Playing Catch Up With Your Self-Directed IRA Savings

self-directed IRAs, self-directed IRA, self-directed Roth IRA, self-directed 401(k)According to a recent study, only 28% of respondents are on track or have achieved their goals for their retirement savings. If you fall within the 72% of individuals who are not on track, you can combine your expertise in real estate along with “catch-up” contributions to get you back on track. Depending on your age and your desired retirement date, including the following in your catch-up process can help you to increase the money in your retirement account thus increasing the capital that you have available to invest in real estate with your Self-Directed IRA.

Use the Catch-Up Provision for Self-Directed IRAs

If you are at least age 50 by the end of the year, you are eligible to contribute amounts above the regular contribution limits, providing your contributions do not exceed your eligible income for the year. These amounts are referred to as catch-up contributions. The following are the types of catch-up contributions available:

  • $1,000 to traditional and/or Roth IRAs: This can be split between your Roth IRA and your traditional IRA, or contributed to one of the two. This is in addition to your regular $5,000 contribution limit.
  • $5,500 to 401(k) and 403(b): This can be split between your 401(k), 403(b), Thrift Savings and SIMPLE IRA plans (For SIMPLE IRAs, the limit is $2,500).

If you are eligible to contribute the maximum catch-up amounts to both IRAs and 401(k)/403(b) accounts over a 20-year period, you could accumulate as much as $30,969 to your IRAs and $170,331 to your 401(k)/403(b) for a total of $201,300, assuming a 4% rate of return. This would be in addition to your regular contribution and any income earned by the real estate investments in your self-directed account.

Claim Tax Deductions and Tax Credits

Affordability is a common reason given by individuals who do not make contributions to retirement savings account. For these individuals, covering everyday expenses might seem to make it impossible to save for retirement. However, there are provisions that, if taken advantage of, soften the financial burden of contributing to a retirement account. These include:

  • The Saver’s Credit: The saver’s credit allows eligible individuals to receive a nonrefundable tax credit of up to $1,000 for contributions they make to IRAs and employer plans such as 401(k) and 403(b) plans.
  • Tax Deductions: Eligible individuals can claim tax deductions contributions they make to traditional IRAs.
  • Pretax Contributions: Salary deferral contributions can be made on a tax-deferred basis, which reduces the amount of income on which the individual pays income tax.

In all these cases, the cost of making the contribution is reduced by the tax benefit. While the reductions may not be dollar for dollar, they help to cushion the financial burden of funding the retirement account. If you are one of these individuals for whom affordability is an issue, these tax benefits could allow you to save more than you thought you could afford, if you meet the eligibility requirements.

Realistically Speaking

The explanations are intended to show that it is possible to play catch-up with your retirement savings, even if the rate of catch-up is only a percentage of the numbers used above. Consider too that the limits mentioned above are in effect for 2014, and could be increased in future years for cost of living adjustments.

 

The Savers Credit Reduce Retirement Funding Cost for Some!

Tax Credit for Contributions to Your Retirement Accounts

If your adjusted gross income (AGI) is below a certain amount, you may be eligible to receive a nonrefundable tax credit for contributions to your retirement accounts, thereby lessening the cost of making the contributions. This nonrefundable credit is referred to as the saver’s tax credit (saver’s credit), and can reduce your federal income tax on a dollar-for-dollar basis.

Eligibility Requirements

In order to be eligible for the saver’s credit, you must meet a few requirements. These include the following:

  • You must be at least 18 years of age,
  • You should not be a full-time student, and
  • You must not be claimed as a dependent on someone else’s return.

In addition to these requirements, your AGI must not exceed certain amounts, and the amount of credit for which you are eligible is also subject to AGI limits. The saver’s credit can be claimed by:

  • Married couples filing jointly with incomes up to $59,000 in 2013 or $60,000 in 2014;
  • Heads of Household with incomes up to $44,250 in 2013 or $45,000 in 2014; and
  • Married individuals filing separately and singles with incomes up to $29,500 in 2013 or $30,000 in 2014.

The dollar amount of credit is limited to $1,000 per individual, $2,000 for married couples.

Eligible Contributions

You may claim the credit for the following types of contributions:

  • Pre-tax salary deferral contributions to 401(k), 403(b) annuity, eligible deferred compensation plan of a state or local government [457(b) or governmental 457 plan], SIMPLE IRAs and salary reduction SEPs (SARSEPs).
  • Voluntary after-tax employee contributions to a qualified retirement plan or section 403(b) annuity. and
  • Contributions to traditional IRAs and Roth IRAs.

You can split the contribution among more than one of these accounts, or deposit the entire amount to one account.

Distributions Can Reduce the Saver’s Credit

Certain distributions can reduce the contribution eligible for the saver’s credit. These include any taxable distributions from a retirement plan or IRA:

  • That is received during the year that the credit is claimed
  • During the two preceding years, or
  • During the period after the end of the year for which the credit is claimed and before the due date for filing your tax return for that year.

A distribution from a Roth IRA that is not rolled over is taken into account for this reduction, even if the distribution is not taxable.

How to Claim the Credit

The saver’s credit is claimed by Filing IRS Form 8880 and following the instructions provided on the form. These include instructions on how to indicate the correct amount on Form 1040.

Form 8880 must be attached to Form 1040 in order for the IRS to approve the claim.

Other Features and Benefits

Other features of the saver’s credit include the following:

  • It may be claimed for the same year that you claim a deduction for a traditional IRA contribution. For those eligible for the deduction, this means double benefits,
  • It will not change the amount of your  refundable tax credits, such as  the earned-income-credit or the refundable amount of the child-tax-credit,
  • The saver’s credit for any year cannot exceed the amount of tax that you would otherwise pay (not counting any refundable credits or the adoption credit) in any year,
  • Your tax liability is reduced to zero because of other nonrefundable credits, such as the Hope Scholarship Credit, you will not be entitled to the saver’s credit , and

You can also use the saver’s credit to offset both an alternative minimum tax liability and a regular income tax liability.

Advanced Real Estate Concepts January 2014 Webinars

Presenters: Jim Hitt and Sean McKay

4 Dates and Times to select from:

January 15th at Noon

January 15th at 7 p.m.

January 31st at Noon

January 31st at 7 p.m.

Details:

Do you ever wonder how investors realize tremendous rates of return with minimal investments?

In this webinar you will learn about some of the advanced tools these investors are using including:

• LLC’s
• Options
• Wrapping Mortgages
• Partials
• And so much more…

Click here to select the webinar you would like to attend.

Growing Your Retirement Account with Real Estate – Intermediate Webinars

Real Estate IRA

Due to the increased demand for our webinars, we are now offering this webinar more frequently.

Join us for this intermediate class and learn how to grow your Self-Directed IRA with Real Estate!

Topics covered include:

  • Prohibited Transactions
  • Disqualified People
  • Specific Strategies
  • Case studies that clients are using to grow their retirement account

Click here to see when this webinar is being offered and to select the webinar you would like to attend.

Getting Started with Self-Directed IRAs January 2014 Webinars

Location: Since these are webinars, you can attend from anywhere as long as you have a computer and a phone or alternatively a computer with speakers.

Details:

Have you ever looked at your retirement account statements and thought, “At this rate, I will NEVER be able to retire.” Come join us for an information packed webinar to learn how you can take control of your financial future by “Self-Directing” your IRA or 401k.

In this webinar we will explain:

Why most Americans are not on track to retire.

What is a Self-Directed IRA/401k?

How to UNLEASH your IRA or 401k to invest in what you UNDERSTAND.

The process to make an investment with your Self-Directed IRA/401k.

Strategies that clients are using to get quality returns.

How to Register:

Please click here to see when this webinar is being offered and to select the webinar you would like to attend.

CREIA (Carolinas Real Estate Investors Association) Monthly Meeting January 2014

CREIA (Carolinas Real Estate Investors Association)Vicki Gehring, from America IRA, LLC, will be attending the CREIA (Carolinas Real Estate Investors Association) Monthly Meeting.

American IRA is a National Provider of Self-Directed IRAs.

Event Location: Asheville-Buncombe Technical Community College – Enka Campus

Address: 1459 Sand Hill Road, Candler, NC 28715

Date: 1/13/2014

Time: 6:00PM to 9:00PM

Details:

To be announced soon

Event Leaders:

William and Lynelle Goacher

Cost: Free for members, $15 for guests or $20 for couples

Jim Hitt, CEO Of American IRA-A National Self-Directed IRA Provider, Will Be A Guest Speaker At Richard Roop’s Strategic Marketing Secrets Live Success Retreat.

This event is powered up with two seasoned and extremely successful real estate investors who have invested both with and without their Self-Directed IRAs. Beginning real estate investors will find the tools and knowledge they need to move forward and intermediate to advanced investors will be given a wealth of information to help them take their investing to the next level.

Jim Hitt, CEO and Founder of American IRA, will be a guest speaker at this event. Jim has over 40 years investment experience in all areas including the financing and acquisition of real estate, private offerings, mortgage lending, business’s, joint ventures, partnerships and limited liability companies using creative techniques. Jim’s developed, owned, and managed everything from single family homes to multi-unit commercial properties and million dollar business’s. Jim uses his experience to educate people about the power of tax-free and/or tax-deferred investing with Self-Directed IRAs.

Richard Roop has been a full time creative real estate investor since 1996. Richard has taught thousands of real estate investors throughout the nation how to generate cash now, cash flow, and cash for later, regardless of what’s happening in the economy. Richard has bought over 500 homes, manages millions of dollars in real estate and still actively buys and sells houses every month in Woodland Park, Colorado.

Attend this event to discover:

* How to Get Motivated Sellers Calling
* How to Get More Sellers Submitting Property Info Online
* How to Get More Offers Accepted
* How to Sell or Occupy Properties Faster
* How to Build Buyer Lists
* How to Raise More Private Money
* How to Have Private Lenders Waiting in Line for Next Deal
* How to Become a Marketing Pro
* How to Create Winning Marketing Campaigns
* How to Operate on a Shoestring Budget
* How to Reduce Wasted Time, Money & Effort
* How to Develop Positive Habits, Attitudes & Expectations
* How to Delegate & Outsource Most of the Work
* How to Generate Leads
* How to Write Compelling Ads, Emails & Letters
* How to Target the Most Qualified Prospects
* How to Hit the Right People at the Right Time
* How to Increase Ad Response
* How to Track, Organize & Manage Leads
* How to Convert More Leads into Cash Profits
* How to Create Sales Presentations in Print
* How to Get More Referrals & Repeat Business
* How to Follow Up Systematically
* How to Drive Free Traffic to Websites, Blogs & Online Ads
* How to Get Ranked Higher with Search Engines
* How to Increase Opt-ins
* How to Make Money with Social Media
* How to Create & Manage a Real Estate Website
* How to Cash in on Mobile Marketing Opportunities
* How to Find & Build the Best Mailing Lists
* How to Handle Incoming Calls for Maximum Results
* How to Select & Advertise in Offline Publications
* How to Distribute Flyers and Send Postcards for Free

Click here for more information.

American IRA, A National Provider of Self-Directed IRAs, Announces Fair Market Valuations Must Be Completed By March 15, 2014

Self-Directed IRA Fair Market ValuationClick here to download the Fair Market Valuation Form.

American IRA-a National Provider of Self-Directed IRAs since 2004, announces that Fair Market Valuations are due by March 15, 2014.

With traditional stocks, fair market valuations are not necessary because the market evaluations are done on a daily basis and publicly reported. In contrast, non-traditional assets held within a Self-Directed IRA have values that can change depending on many factors. Since the value of these assets fluctuate, a yearly outside evaluation is required by the IRS.

A QUALIFIED, INDEPENDENT THIRD PARTY should perform the valuation and then complete both sections of the Fair Market Valuation Form, including their signature.  When providing an asset’s current value, please provide all supporting documentation to substantiate the value.  Please be advised that this valuation will be used for reporting purposes to the IRS.

It is as easy as counting to 4 – clients need to:

1. Enter their account information per self-directed investment they maintain with American IRA, LLC. (Example-2 Assets requires 2 separate valuations)

2.   Enter the current fair market value of their investment identified by this form. A QUALIFIED, INDEPENDENT THIRD PARTY should complete the valuation or appraisal and individuals should include supporting documentation with regards to this valuation.

3.  List the contact information of the qualified, independent third party providing the valuation of their self-directed investment. The qualified, Independent third party may be:

  • Managing Partners
  • Certified Appraisers
  • Certified Commercial Realtors
  • Independent Valuation Company
  • Knowledgeable Party

4.  Follow these requirements:

A.    Real Estate: Broker’s opinion of value or appraisal. Tax values may not be used.
B.    LLC: Valuation needs to be completed by the manager of the LLC.
C.    Promissory Note: May be valued at the current principle balance.
D.    Gold, Charles Schwab Accounts, and Fidelity Accounts: May be valued at market value.

Click here to download the Fair Market Valuation Form.

If you have any questions about this or about Self-Directed IRAs, please contact the knowledgeable American IRA staff.

Self-Directed IRAs and Commercial Real Estate

Commercial Real EstateCommercial Real Estate – Keeping it Real!

Self-Directed IRA investing in commercial real estate is not much different than buying a residential property, except there’s a whole lot more due diligence.

The offering says gross potential, (a.k.a. pro forma). This is one of the things you’ll run into all the time. The seller says it’s got a great pro forma. Here’s what it can generate. You want to find out what it did generate, not what it’s going to generate. You want to keep it real and buy what it’s doing today.

Commercial Real Estate-REOs, Foreclosures, and Distressed Sales

With REOs, foreclosures and distressed sales, you’re going to have to evaluate on a case-by-case and get the real numbers. Obtain properties tax returns. With existing loans, you want to find out can they be assumed? Is there a prepayment penalty? Is there an extension available? What is currently owed and what are the terms?

Commercial Real Estate-Subordinate Financing

The other thing you want to find out is will they allow subordinate financing? Many commercial loans don’t allow subordinate financing. If you’re looking at creative financing or all-inclusive deeds of trust and if you can’t put a second on there, that creates a problem. We have a way around that.

Commercial Real Estate – Documents

  • Leases
    • To protect your Self-Directed IRA, verify the income of the property. A lease is the most important document. Are there any special arrangements? The landlord says they’re paying $1,000 a month, but it turns out that I’m obligated every year to repaint the place, re-carpet the place, they have first right of refusal on the lease next door at a below market rate. Does it match the rent roll?
    • Read every lease line by line and make notes, or get somebody that knows how to read leases line by line. Who owns the lease hold improvements?
  • Rent rolls
    • Help identify the turnover or collection issues
    • Lists the names, the rent, and the contact information
  • Tenant file
    • You should have an application, a credit report, a criminal background report, a signed current lease, and a variety of other things.

Commercial Real Estate – Expenses

Utility Bills

  • Check the utility bills for usage. You may have a tenant in there that’s using too much water, too much electric or too much gas if they’re centrally metered on a large commercial project, but they’re sub-metered.

Insurance

  • Is the property properly insured?
  • Does the insurance need to be increased?
  • Will the current insurance company be writing that type of insurance next year?
  • Are there any planned rate increases for this type of policy?

Property Taxes

  • When are they reassessed?
  • Are they delinquent? If they’re delinquent it means there’s an opportunity there for renegotiation with the seller. Obviously they’re not telling the truth or there are going to be problems other places.
  • When is the property reassessed? In California for example, it’s reassessed at sale. Different states do different things.
  • How does the property compare to similar properties in the assessed value? Is it higher or lower? The reason why that’s important is because you may have an opportunity to lower the taxes, which creates more income. It goes the other way too.

Commercial Real Estate – Title

You want to make sure that you get a good title company, and that ALTA will cover easements, encroachments and other title issues. To get an ALTA you need to make sure that the survey is correct. These steps are important, you don’t want your Self-Directed IRA to end up with the building on the wrong lot!

Commercial Real Estate – Third Party Reports  

  • Appraisals
  • Zoning
    • Make sure it’s zoned properly. If you’re expecting to be able to put 18 units per acre on there and you go down to the county and they say you can only put 16, that will affect the value of the property.
  • Permits and Licenses

Commercial Real Estate – Key Points

  • Tenant estoppel letter
    • Mike signs a tenant estoppel letter that he says I’m paying $1,000 a month, my lease started on September 1, 2009, it’s paid through August 1, 2012 and there are no other agreements written or oral than these terms and conditions.
  • Mortgage Estoppel letter
    • This is the same thing. The lender says these are the terms and conditions, and that is in fact the case, particularly with a private party.
  • All documents related to property should be requested and verified. Get a list of the personal property.
  • Create a cash flow statement on your numbers; keep it real…not pro forma.