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Category: Accounts Can Be Self-Directed, Not Just Roth IRAs.

Growing Your Retirement by Investing in What You Know Best: Getting Back to the Basics

Posted on by Quest Trust Company
Estimated reading time: 3 minutes

Building wealth and saving enough for retirement can get overwhelming, but it doesn’t have to be. Most people think that they can only invest in publicly traded investments like stock, bonds, mutual funds, and CDs… but that isn’t true at all. With self-directed IRAs, you can diversify your investment portfolio into private assets like real estate, notes, land, oil and gas, and other private entities. The best part? It’s all on your terms. Self-directed IRAs truly allow people to take back control of their retirement savings and invest in assets that make sense to them. 

What is a Self-Directed IRA?

Self-directed IRA custodians make investing fun while putting the control back in your hands. A self-directed IRA is like any other IRA account; the term “self-directed” is just used to describe the type of account it is. The difference between a regular traditional IRA and a truly “self-directed” IRA is the types of assets they hold. With a self-directed IRA, you have the ability to choose from the broadest possible spectrum of investments, including those not traded on a stock exchange. You get to make all the decisions about your financial future. Most people find that they make more money and feel more confident when they are able to invest into things they know and understand. 

What Can an IRA Invest Into?

A self-directed IRA can be used to purchase almost any private asset. Common investments include single family real estate, rehab properties, commercial and multifamily real estate, private loans, performing and non-performing notes, oil and gas, land, startup companies, LLCs, and other private businesses. The list goes on! The rules say that as long as you do not invest into collectibles, like art or cars, and life insurance you are safe. 

What types of accounts can be self-directed?

Every custodian will offer different accounts. At Quest, we offer seven different types of retirement accounts that can be self-directed:

  • Traditional IRA – With the Traditional IRA, your earnings grow tax-deferred. Only pay taxes on your gains when you make withdrawals in retirement.
  • Roth IRA – The Roth IRA is a special retirement account where you have the ability to grow your profits completely tax-free.
  • SEP IRA – This self-directed tax-deferred account can be great for self-employed individuals, allowing a tax deduction for contributions made to a SEP IRA.
  • Simple IRA – A SIMPLE IRA is an employer-sponsored retirement plan designed specifically for small businesses, giving employees and employers a simple way to contribute and grow this account.
  • HSA – Get the best of both worlds with an HSA, with the ability to get tax-deductions on contributions and tax-free distributions for qualified medical expenses.
  • ESA – Education isn’t cheap, but with a Coverdell ESA you can earn tax-free distributions on countless qualified educational expenses as you self-directed this account.
  • Solo 401k – With the extra benefits that come with this account, like checkbook control and more freedoms, many people are eager to learn how to get started – just make sure you qualify.

Self-direction can be a great option for those looking to take more control of their financial future. If you are interested in learning more about self-directed IRAs or would like to get started, schedule a free consultation with an IRA specialist today by clicking here!

What Common Mistakes Can I Avoid When Setting up a Self-Directed IRA?

Posted on by Quest Trust Company
Estimated reading time: 3 minutes

Do you want to take more control over your retirement investment accounts? Have you been considering a self-directed IRA but worried about the rules?

You want to diversify your portfolio – outside of the traditional investment markets such as stocks and bonds. That’s where a self-directed IRA comes into play. It allows you to diversify while also keeping control of your investments yourself.

However, you need to make sure to avoid some common mistakes and pitfalls that plague many investors.

Read on to make sure that you don’t fall into these common pitfall traps.

A self-directed IRA allows you to invest in alternative financial investments. These can include real estate, promissory notes, oil, and gas, tax lien certificates and more.

However, instead of being administered by a bank or brokerage you instead manage the fund yourself.

Take Control Yourself

You know you need to save your money for your retirement. But it can be daunting, to say the least when you are responsible for it yourself. 

When it comes to your retirement, the only person most invested in your success is yourself. Therefore, it stands to reason that you should be the one to make the final decisions regarding your investments. However, without the correct information, you can make some unfortunate mistakes in your choices

Take control of your financial future and get started with a self-directed IRA today. Contact a Quest IRA specialist and find out how we can help you take control of your retirement.

Avoid the Pitfalls of a Self-directed IRA

When you take control of your financial future with a self-directed IRA, you need to ensure to avoid these common pitfalls.

  1. Prohibited transactions – these can be tricky to navigate so it’s important to know the rules.
  2. Due diligence – As mentioned, the rules can be tricky, and it’s imperative that with a self-directed IRA you make the decisions yourself. Always ensure you do proper due diligence before getting into any investment.
  3. Lack of liquidity – with a self-directed IRA minimum distributions are required at 72, however, the alternative investments allowed can be hard to sell. This lack of liquidity can be a common pitfall if you find yourself in an emergency and can’t get your money out of your self-directed IRA.
  4. Lack of transparency – when it comes to your exit strategy for selling your alternative investments all parties involved must be in agreement. You also must be fully transparent as to the valuation of your investments. Without this full transparency, you can fall into another common pitfall of self-directed IRAs.
  5. Lack of diversity – as most successful investors will tell you: diversity is key to successful investment accounts. However, with self-directed IRA funds, sometimes investors forget to ensure that it is fully diversified.

With a self-directed IRA, you need a trustee or custodian that specializes in these non-traditional investments. However, remember one of the common mistakes with self-directed IRA funds is the self-directed IRA owner not performing proper due diligence on investments.

So this trustee is simply a custodian of your account, not your adviser. You need to work with a company that understands the IRA rules and you can trust.

Stay Educated and Stay out of Trouble

We set up self-directed IRAs to help you prepare for your retirement. The most prepared people for retirement are those that are best educated.Keep continuing your education so you can fully prepare for the best retirement possible. For answers to your questions, contact us today. We can help you open a Quest account to get you started.

How to Set Up a Self Directed IRA: A 5 Step Guide

Posted on by Quest Trust Company
Estimated reading time: 3 minutes

Investing for retirement is something worth beginning as early as possible.

Current annual costs for someone over the age of 65 are approximately $50,000. So you’ll need a significant amount in your retirement account in order to live comfortably during this time.

One of the best ways to begin saving is a self-directed IRA, but not everyone knows how to go about it.

Not sure where to start? Don’t worry, we’ve got you covered.

Let’s take a look at everything you need to know about how to set up a self-directed IRA.

1. Select a Provider

In order to get started, you’ll need to work with a financial institution or firm that facilitates the opening of IRA accounts. When searching, though, there are some things you’ll want to keep in mind.

A provider with plenty of experience in this area that also offers a large range of investment opportunities is one you should prioritize. Additionally, your provider should also have experts willing to help you make the right investment decisions for your situation.

2. Choose What Type of IRA You Want to Open

Although you’ll be opening a self-directed IRA, you’ll still need to decide between a Roth IRA or traditional IRA.

Both allow you to invest in your retirement, but they have fairly different attributes. The best one for you will depend on your current finances and how much you plan to have invested by retirement.

You can learn more about the differences here.

3. Understand Your Investment Options

The main benefit that a self-directed IRA provides is the increased flexibility you’ll have when creating your investment portfolio. So, you’ll be able to fine-tune your investments to meet your long-term goals while remaining within your tolerated level of risk.

Working with a reputable provider will help you optimize your portfolio even further.

4. Apply For an Account

After you’ve decided who to work with and what type of IRA account you want to open, you’ll be required to complete an application.

You’ll need the following on hand in order for everything to go as quickly as possible:

  • Government ID
  • Social security number
  • Account information used for funding
  • Fee payment method
  • Info regarding your beneficiary

Depending on your provider, you may need to provide additional information.

5. Start Saving

After everything’s up and running, you can decide how you’d like to fund your account.

These come in three categories:

  1. Transfers: Funding your newly created IRA account from another IRA account
  2. Contributions: Sending money to your IRA account from a non-retirement account, such as from a checking or savings account
  3. Rollover: Transferring money to your IRA account from a different type of investment account, such as a 401K

Once you have money in your account, you can change how you’d like to contribute in the future if you need to. 

Understanding How to Set Up a Self-Directed IRA Can Seem Difficult

But it doesn’t have to be.

With the above information about how to set up a self-directed IRA in mind, you’ll be well on your way to financing your future as early as possible.

Want to learn more about how we can help? Feel free to get in touch with the team at Quest today to see what we can do.

Know the Difference: IRA Transfer vs. Rollover

Posted on by Quest Trust Company
Estimated reading time: 3 minutes

In order to live comfortably during retirement, you’ll need to start saving as soon as you can. Opening an IRA account is widely known as one of the most reliable ways to invest in your future.

There are two major ways to fund your IRA: transfers and rollovers.

Not everyone understands the difference between the two, though. Not sure where to start? Don’t worry, we’ve got you covered.

Let’s take a look at everything you need to know about IRA transfer vs rollover.

An IRA Transfer

When you move money from one IRA account to another, it’s known as a transfer. The same concept applies as when you move money between two separate checking accounts at different banks.

When you move funds from an IRA at one firm to an IRA account managed by another firm, the transfer isn’t reported to the IRS and no taxes are incurred. This is due to the fact that the money in the original IRA account never actually reached the account owner.

If the owner were to instead withdraw the funds and then reinvest them into another account, they would incur taxes upon withdrawal. There may even be tax penalties depending on why the money was taken out of the account.

An IRA Rollover

A rollover occurs when money is either moved from an IRA account to a retirement plan or from a retirement plan to an IRA account. When the money never reaches the account holder, it’s known as a direct rollover.

This type of rollover differs from a conventional transfer because it involves two different types of plans.

Although direct rollovers are reported to the IRS, they generally aren’t taxable since the money was never made payable to the account holder.

During an indirect rollover, the money is distributed to the account holder. But, it isn’t taxed if the money is reinvested in an IRA account within 60 days. This will allow the account funds to remain tax-deferred.

How Should I Prepare For One?

Above all else, it’s important to understand that a rollover will likely take a couple of weeks to complete. This is crucial for those handling indirect rollovers to keep in mind, as penalties occur after 60 days from when the funds are distributed to the account holder.

Additionally, most institutions will require you to fill out paperwork in order to begin the process. Some providers may have specific requirements regarding rollovers that may become a factor when reallocating your funds.

Knowing The Difference Between IRA Transfer Vs Rollover Can Seem Difficult

But it doesn’t have to be.

With the above information about an IRA transfer vs rollover in mind, you’ll be well on your way toward putting money away toward a peaceful retirement.

Want to learn more about how we can help? Feel free to get in touch with us today to see what we can do.

How does a Solo 401k Work?

Posted on by Quest Trust Company
Estimated reading time: 2 minutes

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.

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

Posted on by Quest Trust Company
Estimated reading time: 3 minutes

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

Posted on by Quest Trust Company
Estimated reading time: 2 minutes

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.

How to Decide Between a Traditional Account or Roth Account For Your Self-Directed IRA

Posted on by questadmin

Estimated reading time: 3 minutesSelf-Directed IRADeciding to open a self-directed IRA with a custodian such as Quest Trust Company is a prudent financial choice. With the expanded range of investment choices that you have with a self-directed IRA (as compared to an IRA with a traditional custodian or a 401(k) at work), you’ll have the greatest opportunity to invest in the precise asset types you desire.

But even after you’ve decided to open a self-directed account, you still have another choice to make – whether to form that account as a traditional IRA or as a Roth IRA.

It’s a bit of an oversimplification, but essentially you’re faced with a choice. You can choose to save taxes now, or potentially save much more money later.

With respect to traditional IRAs, many retirement savers are initially drawn to them because they can provide a current year tax deduction for the contributions you make, depending on your income level and whether you’re covered by a retirement plan at work.

For single individuals who are covered by a plan at work for 2021, IRA contributions are fully deductible for a MAGI of up to $66,000 (with a gradual deductibility phase out between $66,000 and $76,000).

While the current year tax deduction might seem irresistible, it is important to weigh it against the value you could derive from a self-directed IRA that’s set up as a Roth account. Roth IRAs allow you to take distributions from your account during retirement on a completely tax-free basis. With a traditional IRA, all distributions are taxable. It can be hard to give up a financial benefit this year for one that you might not realize for several decades, but the difference can be significant, and many retirement savers choose Roth accounts precisely for this reason.

In addition, it’s important to take a look at what you would do with the funds you save from a current year tax deduction to a traditional self-directed IRA. For example, if you invest your tax savings wisely, particularly if it’s in an investment that doesn’t throw off dividends or income or otherwise create a new ongoing tax burden, then that’s a good thing. Similarly, if you use that additional current cash flow to help pay for your child’s college expenses so that you don’t have to take out any funds to do so, then that might be a good financial decision.

But if you instead use the money for entertainment or something else that doesn’t provide you or your family with any lasting economic value, then you may wish to reconsider the true value of that tax deduction, and make your contribution to a Roth self-directed IRA instead.

Possible Advantages Of Having More Than One Self-Directed IRA

Posted on by questadmin

Estimated reading time: 3 minutesYou’ll often hear the financial advice that you can save time and money by rolling over your various IRAs and 401(k)s from previous employers into a single self-directed IRA. Doing so can help you better manage your retirement nest egg, potentially save on expenses, and provide you with the opportunity to invest in high-priced assets.

And there’s certainly a great deal of truth to that advice. It can often seem difficult to stay completely on top of a single retirement account, let alone multiple accounts.

But that doesn’t mean that there aren’t circumstances in which you can gain an advantage for yourself by having multiple self-directed IRAs. Let’s take a look at some of those potential advantages.

Better Management of Individual Assets

Because having a self-directed IRA with a custodian such as Quest Trust Company permits you to invest in unique individual assets such as real estate and private equity and debt instruments, there may be instances where you want to hold such assets in a separate account.

For example, if you own a multi-family apartment complex in a self-directed IRA, it might be easier to monitor or evaluate investment performance of that asset if there are no other holdings in the account. After all, consider how the income and expenses for this type of investment, as well as your management obligations, is likely to be significantly more complicated than holding a simple stock investment.

One Roth Self-Directed IRA and One Traditional Self-Directed IRA

Individuals who have variable levels of income from year to year, including those who frequently change jobs, may find themselves able to make deductible contributions to a traditional self-directed IRA in some years, while being ineligible to make such deductible contributions in other years.

These non-deductible contributions could certainly be made to the individual’s traditional self-directed IRA, but a better approach might be to set up a separate Roth self-directed IRA in order to receive those contributions. Because a Roth self-directed IRA has unique advantages over traditional accounts, you may wish to know of these advantages yourself while still having the potential to make deductible contributions to a traditional account.

Further Advantages of a Roth Self-Directed IRA

Having a separate Roth self-directed IRA as well as a traditional account can help you better achieve your various long-term financial goals better than simply having a single IRA. For example, a Roth self-directed IRA is not subject to the IRS rules on required minimum distributions, so if you have two accounts – one Roth account and one traditional cash account – you can use the traditional account to fund your living expenses once you reach retirement, while continuing to let your Roth account grow on a tax-free basis for as long as you choose.

Furthermore, Roth accounts provide a greater level of flexibility when it comes to estate planning, and some individuals use their Roth accounts as a quick and easy way to ensure their loved ones are taken care of after they pass.

Ultimately the decision of whether to have more than one self-directed IRA will depend on your particular financial situation. But many individuals have found that it can be quite valuable.