Retirement Archives - Quest Trust Company

Questions you should ask before opening multiple IRA accounts

Posted on December 30, 2019August 14, 2020 by Quest Trust Company

Estimated reading time: 2 minutes

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.

Retiring on a Self-Directed IRA

Posted on February 12, 2018April 13, 2021 by Juan Deshon

Estimated reading time: 3 minutesSaving 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 experience in the tech field or knows real estate trends, they can invest in these niches rather than whatever their traditional plan offers. Experts in their field, or even hobbyists, can take a more calculated risk with a self-directed IRA, and be rewarded handsomely when their investments grow. Some types of self-directed investments are inherently riskier, and therefore should only counted on for retirement by a saver who knows the market well. After all, self-directed IRAs are the responsibility of the plan owner and the plan owner alone, and a risky investment can have a major impact on future funds, whether positive or negative.

Retirement Saving Tips

Whether you choose the self-directed route or stick with traditional investment options, there are a few guidelines to follow for ensuring you will have enough saved at retirement for your needs.

Save early, save often. The best way to save for retirement is to start saving as early as possible and to be consistent with it. If you didn’t start saving until later in life, you can contribute extra to your retirement accounts at age 50 with catch-up contributions. The easiest way to save is to use direct deposits from your paycheck, that way there is no temptation to use the money for other expenses while it’s sitting in your account.

Take earlier risks, play safe later. Younger savers can invest in riskier options that have a larger growth potential because they have more time to benefit from the growth and ride out the lows should the market take a dip. Savers closer to retirement should play it safe and focus on keeping the money they’ve already earned through their accounts. Typically, the closer to retirement you get, the more you will want to transfer your stock investments to mutual funds and bonds. You still want to see growth at this stage, but it may be slower than the riskier investments.

Make short-term and long-term goals. What is it you plan on doing with your retirement and saving money? Are you saving for a vacation, a new car, or college? Can any of your accounts help you with these goals? When you have a future goal to work toward, it becomes much easier to save the $50 or $100 extra a month in the present.

Record expenses and make a budget. If you’re nearing retirement, you will need to know exactly how much you will need per month and year to keep your standard of living the same. Record every expense, down to the last cup of coffee, to determine just how much you will need in retirement. Multiply the yearly number by how long you plan on living after retiring, and factor in extra medical expenses. You should reach this minimum savings goal before even thinking about turning in your two weeks’ notice at your place of employment.

Retirement Plans for Teachers

Posted on October 12, 2017December 23, 2020 by Juan Deshon

Estimated reading time: 2 minutesTypically, when thinking about retirement plans most people think of the 401(k) plan, and while this is one of the mostly widely used plans, some people do not have that as an available option. Teachers, for example, use a different plan called the 403(b). While these plans are fairly similar, there a few key differences that should be addressed as these differences may result in monetary losses. Below we will cover a variety of options that teachers have to explore in order to maximize their retirement funds.

One of the main differences between a 401(k) and 403(b) is the investment options that are available. When making investments within the 403(b) plan there is a limited number of mutual fund options available, most of the investment opportunities are annuities offered by insurance companies. While annuities may seem like a good investment, they may end up having fees that could end up costing you a lot of money so make sure to research before investing. Because teachers often don’t have the same investing options that others would normally get with a 401(k), it is important to understand how to invest your money in order to get the best amount from your retirement plan.

When talking about retirement, it is important to address the two different kinds of Independent Retirement Accounts (IRAs): Traditional IRAs and Roth IRAs. Both of these offer tax advantages for retirees depending on where they stand financially. For Traditional IRAs, you may be able to receive a tax deduction that is equal to your contribution with some possible limitations and the amount is taxed after withdrawal, whereas a Roth IRA is funded with contributions that are after-tax. However, with Roth IRAs your income must be under a certain amount in order to contribute. For teachers, it would most likely be more beneficial to invest in a Roth IRA in order to get the most from their investment.

Another option that teachers have is the ability to add to their maximum allowable contribution after a certain amount of time working. This works to the advantage of teachers because they are able to contribute more to the retirement plan in addition to catch-up provisions that are allowed. It is important to make sure that your employer included this in your retirement plan if that is an option that you want available. This generally will only apply after the employee has been working for 15 years with the same employer.

As a teacher, there are many options available in order to customize your retirement plan and make it the most beneficial to you. Because pensions for teachers are no longer a reliable source for retirement, being aware of all your options is imperative to maximizing your retirement fund, and knowing where and how to invest your money will make retiring an easy transition for when the time comes.

Types of Small Business Retirement Plans

Posted on October 11, 2017August 13, 2019 by Juan Deshon

Estimated reading time: 3 minutesIt seems as though a new era is emerging; small businesses are growing more and more popular and soon they are going to be the staple of modern culture. As more and more people move away from large companies it becomes increasingly more important to educate yourself on the steps you should be taking in order to ensure a comfortable future for yourself and, if you’re a business owner, a comfortable future for your employees. Below are a few retirement options to compare that are best suited to small businesses.

One option for a small business, more specifically in-home businesses that consist solely of the owner and possibly a spouse, would be the Solo 401K Plan. Similar to other retirement plans both the employer and the employee contribute however, because you are self-employed you hold both titles. Salary deferrals up to a certain amount are available as well as up to 25% of compensation of the annual maximum.

Another good option for small business is the Simplified Employee Pension Plan (SEP). While SEP’s can be used by any businesses, it is recommended for small businesses. This plan is different than some of the other traditional ones in the fact that it is fully funded by the employer and they contribute up to 25% of an employee’s eligible compensation a year. Each eligible employee must have an individual SEP account and will receive the same percentage of compensation as all other eligible employees.

Many small business that have 100 employees or less will often have a Savings Incentive Match Plan for Employees (Simple IRA). In order to be eligible for this plan the employer must have earned at least $5000 in the previous year, and any employees must have earned at least $5000 from the employer for the two prior years and have an expected $5000 income in the upcoming year. This plan is funded by employer and employee. Employers have a mandatory matching contribution and employees can potentially have 100% compensation if the amount is less than the set total.

One of the most well-known retirement plans is the 401K Plan. This plan allows for the employee to make personal contributions up to a certain amount per year however, one of the main advantage of this plan is that there are many investment options open such as mutual funds. Employers are also required to make a certain percentage of matching contributions. This plan is more popular with some of the bigger companies and corporations.

If you are considering getting involved with a small business or opening up your own, it is important to stay informed and know all your options. These are some of the more established retirement plans in place currently, but if none of these seem like the right fit for you, don’t be discouraged, there are still other viable options. There may be some other slight variations of the plans covered above that are more catered towards what you want. Prepare for your future and decide what you’re looking for now so that when the time comes for you to retire, you’ll be able to transition with ease.

Are You Diversifying Your Retirement Investments Across Your Various Accounts?

Posted on September 4, 2015December 6, 2018 by Ingrid Chavez

Estimated reading time: 3 minutesWhen you hear the term “retirement account,” chances are you think primarily of IRAs and 401(k)s. And those two retirement savings and investment vehicles can and should certainly form the foundation of a solid retirement plan. Self-directed IRAs are a particularly powerful type of retirement savings account because you’re permitted to invest in the full range of legally permitted asset types, rather than being limited by traditional IRA custodians (such as banks and discount brokerages), or face the even more restricted with your investment choices in a 401(k).

But in a very real sense, virtually any investment or savings account can serve as a retirement account. Because you’re limited in how much money you can contribute each year to the tax-advantaged retirement accounts we mentioned above, you’re going to need to use those other account types if you’re able to save more than those specified amounts.

As you accumulate multiple accounts that you’re using to build a retirement nest egg, you’ll need to consider your investment diversification not on an account by account basis, but across all accounts considered together.

For example, let’s say you’ve determined that at present your optimal investment mix is something along the lines of 40% U.S. large cap stocks, 25% real estate investments, 25% debt instruments, and 10% cash. Your goal should not be to achieve that mix of investments within each IRA or other retirement account you have, but that you achieve it across the aggregate of your savings.

Let’s further assume that your primary retirement savings account is a self-directed IRA with a custodian such as Quest Trust Company, and that you also have a small 401(k) account at work, and a taxable investment account that’ve decided to use to help fund your retirement. Because you can’t use those smaller accounts to invest directly in real estate, and your options for choosing debt investments may be limited to publicly traded corporate and government bonds, the real estate and debt investments will likely be the primary focus of your self-directed IRA.

In fact, when you look at each of your accounts, they may appear to be woefully imbalanced and overly focused in a particular asset type. But taken as a whole, you can be confident that you’re on the right track in meeting your diversification goals.

Given the limitations of traditional IRAs and 401(k)s, it might be prudent to use those accounts primarily for the “plain vanilla” investments such as large cap publicly traded stocks, government bonds and the like. If you only have a self-directed IRA you can certainly use it to make such investments, but as your nest egg grows and you direct more retirement savings to different accounts, you can use this diversification technique to meet your targets.

As you save, be sure to to prioritize your contributions to those accounts for which you’ll receive the greatest benefit. Many investors choose to maintain both a traditional self-directed IRA as well as a Roth self-directed IRA in order to ensure they can make the best choice for their contributions each year.

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

Posted on March 16, 2015April 21, 2021 by questadmin

Estimated reading time: 2 minutesThere’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 always going to be significantly less than those for purchasing a piece of real estate or for other custodial services..

Leverage Your Own Investment Experience. The next step is to examine those areas in which you have substantive investing experience, and consider cutting back on the professional management. For example, if you’ve accumulated years of experience investing in real estate with your taxable accounts, then you may be able to use that knowledge and expertise to make real estate investments with your self-directed IRA.

Professional Management. On the other side of the equation (and this might seem a bit counterintuitive), bringing in outside help in the form of professional active management might end up being a positive for your account. A professional may be able to identify areas in which your investment is underperforming and thereby increase your overall net return even once their fees are taken into account.

Evaluate Your Options. You may have more options available to you when it comes to structuring the fees you pay than you realize. For example, some custodians let you choose how your annual account maintenance fee is structured, whether that’s based on a percentage of your total account value, an asset by asset calculation, or even a flat fee that covers your account as well as the accounts of your immediate family members. You may be able to save a significant amount of money next year simply by going back to your custodian’s fee schedule and taking another look.

Real Estate Alternatives to Consider With Your Self-Directed IRA

Posted on October 16, 2014December 9, 2019 by questadmin

Estimated reading time: 3 minutesReal estate is one of more popular types of investments that retirement savers choose to make with their self-directed IRAs. Custodians who offer self-directed IRAs, such as Quest Trust Company, offer also offer many other legally permissible investment options that other traditional custodians don’t offer, and which allow individuals the greatest ability to apply their investment philosophy to their retirement savings.

But direct investments in real estate might not be suitable for every investor’s portfolio or investment profile. The key to successful investing, whether in the context of retirement planning or even general investing, is to find investments that are suited to your needs and to your investment approach. Fortunately, there are ways to invest in real estate assets without having to meet the administrative challenges of managing direct real estate holdings.

Real Estate Investment Trusts

One option for being able to invest in real estate without having to take on the risk of doing so directly is to purchase shares of a so-called “real estate investment trust” or “REIT.”

A real estate investment trust is an actively managed trust that itself invests in real estate of various types. Shares of a REIT are generally traded like shares of stock on the major exchanges, and are typically structured and operated in order to receive special tax breaks – the most significant of these is that the REIT offers high yield to investors. For investors who are looking for current income, REITs can be a great option.

Most REITs are generally focused on a particular type of property (such as multifamily residential or commercial) or real estate mortgages. But there are some REITs that try to take a hybrid approach by investing in physical properties as well as mortgages.

Investment Partnerships

Another way to invest in real estate without having to hold property is to commit a portion of your portfolio to private investment partnerships that focus on real estate investments. Rather than buying property yourself, you are buying an interest in an investment partnership that has its own administrative structure in place to buy and manage properties for the benefit of the partners. While you’ll likely be able to vote on many of the decisions he investment partnership makes, it’s vitally important that you are comfortable with the partnership management structure that’s in place.

Private Mortgage Lending

When you have a self-directed IRA you can make private loans as another type of investment. You’ll probably want to stick to loans that are secured (meaning that the borrower pledges collateral that you can take possession of if they fail to meet their loan repayment obligations), and this includes private mortgage lending. This is yet another way to invest in real estate alternative investments and not have to hold property directly.

The term “real estate” means a specific type of investment class to many investors. There are in fact a wide range of real estate alternatives that you can invest in with your self-directed IRA without having to hold property directly.

Top Five End-of-the-Year Tax Moves

Posted on July 24, 2014April 13, 2021 by questadmin

Estimated reading time: 3 minutesWhile 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 are considering all available tax reductions before you file your return. You are likely to already be familiar with most or all of the deductions, but consulting with a tax advisor (or even using a trustworthy piece of tax filing software) may reveal a valuable deduction or two that you didn’t previously know about. In some cases the availability of a tax break – such as a Federal Renewable Energy Tax Credit – may require you to spend additional money, but if it’s a purchase you would likely be making in the near future anyway, the effective cost will be reduced when you can receive a tax deduction in connection with that expenditure.
Consider Deferring Income. If you own your own business or are self-employed as a consultant, you may be able to save money on your 2020 taxes by deferring income into 2021. Your ability to do this will depend upon the method of accounting you use for your business (i.e., cash basis accounting versus accrual). By delaying sending out invoices, or even pushing forward the due dates of those invoices, you may be able to shrink your 2020 tax bill. (Of course, you’ll still have to pay the appropriate tax as part of your 2021 return.)
Start Planning for 2021. There’s no reason to wait until January 1 to begin planning your 2021 tax strategy. A starting point may be considering the areas in which you fell short during the past year. For example, if you aren’t going to be able to make the maximum allowable contribution to your self-directed IRA this year, be sure to readjust your budget so that you’ll be able to do so next year.

Finally, pay attention to changes to the tax laws that occur or are likely to occur at the end of the year (or in 2014, but are made retroactive in effect) and verify that the assumptions on which you’ve based your 2020 tax planning remain valid.

Make a Brighter Future For Your Children and Grandchildren by Appointing a Trust as Your Self-Directed IRA Beneficiary

Posted on June 17, 2014October 31, 2018 by questadmin

Estimated reading time: 3 minutesYou start saving for retirement to take care of yourself, right? You want to be sure that you and your spouse can lead a safe and comfortable lifestyle during your retirement years, so you set up a self-directed IRA and make regular contributions to it.

But at the core of all saving and investment there’s likely to be something more. After all, most people tend to keep saving and investing even after they’ve got enough to take care of themselves. We often tend to continue making these savings and investment choices because we’re thinking beyond ourselves and our spouses. We believe that with our saving we can benefit our children and our grandchildren, and help to improve their lives.

One technique that some individuals use is to name a trust as the beneficiary of their self-directed IRA. The rationale, particularly if they’ve already created the trust for other reasons, is that a trust beneficiary will give them greater control over their estate planning. Here are some considerations for appointing a trust as the beneficiary of your self-directed IRA.

Make Sure You Have a Good Reason. Naming a trust as a beneficiary will invariably involve more paperwork and planning than simply naming the individuals that you want to benefit. In order to make this worthwhile, you want to be sure that you have a good reason for involving a trust in the handling and administration of your self-directed IRA assets.

One common reason to name a trust as your beneficiary is if you don’t want your children or grandchildren to have immediate access to the full amount of your bequest. Trusts can be set up to make periodic payments to the individuals you name, or to make payments for certain purposes (such as college expenses, for example), so that the assets you’ve accumulated will not be spent too quickly.

Spousal Beneficiaries. The spousal rollover provisions for IRAs are very powerful, and the benefits are might outweigh anything you may be able to gain from having your spouse benefit from a trust that’s the beneficiary of your self-directed IRA. Speak with your advisor to weigh the pros and cons of each approach.

The Trust Beneficiaries. Avoid the temptation to make your structure overly complicated. For example, the beneficiaries of your trust should be individuals, and not additional trusts or charities. For example, any structure that has the effect of completely avoiding taxes that would otherwise be due is likely to draw examination from the IRA.

Furthermore, if there are a number of different children and grandchildren that you wish to help, consider setting up separate trusts for each individual. You may also wish to divide your self-directed IRA into multiple accounts in order to feed into each of these trusts. The costs can be a disincentive for some, but don’t be tempted to try to cut corners. Getting something wrong can have immediate and significant negative tax implications.

Top Tax Friendly States for Retirees

Posted on April 28, 2014December 10, 2018 by questadmin

Estimated reading time: 3 minutesMany retirees are surprised to find that tax planning remains important even when they enter retirement. In fact, for some retirees who have stopped working full time, giving sufficient thought to their tax situation is at least as important (and in some respects is even more important) than it was prior to retiring.

This is due in no small part to the fact that different states have sometimes vastly different methods for taxing (or not taxing) their residents. Because these differences can sometimes be significant, it’s not uncommon for perspective or near retirees to move to a new state largely for reasons of saving on their annual tax bill. With that in mind, here is a brief survey of some of the most tax friendly states for retirees.

Alaska: Alaska has long been a preferred retirement destination for some, in large measure because the state imposes no tax whatsoever on individual income, and has no statewide sales or use taxes.

Florida, Nevada, South Dakota, Texas, Washington and Wyoming: As with Alaska, these six states are currently free from income tax. These states do, however, have sales taxes of varying levels.

Tennessee and New Hampshire: Neither Tennessee nor New Hampshire as a general statewide income tax, although they do tax dividend and interest income that exceeds certain thresholds. Depending on the composition of your retirement portfolio, and how you plan to fund your retirement years, Tennessee and New Hampshire may or may not be a good low tax option. Furthermore, as with most other states that have no general income tax burden, sales tax rates are relatively high.

Other Financial Considerations. One mistake that some retirees make when considering moving to another state to lessen their tax bill is focusing solely on the applicable income tax levels. We briefly mentioned that sales taxes can vary widely, but there are other tax considerations as well. For example, local property tax levels can vary widely from state to state, and even within a particular state. If you plan to purchase the residence you’ll be living in during retirement, your annual property tax bill may be at least as important as your income tax burden, and you need to plan accordingly.

Of course, the list above represents the current status of tax laws in these various states, and state laws can (and do) change over time. While it may be sound financial practice to let your prospective tax burden play a large role in your retirement planning, it may be unwise to let that be the only thing you consider. That state’s tax structure may change, and there can be significant costs associated with moving to a new state. Look to balance your financial and nonfinancial reasons for choosing a particular retirement destination so that if your tax bill increases you’ll still be happy with your decision.