Plan Types and Information

  • Why Bother With a Non-Deductible IRA?

    Many individuals first become interested in opening an Individual Retirement Account when they learn that in some situations their annual contributions are deductible on their current year’s tax return. It’s important to understand that the term “deductible IRA” refers to traditional IRAs, as opposed to the Roth IRA structure. But it’s also important to know that the actual deductibility will depend on a number of factors, and that not all contributions to a traditional IRA are deductible. The concept of a “non-deductible IRA” therefore refers to Roth IRAs and sometimes to traditional IRAs. Here are some reasons why, despite the non-deductibility of contributions to those accounts, they can still be an extremely valuable part of your retirement planning. To Save on Taxes Later in Life If you have a Roth IRA, the withdrawals you make in retirement will not be subject to federal income tax. Since the majority of your IRA account balance will likely be comprised of earnings, the total value of tax savings down the road will far exceed the value you’d obtain from having your contributions be tax deductible. To Avoid the Rules on Required Minimum Distributions Once you reach age 72, you must begin taking annual distributions from a traditional IRA, ...

  • Can You Start Self-Directed IRAs for Your Children?

    One question that often comes up when a new parent begins considering their child’s future finances is whether they can start an IRA on their behalf. Since the time value of money is perhaps the greatest power of a self-directed IRA, it’s easy to see why parents would try to make this happen. Unfortunately, IRAs can only be opened by individuals for themselves, with money they earn themselves. Let’s take a closer look. The Earned Income Requirement. The biggest hurdle you’ll have to overcome when you work to help your child opened a self-directed IRA is the IRS requirement of earned income. In order to make any contribution to an IRA, the account holder must have earned income of at least that amount for the year of contribution. So, for example, let’s consider an individual who has accumulated a significant amount of assets in their non-retirement accounts and now lives off of their investment earnings. Even if that individual earns $100,000 per year in investment income, they won’t be able to make contributions to an IRA unless they have earned income as well. Earned income is essentially what someone receives in exchange for their time or services. This might be salary or ...

  • First Time Using Your Self-Directed IRA to Invest in Private Stock?

    As you look to use your self-directed IRA to broaden your investment holdings, you may come across opportunities to invest in private stock. Among many individuals, this type of investment is among the least familiar, and potentially most confusing. Let’s take a look at some of the basics about using your self-directed IRA to invest in private stock. Let’s first make sure we understand what we’re talking about when we use the term “private stock.” In the broadest possible terms, shares of “stock” in a company represent ownership interests in that company. Depending on the type of stock the company chooses to issue, this ownership interest may include the right to receive dividends (should the company choose to pay them), to vote on certain matters relating to the company’s governance, and to receive money back in the event of a company liquidation (if there are funds available after repaying company debts and other obligations). Most individuals who are saving for retirement are familiar with stocks in the context of “publicly traded” securities. Publicly traded stocks on those in which buyers and sellers conduct their transactions on a public stock exchange, subject to the rules and requirements of the exchange. In the United ...

  • Will This Be The First Year You’re Subject To Required Minimum Distributions On Your Self-Directed IRA?

    While the U.S. government wants to encourage individuals to save for retirement by providing tax incentives for using the IRA structure, they don’t want to forego the tax revenue entirely. For example, you’ll potentially be able to take a tax deduction for contributions you make to a traditional self-directed IRA, and won’t have to pay taxes on any investment growth or gains that occur and remain within your account, but you will have to pay taxes when you make withdrawals from your account. One important way that the IRS rules manage the balance between allowing tax breaks for retirement savings, but requiring that the account holder pays taxes at some point, is the set of rules on required minimum distributions (“RMDs”). RMD Basics. Once a traditional IRA account owner reaches age 72, they must begin taking distributions from their account, and those distributions must meet certain minimum amounts that are calculated based on the account balance and the account holder’s age. The account holder must withdraw the calculated minimum amount from their account every year. It’s important to note that because the required minimum distribution amounts are only minimums, the account holder is always free to take larger or more frequent distributions from ...

  • Setting up Your Future with an Inherited IRA

    Whether you have just inherited an IRA from your spouse, parent, or grandparent, an IRA beneficiary can potentially stand to earn thousands, if not millions, on these investments. Inherited IRAs have a few more rules than an IRA you set up yourself, so you can’t just accept the money and forget about it until your own retirement. Depending on the type of IRA you inherit and what you decide to do with it, you may owe taxes on the money or be required to take a yearly required minimum distribution (RMD). Find out more about Inherited IRA rules and how to use them to grow your own retirement below. What is an Inherited IRA? When a family member dies and leaves an IRA to a beneficiary, one option for the money is to transfer it to an Inherited IRA. Inherited IRAs have the advantage of allowing immediate penalty-free access to money. However, any distributions on a traditional IRA are subject to taxation and may bump you up to a higher tax bracket since it counts as income. Distributions from an Inherited Roth IRA are not subject to tax as long as the original account holder had the account for at least five ...

  • When is it appropriate to do a direct rollover from 401K to Roth IRA?

    Roth IRA rollovers are familiar with individuals who have separated from their employers. In most cases, this is due to reasons such as retirement or acquiring a new job. Usually, IRA acts as investment vehicles that allow for healthy retirement income planning and investment options. There are many options for doing 401(k). However, it is crucial that one submits to the possibilities provided by the plan administrator. The rollover is always a smart decision but is subject to professional guidance in cases of investment options and tax exposure. Factors affecting the choice of a rollover • Will the rollover result in the imposition of taxes? • How is it easier to manage the money after the rollover? • What will be the investment options? • How economical is the rollover? 401(k) to Roth IRA It is considered appropriate to do a rollover when an individual is retiring or is changing to a new job. Nevertheless, few employers allow for in-service rollovers when an individual is still in employment. In this case, Roth IRAs provide the participants with benefits that boost their retirement plans. The rollover allows the participants to convert their retirement plans into other ...

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

    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 ...

  • Top Five End-of-the-Year Tax Moves

    While you generally have until the tax filing deadline to make tax your contributions to your individual retirement accounts, nearly all other tax moves you make must be accomplished prior to December 31 of this year. With that in mind, here are the top five end of the year tax moves you may wish to consider. Contribute to Your IRA. Maximizing your contributions each year to your self-directed IRA is one of the most valuable things you can do each and every year from a tax perspective. Even if the contributions to your IRA are not deductible, the long-term tax savings can be quite significant. Make this a priority. Match Investment Losses With Gains. As you know, the tax burden arising from investment gains will depend on how long you held the investment as well as your level of income. Individuals who are facing relatively high tax bills from short-term investment gains can offset (either in part or entirely) those gains by realizing a corresponding investment loss. If you are already considering selling a losing investment, you may therefore want to close the sale prior to December 31, 2013, in order to reduce your tax bill. Consider All Available Deductions. Be sure you ...

  • Smart Tips for Using Your Self-Directed IRA for Estate Planning

    Estate planning is one of those things that virtually no one enjoys, but that just about everyone could be spending a little more time on. The term “estate planning” usually brings to mind a person’s last will and testament, and perhaps a power of attorney and one or more trusts that they may have created. But consider for a moment when you fill out paperwork for practically any type of financial account, including investment accounts, IRAs, a 401(k) you may have at work, bank CDs and even checking accounts. Every one of these is going to ask you to name a beneficiary to your account. And naming beneficiaries on your financial accounts, including your self-directed IRA, is a form of estate planning. The Differences Between Traditional and Roth Accounts Let’s first briefly cover how a Roth self-directed IRA is generally regarded as being much more powerful for estate planning purposes than a traditional self-directed IRA. One of the biggest differences between Roth and traditional accounts is that Roth accounts are not subject to the rules on required minimum distributions. For traditional accounts, these rules state that once the account holder reaches age 72, they must begin taking certain minimum distributions from their account each ...

  • What Type of Real Estate Investment Makes the Most Sense For Your Self-Directed IRA?

    Having the ability to invest in real estate with your self-directed IRA means that you have important and powerful alternatives to simply investing in stocks, bonds and mutual funds, as you would be limited to with a traditional IRA custodian. But even if you’re interested in using your self-directed IRA to invest in real estate, you’ve still got choices to make in terms of the types of real estate to purchase. You can make this determination by asking yourself what are your investment goals and objectives. Long-Term Growth If your primary investment objective is long-term growth, then there are a number of different types of real estate investments you can make. Some of the most common types of investment real estate, including single-family and multifamily residential properties, are certainly capable of generating healthy long-term returns. As with any type of investment, though, you still need to do your research in order to be as confident as possible that you are choosing the right property. Real estate investments as a whole will increase in value over time, but that’s not always the case. And just take a look at what’s happened to real estate prices across the country over the last 20 or 30 years. ...

  • Getting Started with a Self-Directed IRA When Your Nest Egg is Small

    While you might have been initially drawn to a self-directed IRA because of the investment flexibility that this account type offers when compared to IRAs with traditional custodians (e.g., being able to invest in precious metals, and real estate, and private companies), it’s true in all areas of investing that not every investment option is suitable for every investor. Make the Maximum Contributions Every Year. When your self-directed IRA balance is relatively small, it’s vital that you make the maximum contributions to your account each and every year. If you fail to make the maximum contribution in any given tax year (the contribution limit for the 2021 filing period is $6,000, with an additional $1,000 allowed for taxpayers age 50 and over), you won’t be able to make up for that lost opportunity in later years. Once the chance to make the maximum deposit has passed, it’s gone forever. Consider Maintaining Two Accounts. It’s a common misconception, but taxpayers are not limited to having a single IRA. In fact, it can be good practice to maintain both a traditional self-directed IRA as well as a Roth self-directed IRA, and then decide where to make your deposits each year based on the tax ...

  • Retiring on a Self-Directed IRA

    Saving for retirement is one of the most important actions one can take to secure their future. Sadly, many Americans haven’t saved a single dollar, or are grossly behind in their yearly savings goals. If this describes you, don’t worry. There are ways to jumpstart your retirement savings and catch up to where you need to be to live comfortably in retirement. One way to do this is with a self-directed IRA. What is a Self-Directed IRA? These types of accounts are just like traditional retirement savings accounts but include many more options for the investment savvy. Usually, Traditional and Roth IRAs, as well as 401ks, offer a few investment options to choose from—mostly stocks, mutual funds, and bonds. These accounts rarely allow investors to invest outside of what the various plans offer. Self-directed IRAs allow open investing in real estate, gold, private placements, trust deeds, and single-member LLCs. This gives savers more flexibility with their investments, which can help increase their funds more rapidly depending on the type of investment. Benefits of a Self-Directed IRA Besides offering more investments for savers to choose from, self-directed IRAs are also great vehicles for people to invest in what they know. If a saver has ...

  • 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 ...

  • Is Your IRA a Truly “Self-Directed IRA”?

    Owning a self-directed IRA may be the key to your comfortable retirement. A self-directed IRA is an individual retirement account where the owner directs all investments. There is no legal distinction between a self-directed IRA and any other IRA, except that with a truly self-directed IRA, the account agreement allows the broadest possible spectrum of investments. There are several types of accounts that can be self-directed, such as Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, 401K, Coverdell Education Savings Account and the Health Savings Account. You can use your self-directed IRA to purchase almost anything such as assets like real estate, promissory notes, non-publicly traded company stock, limited partnerships, tax liens, LLCs and much more. Self-directed IRAs allow you to invest in what you know best! Quest Trust Company has been the leader in self-directed IRAs for over a decade. Open an account us and take control of your financial future.

  • Best Places to Retire Around the Globe

    While the absolute numbers are still relatively small, an increasing number of retirees are choosing to retire outside of the United States. It might seem extreme, but there can be some significant advantages to retiring abroad. The basic costs of living (rent and food) are much less in most parts of the world, health care costs are often vastly lower than in the U.S., and retirees can choose whatever climate or geography suits their personal tastes.   In addition, some foreign countries have seized upon this trend and now welcome retirees in a number of different ways, including allowing U.S. retirees to buy into their national healthcare plans for a minimal fee, and by making it easier for them to rent or purchase property.   Here are some of the best (and most popular) places to retire around the globe:   Central America. Unfortunately, many soon-to-be retirees still equate much of Central America with the political instability and turmoil that existed there in the 1970’s and 1980’s. But while there are still some areas of the region that require a bit of extra caution when visiting, Central America contains a number of countries that are safe, affordable, and very welcoming to U.S. retirees. Among the most ...

  • Take Full Advantage of These Valuable Tax Benefits in Your Self-Directed IRA

    If you are new to individual retirement accounts, you may not be familiar with all of the key tax breaks that they can provide. Current Year Deductions for Contributions. The tax benefit that most taxpayers (even those who haven’t yet set up an IRA for themselves) are familiar with is the possibility that the annual contributions they make to their account can be deducted from their tax return for the year of contribution. There are some limitations and requirements in order to receive this deduction. Depending on your modified adjusted gross income (MAGI), the contributions you make to a traditional IRA may be tax deductible. Individuals who are not covered by a workplace retirement plan are eligible for full tax deductibility of their contributions, regardless of their MAGI. 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). For married couples filing jointly, where the contributing spouse is covered by a workplace plan, full deductibility is available for a MAGI of $105,000 (with a deductibility phase out between $105,000 and $125,000). Tax Deferred Investment Growth Perhaps the bigger tax benefit of a self-directed ...

  • How To Save On Investment And Management Expenses Next Year With Your Self-Directed IRA

    There’s no such thing as a free lunch, or so goes the saying. Even in the context of saving money for retirement, you’re going to have to pay for the various services provided by your account custodian. Even if you have a “free” account at a discount brokerage, you’ll still pay transaction based fees for buying and selling investments. All other things being equal, the more you spend on fees, the smaller your retirement nest egg will be. With that in mind, here are some suggestions for saving on investment and management expenses next year in your self-directed IRA. Understand Your Baseline. The first step to reducing the fees you pay is to understand what you are paying now. Take a look at your prior account statements and identify all the fees and expenses you paid. It may be helpful to separate them out by investment type, so that you can compare appropriate categories going forward. It’s important to acknowledge and understand that when it comes to fees and expenses, you’ll need to pay more in order to get a higher level of involvement and service. The fees and commissions applicable to buying a few hundred shares of a publicly traded stock are ...

  • Is Now the Time to Invest in Oil & Gas with Your Self-Directed IRA?

    You’ve likely noticed that gas prices are at the lowest level in years. And while that’s great news for consumers when they fill up their tanks, it’s presented investors in the oil and gas industries with a number of challenges. For example, lower energy prices mean that the development of new natural gas extraction operations has come to a virtual standstill in the northern Midwest and western plains — areas which just a few years ago were experiencing explosive growth in these types of activities. In fact, some developers are choosing to “cap” or decommission their natural gas wells until market conditions improve. As with any disfavored asset class, you’re faced with the question of whether the low price merely represents a buying opportunity, or if it means there’s been a fundamental shift in the circumstances surrounding that asset. Let’s examine some of the factors surrounding that discussion. Types of Assets. There are a wide range of investment options in the oil and gas industries. You can make direct investments (in the form of equity or debt) in exploration and development companies, as well as in the companies responsible for refining the petroleum products. It’s important to note that various types of investment in ...

  • 2021 Contribution Limits: IRAs and Beyond

    Self-Directed IRAs (SDIRAs) are some of the best vehicles when it comes to receiving tax benefits when we use them to invest. Common ways to fund an IRA are by using methods such as rollovers from previous employers or transfers from other IRA accounts, but personal contributions may also be another way to help these accounts grow.  Although it would be nice to contribute as much as we wanted, every year specific limitations are set by the IRS on how much money individuals can contribute to their IRAs and other tax advantaged retirement accounts. Now that the 2021 contribution limits have been announced, we’ve listed those limits here for you.   Personal Plans Traditional and Roth IRAs are both considered personal plans, and often follow similar guidelines on their limits. For 2021, the contribution limits for Traditional and Roth IRAs remained the same as 2020, but some other accounts did see an increase.  The 2021 contribution limit for Traditional and Roth IRAs is $6,000, with a catch –up contribution of $1,000 ($7,000 total) if you’re age 50 or older. In order to make a contribution to these two accounts, one must have “earned income”. Earned income includes money such as wages, salaries, bonuses, commissions and ...

  • Four Advantages of Opening Multiple IRA accounts

    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 ...

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