Questions you should ask before opening multiple IRA accounts

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

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

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

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

Are you willing to manage the paperwork for two IRAs?

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

Do you have a good financial institution on your side?

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

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

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

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

Three Employer-Sponsored Retirement Plan Options

If you want to supply your employees with retirement benefits, you have three major options. You can offer 401(k), SEP IRA or SIMPLE IRA plans. 

Each solution provides different advantages, so it’s wise to learn the details on all three options and carefully compare them before making a choice.

Contributions

The SIMPLE IRA limits total yearly employee deposits to $19,000 or $22,000 after the age of 50. Both 401(k)s and SEP IRAs permit substantially larger contributions. Total deposits are capped at $57,000. Staff members over 50 years old can add more money to their retirement accounts as a “catch up”.

Both 401(k)s and SIMPLE IRAs permit employees to contribute funds whereas SEP IRAs do not provide this option. The employer is fully responsible for funding an SEP program. Companies can deposit amounts equaling as much as one-quarter of workers’ wages in SEP or 401(k) accounts.

Complexity

Both types of IRAs are simpler to establish and maintain than 401(k) plans. This saves time while reducing administrative costs. 

The process of creating an SEP program involves several steps, such as:

  • Producing a legal document.
  • Supplying said document to staff members.
  • Opening separate accounts for individual employees. 

Pre-written, ready-to-use agreements are available.

Qualifications

A company must have no more than 100 staff members to use a SIMPLE IRA. On the other hand, a SEP IRA would be used for sole-proprietors or those with few employees or employees that may be seasonal. The solo 401(k) plan requires an individual to have NO employees in any companies they may own.

Employees must earn a minimum of $5,000 per year in order to enroll in the SIMPLE accounts. The income requirement for SEP IRAs is only $600 and contingencies for eligibility can be made. For example, being over the age of 21 and having worked for the company for at least 3 of the last 5 years.

Similarities

All three options have penalties for people who withdraw money at less than 59.5 years of age. This fee equals one-tenth of the withdrawn amount. Federal taxes are usually deducted from withdrawals, even after a worker reaches retirement age. Nonetheless, employer-sponsored retirement plans are treated favorably by the IRS.

Please contact us to speak with a knowledgeable IRA Specialist to set up accounts or learn more about the above-mentioned options.

We serve clients promptly, offer a wide range of employee retirement solutions and waive many of the fees that competitors charge.

References

https://www.investopedia.com/ask/answers/102714/what-are-main-differences-between-simplified-employee-pension-sep-ira-and-simple-ira.asp

https://twocents.lifehacker.com/the-sep-ira-limit-is-increasing-in-2019-1830310964

https://www.fool.com/investing/what-is-a-sep-ira.aspx

https://www.investopedia.com/ask/answers/10/why-employer-matches-401k.asp

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 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

Typically, 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

It 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.

Can You Deduct Your Self-Directed IRA Contributions Deductible In 2015?

Being able to deduct your self-directed IRA contributions from your tax return can be a great incentive for you to maximize those contributions each year. But not all IRA contributions are deductible.

Roth vs. Traditional Self-Directed IRA. The first consideration in determining whether you can deduct your 2015 contributions to your self-directed IRA is whether your account is set up as a Roth account or as a traditional account. Contributions to Roth accounts are never deductible, and contributions to traditional IRAs are sometimes deductible. Let’s examine the circumstances under which contributions to your traditional self-directed IRA can be deducted on your 2015 tax return.

You Aren’t Covered By an Employer Sponsored Retirement Plan. If you don’t participate in an employer retirement plan (such as a 401(k) plan, profit-sharing plan, SEP, SIMPLE-IRA or certain defined benefits plans that you participate in), then your contributions to your self-directed IRA will be fully deductible, regardless of your income, if either (a) your tax filing status is single or (b) you file a joint return with your spouse but your spouse is not covered by a retirement plan at their employer.

If you file a joint return but your spouse is covered by a retirement plan at their job, then you’ll be able to deduct the full value of your contribution if your joint income is $183,000 or less. You can take a partial deduction if your joint income is between $183,000 and $193,000, and no deduction is available if your joint income is $193,000 or more. For purposes of these income thresholds, it’s not your gross income, but your Modified Adjusted Gross Income (“MAGI”) that’s relevant.

You Are Covered by an Employer Sponsored Retirement Plan. If you are covered by a retirement plan at work, then your ability to deduct your self-directed IRA contribution will again depend upon your MAGI and your filing status.

If you file a single tax return, then you’ll be eligible for a full deduction if your MAGI in 2015 is$61,000 or less. You can take a partial deduction for an MAGI between $61,000 and $71,000, but no tax deduction for your contributions if your MAGI is $71,000 or greater.

If you’re married and file a joint return, then you can take a full deduction for your contribution if your joint MAGI is $98,000 or less, or a partial deduction if your joint MAGI is between $98,000 and $118,000. Your deduction will not be deductible if your joint MAGI is $118,000 or more.

While being able to get a current year tax deduction for contributions to a traditional self-directed IRA can be valuable, even non-deductible contributions (such as to a Roth self-directed IRA or to a traditional account in years where your MAGI is too high) can be extremely valuable to your retirement future. The ability for your investments to grow in a self-directed IRA for years or decades on a tax-deferred or tax-free basis is something you shouldn’t pass up.

 

Real Estate Alternatives to Consider With Your Self-Directed IRA

Real 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.