Like any entrepreneurial endeavor, a fishing boat can be a self-directed investment in a retirement plan. Your fishing operation could exist as its own business in which income returns to the account and bears the applicable tax advantages of your plan.
In 2016, the Department of Labor (DOL) drafted a new Fiduciary Rule designed to protect the interests of consumers. Specifically, it addresses investment transactions made by account holders on behalf of their IRAs, 401(k)s, and other retirement or tax-advantaged savings vehicles.
Through regular donations and employees who volunteer their time, New Direction IRA has been a long-time contributor to the Birds of Prey Foundation. They’re proud to sponsor the upcoming Fall Migration Dinner, an event that raises additional funds for the organization and celebrates the release of newly rehabilitated animals.
Once your IRA or 401(k) purchases such land, you’ll have a number of options for optimizing your investment. Your plan could lease the land to another business (say, a sunflower farm) and earn regular income in accordance with your lease agreement.
Memorial Day is one of our nation’s most important holidays. On the final Monday of May, we remember the military men and women who gave their lives in the line of duty. In the years following the Civil War, a day of remembrance was created to honor the lives lost in that bloody American conflict.
California is home to some of America’s strongest institutions. Hollywood and up-and-coming technology companies have blossomed in recent decades, but vineyards and wine producers have existed on the west coast for centuries.
A member of our staff was recently contacted by Fidelity, with whom he holds two IRA accounts. One of these IRAs is invested in a publicly traded partnership (PTP), which allows partners to contribute capital and acquire shares exchanged on public markets.
April showers have made way for sunshine, so temperatures are on the rise and it’s time to get outside. As such, May is National Bike Month, which promotes initiatives that encourage otherwise stationary or car-inclined folks to bike to work or school, broaden horizons for outdoor exploration, or even try biking for the first time.
Traditional retirement account types provide a passive relationship between investors and administrators, while self-directed retirement investing involves contact with multiple entities. In this way, a self-directed investment strategy more closely resembles a personal investment, but confusion can occur when IRA providers join the process.
Roth IRAs provide the unique opportunity to generate tax-free retirement wealth. You pay taxes on contributions, but earnings may be distributed without tax liability if you’re able to satisfy certain qualifications.
Retirement is the prize at the end of years of hard work and a responsible financial strategy. Medical expenses, on the other hand, are virtual certainties that can happen suddenly and well before retirement age.
Self-Directed retirement puts you in control
Having recently celebrated their 30th anniversary, the Retirement Industry Trust Association (RITA) held their spring conference in Washington D.C.
The factors to consider include: your age, your contribution and deferral capability, if you are a sole proprietor or own a company, whether you have common law employees, when you wish to retire, and your tax situation.
Self-Directed IRAs allow various investment options, all at the direction of the account holder. Your IRA can invest in real estate, a privately held business, and physical precious metals. Self-direction allows diversification in your retirement portfolio. If you are considering diversifying your IRA portfolio with gold, silver, or other bullion meeting the IRS criteria, there are a few things to consider.
Studies show that employer-sponsored plans are providing less income today than in the past. Through self-directed IRA investing, investors can choose an alternative asset market to grow tax-free (in a Roth IRA) or tax-deferred (in a Traditional IRA) wealth for their retirement.
Are you required to take a required minimum distribution from your IRA? Distribution rules allow you to take that RMD in cash or in kind. So, if you are not ready to cash out your American Eagles, you can elect to keep your assets by taking your distribution in-kind.
In a client letter issued on February 8th, 2017, Merrill Lynch announced that it will no longer accept or hold certain investments. If you are an account holder who currently holds alternative assets with Merrill Lynch, you have the right and ability to choose your new provider.
With interest rates on the rise, self-directed IRA real estate owners may want to refinance any current mortgages held within their account(s), or take out a new loan on a property that their IRA owns 100% of in order to get control of an additional property(s) while the rates are still low.
Below are three timeless investing strategies, tweaked slightly to make sense for the current generation of young and novice investors. The fourth strategy is specific to millennials as they potentially face a new retirement horizon.
The mutable nature of social security may encourage retirement investors to try and secure funding for their future through alternate routes. Diversity in a retirement portfolio through self-directed IRA investing can help offset whatever decrease retirees may be facing with social security moving forward.
Retirement accounts, established in 1974, have always enjoyed unique tax advantages for investors. Regardless of changes in income tax or an investor’s tax bracket, investors can enjoy the pre-tax benefits of a Traditional IRA and the post-tax benefits of a Roth, as long as they meet the qualifications for each account type.
Below are some commonly asked questions and answers about self-directed IRAs.
Investors with crystallized financial literacy are less likely to have difficulty managing personal finances as they experience cognitive aging than those who are financial novices.
The IRS “generally agreed” with recommendations made by the GAO to improve guidance for self-directed IRA account holders on ongoing federal tax liability and determining fair market value of hard-to-value alternative assets.
IRS says to be wary of promoters who claim IRA owned gold and silver can be stored at home or in a safe-deposit box.
Many clients ask if their self-directed IRA needs an LLC to invest in alternative assets. An IRA does not need an LLC to purchase alternative assets. However, some IRA investors do utilize an LLC with their retirement accounts in order to have closer control over their funds.
As a self-directed IRA provider, New Direction IRA has frequent run-ins with popular misconceptions about retirement accounts. Below we address three common misconceptions about self-directed IRA investing.
Below are some common self-directed IRA questions and answers.
The Department of Labor has recently redefined the rules about who qualifies as a fiduciary to a retirement plan, and what the responsibilities are of the fiduciary.
The New Direction Team brought IRA technology and education to NAR and AAPL conferences in November, 2016.
On Thursday, November 3, 2016, CEO Bill Humphrey and President Catherine Wynne of New Direction IRA, Inc., hosted two four-hour continuing education classes at the CPE4U office. These courses specialized in educating CPAs so that they can knowledgeably advise their clients about the important rules and benefits of self-directed IRA investing.
The 72t rule refers to IRS code 72t (section two), which allows IRA owners to access their retirement savings before they reach 59.5 years of age; without incurring the typical 10% penalty for early withdrawals. The withdrawals are taxed at the owner’s current income tax rate.
If an investor’s real estate IRA is earning rental income, and the IRA isn’t paying off debt or distributing cash to the IRA holder, then the investor is likely to consider a few choices for reinvesting the cash surplus.
As the need for financial literacy rises for our next generation of account holders, educational materials need to be engaging and accessible.
On October 1, 2016, New Direction IRA hosted its inaugural Retirement Fast Track Summit. This focused course gave attendees the necessary information they needed to master self-directed IRA investing before noon.
A recent change in IRS rules (Rev. Proc. 2016-47) provides IRA owners with a simpler “self-certification” procedure that allows taxpayers who meet one of eleven criteria to make a rollover past the 60-day limit, without needing a private letter.
The best real estate IRA provides the account holder with three key services: on-time transactions, state of the art technology for the account holder, and free education on demand.
Using a 401(k) to invest in real estate is allowed as long as the plan document is written to allow that asset. Using an Solo 401(k) to invest in real estate is a powerful combination because 401(k) plans are typically exempt from UBIT incurred by UDFI.
Private equity in real estate can be used for fractional ownership, possible liability protection, ownership of your IRA, and more. Real estate crowdfunding is a popular way to get the benefits of owning real estate, while tailoring that ownership to individual investment goals.
New Direction IRA CEO and Co-Founder Bill Humphrey will be presenting a webinar with Strafford, a national CLE/CPE webinar provider. This CPE webinar will give non-profit tax professionals and advisers a thorough guide to calculating and reporting UBTI as it pertains to IRAs and other qualified plans.
Self-directed IRAs not only accrue tax-advantaged or tax-free earnings, but they can also be passed down to a beneficiary without probate. Inherited IRAs can be an excellent way to avoid probate court and leave your beneficiaries money.
With self-directed IRAs moving into the future, it makes sense for our clients to be able to manage their retirement savings as easily as an online bank account.
The new myDirection client portal is optimized for all mobile devices. You can pay your bills, initiate transactions, check your progress and manage your account from the convenience of your smart phone.
We listened to our clients, and the new myDirection.com gives our investors even greater clarity and control over their investments.
Part of devising a long-term plan for your real estate IRA is understanding how refinancing your IRA owned real estate can reduce UBIT. Refinancing to lessen the burden of UBIT can be beneficial for both the short-term and long-term property costs.
Self-directed IRA holders who wish to pass along their retirement savings to their heirs have several choices to make regarding the future of their accounts. Below are seven things that self-directed IRA benefactors and beneficiars should consider when devising a strategy for their Inherited IRA.
The majority of Americans have not yet taken the steps they need to start saving for retirement. Retirement investors can realize more freedom and control over their savings by opening an account with a self-directed IRA provider, where they can then invest in the asset markets that they may already have in-depth knowledge of and experience with.
Investors may have many strategic reasons for converting from a self-directed Traditional IRA (or any other pre-tax account structure) into a self-directed Roth IRA. Below is a discussion of a few important factors that self-directed IRA investors may want to take into account when considering converting from a pre-tax plan to a post-tax Roth IRA.
The idea behind the passing of Title III is to give investors more power and the opportunity to invest their funds in an asset outside of the stock market. Self-directed IRAs are a way for investors to reach the same end, with even more flexibility and control.
On Wednesday, May 18, the Obama administration announced a new rule that will allow middle-income workers to receive overtime pay. More yearly income could mean more money for account holders to set aside for retirement at a tax free or tax-advantaged state.
In exchange for the tax advantages offered by Traditional IRA accounts, the IRS enforces rules regarding Traditional IRA distributions. However, the IRS does allow a few exceptions that allows for distributions without penalty. Below is a breakdown of the ways in which Traditional IRA account holders can potentially take an early distribution without incurring the 10 percent penalty on the amount withdrawn.
Employers, employees, self-employed people, and their families all feel the pull of rising health care costs. Pairing and HDHP with an HSA has has allowed a growing number of families manage their rising health care costs. Below are 10 reasons for employees and employers to consider an HSA.
With education costs seeming to swell with the approach of each new generation, parents (and grandparents) have been pushed to think about saving for future generations’ education costs earlier and earlier. Below is a highlight of the advantages of opening a self-directed Coverdell Education Savings Account and saving for future education costs.
For those who are new to the game of self-directed IRA investing, the industry jargon can sometimes be a little confusing. A self-directed IRA is when you as the IRA holder have the ability to invest in alternative or hard assets like real estate, gold, private equity, notes, etc. Read to learn more.
Below is a list of factors to consider when shopping for the best self-directed IRA provider.
While most account holders think of real estate investing as purchasing rental homes, self-directed IRAs can participate in real estate in a nearly endless amount of ways, from the most well-known types of property to the very specific.
The 2016 review of Social Security and Medicare released by the Social Security Board of Trustees announced there would be no COLA for 2016 due to lack of inflation. On the Medicare front, those enrolled in Medicare Part B will face a 52% increase in their premiums in 2016. Investing your IRA funds in alternative asset markets can provide you with tax-advantaged income that remains autonomous from the sway of bureaucratic shifts in medical assistance programs.
Did you know retirement investors can utilize a 1031 exchange for the benefit of their self-directed real estate IRAs? The following scenario was posed by a client to New Direction IRA's client rep team in an email. Follow the hypothetical below to learn about the interplay of debt leverage, UBIT, and 1031 exchanges to avoid tax inside your real estate IRA.
America's characteristically unpredictable market and ever-changing legislation can make it difficult for the average investor to make ends meet and put away enough savings to reach retirement goals. Created back in 2004, HSAs provide investors with a unique way to save money, grow retirement accounts, and pay for medical expenses.
Some IRAs may have taxable income (and taxes) when assets are purchased with debt financing. In this case, IRA owners may want to take advantage of the 1031 rules, and exchange their first debt-financed property for another.
Despite the plethora of information provided by the IRS, prohibited transactions continue to be a gray area for most tax courts. To further complicate matters, partnering an IRA account with disqualified persons is actually allowed. Read further to learn how this process works.
There are numerous avenues for savvy spenders to explore when looking for a reduced tax burden. One avenue is the Saver’s Credit, or the Retirement Savings Contribution Credit.
Although the HSA passed its ten year mark in 2014, the account structure lacks popularity as a tool to save for retirement, despite its incredible tax benefits. An article by Paul Fronstin in Notes explains how under the right circumstances, account owners could create a million dollar HSA by the age of 65.
While owning a Single Member LLC or other entity in your Checkbook IRA can provide some flexibility in regard to investing your IRA funds, it requires greater responsibility on the part of the IRA holder. The following is a delineation of the benefits and the responsibilities of a Checkbook IRA.
Americans have more choices than ever for covering medical expenses. Below is a highlight of the differences between two very different but equally popular insurance types: High Deductible Health Plans (HDHPs) paired with Health Savings Accounts (HSAs), and PPOs (Preferred Provider Organization).
Roth IRA distribution rules are multifaceted, and can seem a bit complicated. However, they do follow an order based on the source of funds for each distribution. Use the following situation to simplify and understand the order of Roth IRA distributions.
New Direction has crafted a top five alternative investments list for our self-directed IRA and HSA account owners. From real estate to private stock, these options rank as the top five most popular investments with our clients.
A recent Tax Court decision held that funds taken from an SEP account to make a third party loan were made taxable to the SEP account holder due to the account holder’s claim of right on the funds.
NDIRA launches TAGIT technology, allowing online platforms to include investor access to trillions of dollars currently held in IRAs, HSAs, and other tax-advantaged plans.
The new tax deal brings more freedom to SIMPLE IRA account holders by allowing retirement investors to rollover or transfer funds from any account type into a SIMPLE IRA.
The Tax Court has recently reached a verdict for a case with a history that stretches back to 2002. There are three main mistakes that IRA owners should understand about this court case.
Roth IRA distribution rules are multifaceted, and can seem a bit complicated. However, they do follow an order based on the source of funds for each distribution. The source of funds determine how each distribution type is taxed.
If you’ve inherited an IRA as a beneficiary, and there is real estate in the account, you may be wondering what your options are. This article will give inherited IRA owners a breakdown of the distribution rules for their Inherited IRA, and equip them with the knowledge they need to choose a distribution strategy that is best for them and their real estate assets.
There are many different strategies available to invest in exciting alternative assets that lie outside of the stock market, including rental properties. Using an Inherited IRA to invest in real estate provides the beneficiary the opportunity to generate income from rent, appreciation, and more.
Every year the IRS publishes a list of twelve common tax schemes and scams called the “Dirty Dozen.” Although tax payers can be susceptible to the scams on this list at any time throughout the year, tax season provides a heightened environment for tricky gimmicks as taxpayers look for resources to file their taxes.
Some retirement investors are hesitant to invest in assets that may incur UBIT, or Unrelated Business Income Tax, because they see it as a penalty or as excessive tax. However, in the case of retirement accounts, UBIT means the account is making money. It is not a penalty, but a cost of doing business.
Whether investors are making a contribution or taking a distribution, the amounts can change annually due to inflation protections and life expectancy tables. Below is a discussion of the IRA contribution limits for 2016.
When you debt-leverage a real estate investment for your IRA, you can buy an investment property worth two or three times more than your current IRA balance; all while allowing a tenant to pay off your IRA’s debts (and possibly provide additional cash flow) through rental income.
Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs) are powerful tools investors can use to save and invest for retirement or qualified medical expenses, all on a tax-deferred basis. Many investors only open one IRA or one HSA account, not realizing they can open as many HSA and IRA accounts as they desire – and the potential benefits of doing so are nothing to overlook.
IRA holders are facing a new change in asset reporting for the 2015 tax year. IRS form 5498, which IRA providers use to report the value of your account, includes new Boxes 15a and 15b, which require IRA administrators to categorize the values of the assets within their clients’ IRA accounts. This includes a category that delineates the value of private loans extended with IRA account funds (15b).
As more companies promote the idea of storing gold and silver at home with an IRA LLC (or in a local safe deposit box), we’d like to highlight the differences between storing precious metals at a depository via an IRA provider, and storing precious metals at home with an IRA LLC.
One of the championing benefits of a self-directed IRA is the freedom and power granted to clients to take the reigns of their retirement savings. A self-directed IRA allows clients to make investment choices that best serve their individual retirement goals and market expertise. A principal facet of this freedom is the ability to invest in alternative assets outside of the publicly traded securities market; including investing in a gold IRA or silver IRA.
In a bankruptcy court ruling in Arkansas on May 25th, 2015, a debtor was forced to forfeit his IRA’s tax-deferred status and give bankruptcy trustees access to the IRA account assets. This ruling marked an historic turn in legal proceedings for IRA owners, as this was the first time a creditor successfully investigated the propriety of a debtor’s IRA transactions, and used evidence of a prohibited transaction to pierce the bankruptcy protection that IRA account assets typically enjoy.
An HSA, or Health Savings Account, provides those with High Deductible Health Plans (HDHPs) an avenue to save and invest money for all present and future qualified medical expenses, or QMEs. HSAs were approved by Congress in 2003 during one of the most intensive governmental interventions in medicine in 40 years. The intent behind the inception of HSAs is to allow participants of HDHPs to pay out-of-pocket qualified medical expenses, with tax benefits, until their deductible kicks in.
A self-directed IRA requires active oversight by the account holder, and therefore isn’t ideal for the passive or unengaged investor. But for the innovative entrepreneur, a self-directed IRA is an exciting opportunity to capitalize on individual market expertise and sniff out promising investment opportunities way ahead of the crowd. In this way, “entrepreneur” and “self-directed IRA investor” are nearly synonymous.
There’s no time like this summer to buy your first home. The market is booming, and you’re ready to stop shelling out cash to your landlord and invest in a long-term asset that will belong to you. Plus, you’ll finally be able to paint the walls! IRA account owners are permitted to withdraw money before distribution age, penalty-free, in certain circumstances – in this case, IRA owners can withdraw up to ,000 for qualified acquisition costs on a home, without paying the 10 percent penalty for early distribution. Qualified acquisition costs generally cover buying, building, or rebuilding your first home, as well as funding most settlement, financing and closing costs. Read on to learn more!
In this fast paced market, you need to act soon before you’re outbid. But before you start signing papers, there are specific investment-titling rules that all real estate investors should keep at the forefront of their minds before initiating any transactions. Remaining conscious of the following guidelines will help you avoid common missteps and save yourself a lot of time and money when using your self-directed IRA to invest in real estate.
If you’re a real estate investor who took a loss this year, it might be a good time to consider a Traditional to Roth IRA conversion.
Here at New Direction IRA, one of the most frequently asked questions by prospective clients is which Individual Retirement Plan will suit them best. The fact of the matter is, there is no easy answer to this question. Our role at New Direction IRA is to be a trusted provider of administrative services for individual retirement plans and HSAs; we specialize in the bookkeeping and reporting for unique and alternative assets. As such, we do not provide investment advice or endorse any products. However, one of our primary functions is to provide educational services for our clients so they may be empowered to make educated decisions about which IRA they would like to self-direct.
If you're the type of active investor who prefers to stay engaged with the oversight of your investments, you are likely already well-versed in the wide array of investment opportunities available through a self-directed Individual Retirement Arrangement. Contrary to common belief, your IRA account has almost limitless investing potential - providing the asset and your management methodology align with IRS guidelines.
Using either a Traditional or Roth IRA can provide tremendous tax advantages for accumulating wealth and assets for retirement. But what are the differences between a Traditional and Roth IRA?
Real estate investing for retirement is becoming more and more popular as housing markets continue to stabilize. But, as with everything involving real estate and investments, you have to do your homework. Not only do you need to do your due diligence in buying and selling properties, but you also need to understand your tax and retirement responsibilities when using real estate investing for retirement.
Is a rental real estate investment the best option for your self-directed IRA? The answer depends on each IRA investor’s unique circumstance. While some rental real estate investors appreciate they can “touch” their investment, others are stressed by the amount of responsibility that comes with being a landlord. Rental real estate investment education begins with understanding some of the finer points of the transaction before jumping in with both feet. Asking yourself some of the following questions can help you to gain a better understanding of whether or not rental real estate investing within a self-directed IRA is right for you.
While many people want to use the power of a self-directed IRA for real estate investing, they often feel they can’t get started because they don’t have enough money in their plan. Thankfully, there are several creative ways to bring your real estate transaction to fruition even when your situation is less than perfect. Even if you are low on funds in your self-directed IRA you can still become a real estate investor. You just need to use some creative real estate investing techniques. While the IRS does have strict rules for self-directed IRA’s, it still allows for considerable flexibility in growing the plan’s assets.
Using your self-directed IRA to hold your real estate investments can be an excellent way of both sheltering the investment from taxes and funding your retirement. The IRS gives some tremendous tax advantages IRAs; however, because of the advantages given they do ask you to follow their rules. The most common danger is inadvertently executing a prohibited transaction. By learning what to avoid, you can safely and efficiently use real estate to grow your retirement account.
Once an investor considers holding real estate in his or her IRA, it is important to take the first step and discover whether or not the current IRA custodian will even allow real estate to be held as an investment. Often, investors must move to a self-directed IRA custodian because their current provider either will not work with real estate or has little experience with holding real estate in an IRA. The name self-directed IRA can be a little confusing because many traditional brokerage custodians offer a “self directed IRA” for investing. The trick to comparing providers is finding out if their plans are only eligible for investments into securities like stocks, bonds, and mutual funds. The key is to find an IRA custodian that will handle real estate and other alternative investments. New Direction IRA provides real estate investors with plan options that make real estate IRA investing easier than most.
Creating real estate income is something many investors have come to view as a basic portfolio ingredient. Whether you are in the accumulation phase or retirement phase of your life, betting on the paltry bond market for income has become frustrating at best. Many investors do not want to expose their portfolios to the risk of a volatile stock market either, though. Thus, many turn to real estate as a source of retirement income and historical capital appreciation. What many investors do not understand is that by holding real estate in a self-directed IRA, investment returns can be sheltered under the tax-advantaged umbrella associated with retirement plans. A self directed IRA removes one major real estate profit loss – taxes on capital gains.
Since its creation in 1997, the Roth IRA has become a popular retirement solution for many investors. This popularity is largely due to the account’s unique advantages. While the Roth IRA isn’t the only way to plan for retirement, knowing its benefits can help you determine what kind of role the account can play in helping you prepare for your future.
Careful planning for future education expenses is becoming more common as the national average for college tuition costs continue to rise. Many savers are already familiar with tax-advantaged vehicles such as the 529 Plan or Coverdell Savings Account but did you know that all IRA account structures offer certain incentives for educational expenses as well? This article explores IRS Publication 970 and the exception to additional tax on early IRA distributions for qualified education expenses.
The typical stereotype when opening an IRA account is that all underlying investments must be exchange traded stocks, bonds, and mutual funds. Stock market volatility frequently intimidates retirement investors to the point that they simply do nothing and forego crucial retirement planning. Roth IRA account owners will be pleased to know there is an entire spectrum of alternative investments unrelated to the stock market that can be held under a ROTH umbrella.
Do you really know how to use your Health Savings Account? Most people don’t. A large number of people who have HSAs use them as “health spending accounts,” and “spending” is the opposite of “saving.” HSA owners aren’t at fault for not maximizing their HSAs’ potential, though. There simply isn’t a great deal of information available on what they can really.
With instability in the stock market, many retirement investors are looking to alternative assets including precious metals. Gold, silver, and other metals carry intrinsic value not found in many traditional assets which makes them particularly valuable in uncertain times. Many IRA custodians only provide their clients with the option to invest in a Gold or Silver Exchange-Traded Fund (ETF) and give them no opportunity to purchase physical precious metals.
Buy high, distribute low, sell high, save taxes! That is the latest scheme circulating in the precious metals IRA industry, and one you as the investor should be aware of.
Energy consumption is on the rise, both nationally and globally, and many new energy companies are popping up to fulfill the increased demand. Growth in the alternative energy industry has increased the number of wind turbines and solar panels that provide power to our homes. The oil and natural gas industry is also still booming, with technological advances in shale extraction leading to more opportunities for expansion. All this growth has caused many of our self-directed IRA holders to ask us how they can take advantage of this emerging industry as part of their retirement portfolio.
Whether you’re getting close to retirement age or you’re just beginning to look into retirement planning, it is important to understand how each type of retirement account fits into your overall retirement plan. Common retirement accounts, such as the Traditional IRA, Roth IRA, and HSA, each play their own role in a well-rounded retirement strategy. Knowing how to utilize each type of account will allow you to develop the best retirement plan for your personal retirement goals.
Many self directed IRA investors have purchased real estate and for good reasons. Real estate is a tangible asset that most people have had experience with, either through purchasing their own home or working as a real estate professional. Real estate is also an asset which rarely loses its entire value, unlike some investments which have that potential downside. While real estate is a very accessible asset, investors do need to be mindful of the various strategies when it comes to investing with their retirement funds. Knowing these strategies can help you achieve your retirement goals.
IRA holders may have become aware of the events at American Pension Services, an IRA provider in Utah. For the last several months, while legal proceedings have been underway, the accounts there have been “frozen”. This has meant that American Pension Services account holders have not had the ability to move their IRAs to another provider. Traditional and Roth IRAs, as well as HSAs, are typically completely portable and account holders can move all or part of their account at will.
At New Direction IRA, a self-directed IRA and HSA provider, we hear a lot of questions about UBIT, or Unrelated Business Income Tax. To get a basic understanding of UBIT and Unrelated Business Taxable Income (UBTI) and Unrelated Debt-Financed Income (UDFI), that two types of income that may be assessed UBIT, let’s go straight to the source: the IRS. The IRS Publication 598 outlines what these tax consequences are and how you’ll incur them.
An attractive feature of an annuity is the predictable, periodic return. For some, a less attractive feature over the past several years has been that their annuity has been tied to the stock market. By using a self directed IRA, investors can enjoy tax-deferred investment growth and achieve periodic returns similar to an annuity without having to worry about the stock market.
In addition to a basic overview of the Individual 401(k) plan, this blog will also discuss the 7 benefits of having one. Read on to learn more!
As the Affordable Care Act takes hold and the deadline to sign up for government healthcare this year has passed, many Americans still have questions about how they should manage their health insurance. One particular area of mystery is government subsidies. Who qualifies? How do I apply? How much will I get? Here, I’ve compiled some handy tools and information to get you started.
In the following case, Bernard and Claire Berks invested in notes with their IRAs, but the borrowers either defaulted or their collateral did not adequately secure the debt. This resulted in the notes being worth zero. The Berks called the provider and told them that “the notes are worth zero.” No documentation supporting this assertion was provided. Read on to find out the results!
Whether you have health insurance or not, it’s important to stay abreast of the major changes that have occurred to the healthcare system in the wake of the Affordable Care Act—also known as Obamacare. Fortunately, the IRS has issued four reminders to Americans as they go forward.
One of the main reasons people think Self-Directed IRAs aren’t worthwhile is because of the fees associated with them. However, the fees associated with SDIRAs are usually favorable when compared to fees you’d be assessed on an IRA with publicly-traded securities and at any brokerage house. At New Direction IRA, we disclose our fees up front so account holder know exactly what they will pay and what they are paying for. Let’s look at our NDIRA real estate IRA fees, which includes FREE online bill pay:
One of the advantages of self-directed IRAs is that they provide more than one way to invest in any given asset. Let’s look at an example to see how.
New Direction IRA, Inc. (NDIRA), an IRA administrative services provider, will give you a credit if you refer a friend to open an account. The new account holder will get a discount on the application fee.
Leveraging is a valuable tool to increase the buying power of an IRA. Leveraging means borrowing funds to increase purchase power and acquire a property that would otherwise be un-affordable. Surprisingly, many people aren't aware that their IRA or 401k funds can be leveraged and utilized as a down payment for a real estate IRA investment. In order to use leverage, a non-recourse loan is required. The IRS restricts an IRA holder from personally guaranteeing the account or its assets. Consequently, lenders usually offer borrowers non-recourse loans with slightly different terms and loan-to-value requirements.
“Alternative assets” is the broader name for the suite of investment opportunities afforded by self-directed IRAs (SDIRAs). These alternative assets include real estate, precious metals,private equity and more. Alternative assets could even be oil rigs, tractors or trees. According the IRS, alternative assets can be anything except collectibles (wine, stamps, etc.) or life insurance. The flexibility afforded by alternative assets and SDIRAs allow the IRA holder to choose what types of assets his IRA invests in. People with self-directed IRAs can rely on their own investment expertise, making tax-free or tax-deferred investments in assets they know and understand personally.
According to a recent Lipper analysis, a typical American household with 0,000 in mutual fund assets pays nearly ,000 in ongoing fees every year—regardless of whether or not they actively trade with the accounts. At New Direction IRA, we disclose fees up front so that investors can compare and calculate net return. This transparency is important because it establishes trust between the provider and the investor. Read on to learn more!
Real estate IRA frequently asked questions and their answers live here! If this doesn't quite answer your questions, please refer to the Real Estate Investing Guide.
The biggest appeal of Checkbook IRAs (IRAs that invest in LLCs created by the IRA owner) is that they allow the IRA, by extension, to purchase things quickly. However, the Checkbook IRA structure is currently under intense scrutiny by the IRS and sets up a situation where unscrupulous account holders can make mistakes and put themselves at risk of penalties, taxes and forced distributions.
Self-directed IRAs, or SDIRAs, are becoming increasingly popular because they allow account holders to choose from a world of investments. At New Direction IRA we’ve seen IRAs invest in everything from trailer parks to oil fields to Middle Eastern currency and more. The sheer number of investments could seem daunting, but many investors view this as an opportunity to invest in what they know and trust. Here, we’ll go through the main alternative asset types and share how you might begin looking for investments.
A Health Savings Account, or HSA, is a valuable tool in managing medical expenses. They can help you save, pay for certain expenses not covered by your insurance and you can reimburse yourself at any time in the future for medical expenses you incur while the HSA is open.
Roth IRAs--passed into law in 1997--are a very popular way to save for retirement because investment earnings are tax-free. Roth IRA holders may also withdraw the amount they contributed at any time without penalty or tax liability. Given the unique tax benefits, Roth IRAs are a powerful tool to save for retirement to begin with. But you can maximize your Roth IRA further by self-directing your IRA and investing in alternative assets like real estate, precious metals, private equity and more.
Most people don’t know that their retirement funds can be used to purchase “alternative” assets and still receive the tax benefits associated with their account. We’ve learned as much in our ten years as administrators of self-directed IRAs (SDIRAs). So, it was gratifying to see that SDIRAs were part of Forbes’ “365 Ways to Get Rich” article published this month. “Number 33” on the list encourages investors to put alternative assets in their IRA and the article even goes on to cite IRS code relating to SDIRAs. In this economic environment, where investors are exploring how to achieve real diversification for their portfolios, adjust to market conditions, or both, self directed IRAs are moving into mainstream consciousness.
Many investors ask us if they can hold proof American Eagle coins in their IRAs. The short answer is “yes.” However, it is a good idea to be familiar with the relationship between proofs and IRAs. A “proof” American Eagle is unusual because it is considered both a collectible, which is categorically disallowed by the IRS, and a bullion product, which is allowed by the IRS. Let’s look at these two characterizations.
If there ever was a subject that will stop an accountant is his or her tracks it is UBIT, which stands for unrelated business income tax. Many investors shy away from certain IRA investments out of fear that UBIT will take out a big chunk of their earnings. But the truth is that these investors are misinformed about the tax.
Self-directed IRA administrators/custodians are now forced to provide current values for all IRA assets for IRS reporting purposes. IRA holders have always been required to provide a valuation of their account assets, but the request has become a requirement due to the changes in the banking industry. Some IRA account holders are not happy about this.
Summer vacations are the perfect time to find a dream home in an ideal location. Today’s investors sometimes need clever solutions for affordability, so it’s important to be aware of all of the available investment tools. One such tool is the self-directed IRA. Did you know that your IRA/401k funds can be used to buy real estate? Let’s look at some of the options available for purchasing a second home with IRA funds:
Saving for retirement is crucial and the IRS has provided several tools to help you do so. Read on to learn more about the different tax structures for IRAs and how they can apply to your strategy!
Owners/managers of IRA-owned LLCs (also known as IRA LLCs or Checkbook IRAs) could be hit with taxes and penalties if they provide “prohibited services” to their IRA and the LLC it owns. In a recent ruling, the U.S. Tax Court clarified that it will base decisions regarding prohibited transactions on a broad reading of the tax code. So what does this mean for IRA owners?
“I have an IRA invested in Real Estate. Now how do I take that real estate to live in, when I’m retired?”
When researching Checkbook Control IRAs, it is a good idea to look into the drawbacks as well as the benefits before moving forward. There are responsibilities the IRA holder must understand. You might want to ask yourself, “Do I really want this much control of my retirement funds?” Ask the following questions before proceeding:
Many self-directed investors who call our office ask, “Can I act as the property manager for my IRA owned real estate?” The answer is yes, but there are several rules that must be followed in order to comply with IRS guidelines.
For those with a penchant for real estate investing, IRAs are a potent vehicle indeed. Outside of a tax-advantaged account, such as an IRA or a SEP IRA, rental income is taxable every year, as you receive it, and passive activity rules restrict your ability to claim losses from real estate. If you use a self-directed IRA, or a real estate IRA, however, you can accumulate all of that rental income tax-deferred, or tax-free if you hold the asset in a Roth IRA. If you have the patience, liquidity and know-how to be a successful real estate investor, it can make perfect sense to leverage these skills in a self-directed IRA or other retirement account as well.
U.S. Department of Labor ruling 2000-10 allows you to partner with your IRA but there are special circumstances under which it is allowed. Otherwise it's self-dealing and a prohibited transaction. Here are the basics for partnering with your IRA.
Read on to learn more about the obscurities in IRA-Owned real estate investing!
When it comes to owning real estate assets in an IRA, it may be tempting to live in the property or work on the property before it is distributed out of the IRA. However, these are prohibited by the IRS and can result in steep penalties and a distribution of the account. At New Direction IRA, we hear a lot of questions from investors asking what they can and can’t do with their IRA property according to IRS rules. Here’s a few of those questions and some basics about how the IRS treats prohibited transactions within real estate IRAs.
There are some compelling logistical advantages to having the financial control that a single member LLC (a.k.a. “checkbook” LLC) can create, but these conveniences are only realized by venturing close to certain IRS prohibitions. In some cases, it is easy to characterize a particular asset or transaction in an IRA as allowed or not, but with a checkbook LLC the parameters are less clear. The question about how to use a single member LLC within the IRS rules for IRAs comes down to interpretation and risk tolerance. Let’s talk a little more about the Single Member LLC IRA disadvantages.
At New Direction the focus, rather than selling or recommending investments, is to help the clients learn about their options and guide the client through the process of making it happen. The self directed investor must be willing to take the responsibility for investment choices, although their outside advisers or associates can help.
Health Savings Accounts (HSAs) are becoming increasingly popular for investors looking to save money and help pay medical expenses. Most investors don’t realize that like other IRAs, the HSA can be used to invest in alternative assets such as gold and other precious metals.
If you own real estate property, you have to submit a valuation to your administrator every year to ensure proper tax reporting by your IRA administrator. A fair market valuation is used to establish or change the value of a real estate holding. All IRA custodians are required to provide a year-end value for IRA accounts. A qualified real estate professional who is not a disqualified person to your IRA may provide a comparative market analysis to meet this requirement.
Securities brokers and some accountants will be the first to tell you that you don’t want leveraged property in either a Traditional or a Roth IRA because you will have to pay additional taxes, specifically Unrelated Business Income Tax (UBIT) but many don't know exactly how it works. Read on to learn more about this specialized tax.
Recently, much of the appeal of real estate investing is the positive cash flow it can generate. For IRAs owning real estate, generating income can make it an attractive option even without the potential for appreciation. The tax your IRA may incur at the end of an investment is only one factor to consider. Smart investors can generate significant revenue from rent. Cap rates of 4 to 10% are not uncommon and, when compared to returns from other assets, can be very enticing for investors in today’s economy. In many cases, income generated from real estate assets can cover any Required Minimum Distributions (RMDs) required for Traditional IRAs at age 70 ½ . Remember, the point of owning real estate or any asset in an IRA is to increase the total value of your IRA.
The term Alternative IRA, which has been in the news so much recently, is frequently misunderstood. It is often thought to be an IRS designation that signifies an account type that is different from a traditional IRA or a Roth IRA, which are designated IRS account types. It is also not unusual for people to be under the impression that self directed means that the IRA owns an LLC which holds the IRA assets. Neither of these is the case. Read on to learn more!
One of the more frequent inquiries we hear at New Direction regards the transacting of business between an IRA and a private company. For us to perform our jobs successfully for your IRA, we will often need a discussion with the account holder to discern whether the participation in the private company is a loan or a private stock (or equity) purchase. Both investments involve sending IRA money to the company with the expectation of a return, but the supporting documentation for the two types of investment is different.
If you’re one of many investors contributing to a Roth IRA or considering a Roth Conversion for an existing pre-tax retirement account, it’s important to understand exactly how the “Five Year Rule” works. Below is a short explanation of how the rule affects your IRA distributions.
American Airlines declared bankruptcy in November 2012. Many senior pilots were asked to put their “B fund” retirement funds in an IRA and many chose a self directed IRA.
The IRS is on high alert regarding any type of misuse or abuse with Checkbook IRA LLC accounts. If investors are considering a Checkbook IRA/LLC for retirement investment, they should be aware that the IRS sent an internal notice focusing on the danger of personally providing services to an IRA-owned LLC or other entity.
he IRS is on high alert regarding any type of misuse or abuse with Checkbook IRA LLC accounts. If investors are considering a Checkbook IRA/LLC for retirement investment, they should be aware that the IRS sent an internal notice focusing on the danger of personally providing services to an IRA-owned LLC or other entity.
Most people don't know that their Individual Retirement Account can be legally invested in almost any type of asset except collectibles and life insurance. That means you can invest your retirement funds in precious metals like gold, silver, platinum and palladium—and it's a relatively easy process.
As a self-directed IRA provider, we get dozens of questions about UBIT, taxes on IRAs and taxes on other retirement accounts every day. Most perplexing to clients, it seems, is Unrelated Business Income Tax, or UBIT. Here are two of our most commonly asked questions and our answers.
Self-directed IRAs allow control of one’s retirement investments. Clients can benefit from self-directed IRAs by reducing their taxes while enhancing their asset protection and estate planning. With this insight, your clients can unlock their own investment expertise, making tax-free or tax-deferred investments in assets they may know and understand personally.
Planning for investment cash flow needs is critical for any investment strategy, particularly illiquid assets like real estate. The investor needs to determine how much cash will be needed and how much will be available to be successful in retirement.
More than 13.5 million Americans are enrolled in Health Savings Accounts as of January, 2013, according to an annual census released by America’s Health Insurance Plans. HSAs can be used as an investment tool, or just as a savings account and tax break. Especially with the healthcare overhaul, HSAs will continue to provide many options for Americans in all tax brackets.
It’s not expensive to invest your IRA in real estate. At New Direction, we have a structured fee schedule so you’ll know exactly what you have to pay and when. These fees include a one-time startup fee and no fees until you make your first transaction. Read on to learn more about the fee structure and what to look for!
Rather than giving up the depreciation tax advantage, you are trading it for a different and possibly better tax advantage. If you buy real estate with personal funds, you can expense a portion of the cost of the real estate over the allowed time period, usually 27.5 to 39 years. Depreciation expense, which doesn’t require current cash (since you already invested the cash when you initially purchased the property) lowers your taxable income. IRA-purchased real estate is different and carries its own significant tax advantage.
A lot of people are surprised when they learn that IRA rules allow them to hold real gold bullion, gold coins and other similar forms of precious metals within their retirement accounts. But IRA rules give investors a lot of leeway as to what they can hold in their accounts. IRAs are not restricted to stocks, mutual funds, bonds, certificates of deposit, annuities and other conventional financial products. With a self-directed IRA account, you can hold precious metals including gold, silver, platinum and other precious metals. Here are some basic requirements:
It’s not been widely known that the IRS allows retirement accounts such as IRAs to hold goldand other precious metals. That’s because most retirement accounts are administered by bank and brokerage companies, who have no incentive to allow client to diversify into asset classes that are not within their expertise. So what exactly are the other options for holding precious metals in an IRA? Here, we’ll look at the types of metals and IRA can purchase and in what form those metals can be.
This discussion is relevant to those of you who receieved a 1099-R without making a distribution and/or anyone who rolled over funds from a 401k to an IRA. This post is designed to help you learn about how 1099-R and 5498 forms.
Nearly half of American workers are not confident they will have enough savings to retire according to the Employee Benefits Research Institute’s 2013 Retirement Confidence Survey. Only 13% of those surveyed said they were “very confident” in a comfortable retirement, while 22% of people believe they’ll have to retire later than they planned due to the poor economy, inadequate finances and lack of confidence in social security—only 31% of workers think Social Security benefits will be higher than they are today. Take a look at what motivates the average American to save for their retirement.
A common misconception to Real Estate IRAs is that an IRA holder (or any disqualified person) can live in the property if they're paying market rent. Read on to find out why this is prohibited and the rules and regulations for the Real Estate IRA.