the chance to participate. Even having only a small percentage of a total investment allows a small dollar IRA to gradually grow. Oftentimes, Coverdell Education Savings Accounts (ESAs) and other small dollar accounts will partner together to purchase an investment. 

There are also many occasions when a good deal is available, but an investor doesn’t have enough money in their IRA to make up the total cost of the purchase. Being able to partner with another IRA account they may have or another money partner provides the ability to purchase the investment after all. 

It is also beneficial for account holders that have multiple IRAs. For those who want to utilize all of their accounts at once, this is a great way to have all accounts involved in one deal. Over all, partnering provides more possibilities for accounts to be involved in deals when they may not have been able to before.  

Who can your IRA Partner with?

Not only can one or multiple accounts be partnered together on investments, self-directed IRAs can also partner with personal funds. When partnering with personal funds, your IRA has a percentage of ownership and you do, too. This is not to be confused with doing a transaction with yourself. Keep in mind that when partnering with a disqualified person, the percentage of ownership is decided at the time of purchase and must remain the same throughout the life of the investment.

Knowing what you can do is great, but it’s even more important to know what you and your IRA can and cannot do. If you haven’t heard about disqualified people and prohibited transactions, it’s important to know these terms to better understand how partnering is different. Disqualified people are certain people or entities that your IRA is not allowed to transact business with, and it’s important to understand who they are before entering into any deals to avoid doing a prohibited transaction. 

Being able to combine funds with other investors and IRAs opens a door to a whole new world of possibilities, and understanding how to partner accounts will allow more investors to grow their accounts faster. For more information on partnering or how to maximize all of your self-directed IRAs, give an IRA Specialist a call at 855-FUN-IRAs (855.386.4727).

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. 

Qualifying for an IRA: Three Things You Need to Know

Whether you have just entered the work force or have been earning income for years, saving for retirement should be one of the top priorities in your monthly budget. Even teens can start a retirement account with the money from their first job. In fact, it is highly encouraged since they will simultaneously have fewer expenses, making it easier than it ever will be to contribute. While it’s never too early to start saving, there is such a thing as too late and missing the opportunity to grow your assets for retirement. Listed below are a few restrictions for IRA accounts to help you determine if you qualify to start one now.

  1. To open an IRA, you do have to earn taxable income. The contribution limits for both traditional IRAs and Roth IRAs are $5,500 per year (or $6,500 if you are older than 50). However, if you earn less than the maximum contribution limit, you can only contribute up to your full income amount. Since Roth IRAs grow tax free, there are income limitations for contribution qualification related to these accounts. The amount you are able to contribute will start to decrease, or phase out, if you earn more than $118,000 as a single person or $186,000 as a couple filing jointly. If you earn more than $133,000 as a single person or $196,000 as a couple filing jointly, you are no longer eligible to contribute to a Roth IRA, but still have the option to contribute to a traditional IRA given that you don’t also have a workplace retirement plan (401K).
  2. As long as you’re earning income, your age won’t disqualify you from contributing to a traditional IRA until you’ve reached 70 ½. You may start taking distributions at age 59 ½ without an early withdrawal penalty, and minimum required distributions (RMDs) are required by age 70 ½. RMDs are calculated based on the amount of funds in your account and your life expectancy. Roth IRAs are not subject to RMDs, account holders are allowed to contribute up to any age, and distributions may be taken at any time without penalty as long as the account has been open for at least five years or the account holder has turned 59 ½, whichever comes first.
  3. Marital Status. As soon as you say, “I do,” you’re entitled to a whole host of benefits—one being spousal IRAs. If you don’t personally earn income, but your spouse does, you can still open an IRA in your own name using your spouse’s income for contributions. In this way, you as a couple can effectively double the maximum contribution limit by contributing $5,500 to each of your accounts every year, given that your spouse earns at least $11,000 per year. This advantage can help your assets grow tremendously for retirement.

Given the importance of saving for retirement and the incredible resource IRAs are for growing your assets, it’s a puzzle as to why there aren’t more restrictions placed on these types of accounts. If you meet the requirements for either a traditional or Roth IRA, talk to your financial advisor today about setting up an account. Your future self thanks you.