Self-Employed Retirement Planning

Self-Employed Retirement PlanningIf you are successfully self-employed, or you are the owner-employee of a successful small business, most of the financial news you see doesn’t speak about self-employed retirement planning.

For example, there’s a lot of information out there about how a straight W-2 employee can make use of his or her employer’s Traditional 401(k) plan. But there’s not much out there about self-employed retirement planning such as how to design a Solo 401(k) plan for yourself, or whether you could be better off with something like a SEP, or Simplified Employee Pension plan.

Taking Charge

For those of you who are in charge of your own financial destiny, and who have not hitched their stars to an outside employer, understanding self-employed retirement planning is critical. You can’t rely on anyone else to take care of your retirement security. Unfortunately, according to a recent industry survey, some 28 percent self-employed individuals aren’t saving for retirement at all.

Nobody is going to do it for you. With that in mind, you will want to take advantage of every quirk the law allows to help you amass your retirement nest egg, and protect it from predators. Here are some principles to keep in mind.

  • Use tax leverage. Accounts grow faster if the tax man leaves them intact, as opposed to levying a current tax on every dividend, every dollar of interest received, and on ever dollar of profit from trading. Retirement accounts like IRAs, Roth IRAs, Solo 401(k)s, Traditional 401(k)s, SEPs and SIMPLES let your money grow tax deferred, or in the case of Roth accounts, tax-free.
  • Protect assets from lawsuits. Trial lawyers go after businesses all the time, for both good reasons and on trumped-up pretenses. They also go after business owners, personally. But money you can keep outside of your business, and in a retirement account, is largely off the table for collections. Specific laws vary by state, but federal law gives a great deal of protection to funds in Traditional 401(k)s and Solo 401(k)s and other pension plans and in IRAs.
  • Leverage your expertise. You’re in business, or you’re self-employed because you’re good at something. You are probably an expert in something you can leverage, even within your IRA or other retirement account. That’s where we have some good news: Retirement accounts aren’t limited to mutual funds, annuities, CDs and money markets. You can invest in nearly anything you can imagine except life insurance, gems, jewelry, art, collectibles and alcoholic beverages – through an increasingly popular option called self-direction.
  • Put lots away. As long as you have sufficient cash on hand to meet your immediate business needs, and accomplish your long term business strategy and lifestyle goals, the more money you can take out of your business and out of your personal name and move into protected retirement accounts, the better.
  • Combine multiple types of accounts. For example, combine Roth and tax-deferred accounts to hedge against changes in tax rates in the future. Take advantage of more liberal hardship withdrawal terms in IRAs but also take as much advantage as you can of the bigger contribution ceilings on Traditional 401(k)s, Solo 401(k)s and SEPs.

Your Options

When it comes to self-employed retirement planning, you have several – the best one for you depends on your circumstances, including the amount you can contribute and what percentage of your income is salary versus Schedule C or dividend income.

The IRA – You get a tax deduction, and you can contribute up to $5,500 per year, or $6,500 if you are age 50 or over. Taxes are deferred until you take the money out. You also have a 10 percent penalty on most non-hardship withdrawals prior to age 59½. Beware: Once you turn 70 ½, you must begin taking money out by the following April 1, or you will face some harsh tax penalties. Your deduction may be limited if your income is high, or if you are covered by another retirement plan at work.

The Roth IRA – Similar rules to the IRA, except there’s no tax deduction. Instead, your investment grows tax-free after that, as long as you leave the money in it at least 5 years. There’s still a 10 percent penalty on the growth if you withdraw money prior to age 59 ½, unless certain hardship conditions apply.

Both versions of the IRA lend themselves easily to self-direction.

The Solo 401(k) – This is a 401(k) plan specially designed for the self-employed or ultra-small business owner. Fees and administration requirements are stripped down, but you can still contribute up to 20 percent of your net self-employment income plus $17,500, up to $52,000 in 2014, when you combine employer and employee contributions. Those age 50 or older can put in up to $5,500 more on an annual basis. This makes the Solo 401(k) an attractive option for those with relatively high incomes who are working on self-employed retirement planning.

Solo 401(k) plans lend themselves well to self-direction, and you can set them up to allow for loans from within the plan if you should so choose. Solo 401(k)s also tend to work well for self-directed investing strategies that involve leverage, such as real estate, because 401(k)s are exempt from unrelated debt-financed income tax rules that apply to IRAs.

You can also select Roth tax treatment for your Solo 401(k) plan, if you choose.

The SEP IRA – The SEP IRA also allows you to set aside up to $52,000 in 2014, or 25 percent of self-employment compensation – whichever is less. You have more flexibility if you have no employees – if you do have full-time employees you will likely have to fund their accounts with matching funds on the same basis that you match your own contributions with company money.

The SEP IRA is a great option for self-employed retirement planning because of the large annual contribution limit, and because of the relative ease of setup and low ongoing administration costs.

The SEP IRA also is compatible with self-direction.

Want to learn more? Stay tuned to this blog! Or better yet, visit our library at www.AmericanIRA.com, or call us at 866-7500-IRA (472). We are one of America’s leading experts on self-directed retirement investing and work with clients all over the country.

We look forward to serving you.

 

 

 

 

 

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Self-Directed SEP IRAs – The Basics

SEP IRAMany people have already heard about real estate IRAs, gold IRAs, and Self-Directed IRAs in general. What is less well understood, however, is that the self-direction concept isn’t limited to IRAs. You can also gain the same flexibility, versatility and potential for diversification from other kinds of retirement plans as well – including the Simplified Employee Pension Plan, or SEP IRA.

SEPs have become very popular with small business owners in recent years for a variety of reasons:

o   They offer generous contribution limits that are several times higher than those for IRAs. In 2014, SEP plan sponsors can contribute up to 25 percent of compensation to their SEPs, up to an annual limit of $52,000.

o   They are much less expensive to set up than traditional 401(k) plans and defined benefit pension plans.

o   They do not lock business owners into making a specific contribution every year.

o   They do not require an actuary

SEPs are particularly well suited to self-employed individuals or owner-operators who are the only full-time employee of their own businesses, and who have a significant amount of free cash flow to invest. However, you are not obligated to invest in the SEP if you have a tough year. If you do have employees, however, and you choose to fund your own account, you must fund theirs as well.

SEP Eligibility

To participate in a SEP IRA, an employee must be at least 21 years old and must have worked for the company in at least three of the last five years.

Self-Directed SEP Investment Options

  • Like their IRA cousins, SEPs allow you to self-direct. If you are dissatisfied with the mediocre returns commonly available in mutual funds and publicly traded stocks and bonds. As s SEP Owner, you can own any of these alternative asset classes within your self-directed SEP IRA:

o   Rental real estate

o   ‘Fix and flip’ properties

o   Commercial real estate

o   Tax liens and certificates

o   Private lending

o   Hard-money lending

o   Land banking

o   Private equity

o   Closely-held companies

o   Partnerships and LLCs

o   Gold and other precious metals (with some restrictions)

o   Unregistered securities

o   Individual stocks and bonds

…And much more. Just be sure not to try to invest your SEP money in a small list of assets the IRS prohibits within retirement accounts:

o   Gems and jewelry

o   Life insurance

o   Collectibles

o   Alcoholic beverages

o   Certain forms of precious metals of inconsistent purity standards.

There are also some restrictions on counterparties in your SEP transactions. Specifically, your SEP IRA cannot directly conduct business with you, your spouse, your direct ascendants, descendants, any of their spouses, nor any entity controlled by them. You cannot buy from, sell to or rent to any of them, nor can you lend SEP money to or borrow from them – even if your SEP is engaged in the business of lending money. These rules are designed to prohibit the abuse of the tax advantages of the SEP IRA.

Who Should Consider a Self-Directed SEP IRA?

Consider a self-directed SEP IRA if many of the following criteria apply to you:

  • You are a sole proprietor, independent contractor or self-employed
  • You want to make contributions for yourself as well as for any employees
  • You don’t want to be locked in to an inflexible contribution every year
  • You have a significant amount – over IRA limits (currently $5,500 or $6,500 for those aged 50 and older) to invest every year
  • You want a broader array of investment options than those available to you in an ‘off-the-shelf’ program.

Self-Directed SEP IRA Contribution limits

The current contribution limit is 25 percent of your total compensation for the year, up to a maximum contribution of $52,000.

To learn more, simply log on to our website and enroll in one of our free, no-obligation webinars. We’ll walk you through all the basics. Or give us a call at 1-866-7500-IRA (472). We can walk you through the process and give you a personalized assessment for your own particular circumstances.

 

 

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Alternative Self-Directed IRA Investments for the Self-Employed and Small Business Owner – Part 1

Self-Directed SEP IRAsSelf-directed IRAs allow you to take personal charge of your IRA holdings and direct your investment dollars into any number of non-traditional retirement account holdings – including real estate, private IRA lending, private placements, tax liens, precious metals, and much more. This can be an important factor in diversifying your retirement portfolio, or allowing you to pursue greater returns than you may expect in stocks, bonds, mutual funds and CDs.

Good News

The good news is that the many benefits of self-directed IRA accounts aren’t limited to IRAs. The tax code also allows you to use self-direction within other popular small-business retirement plans, including SEP-IRAs, SIMPLE IRAs and Solo 401(k) plans (also called “individual 401(k) plans).

Even if your income renders you ineligible to make deductible contributions to a traditional IRA, you can still make deductible contributions to these retirement plans – and in most cases, you can contribute a lot more than $5,500. Under the right circumstances, your tax deductible retirement account contributions can be as high as $51,000 in a calendar year.

SEP IRAs

The SEP IRA, or simplified employee pension plan, is one of the more popular retirement solutions for small business owners. It is relatively easy to set up, and works extremely well for organizations with just one or two highly-paid principals.

As of 2013, you can contribute up to 25 percent of your taxable compensation, or $51,000 – whichever is lower – into a SEP IRA, except for self-employed individuals (see below).

Some factors to keep in mind:

  • Your business must contribute to SEP accounts for all qualified employees.
  • Generally, a qualified employee is any employee who is at least 21 years of age, has worked for you in at least three of the previous five years, and who earned at least $550 during the year from you.
  • You aren’t required to make company contributions to employee SEPs every year. However, if you do make any contributions, you have to contribute to everyone’s account that performed services for your company that year.
  • To deduct a SEP contribution for a given tax year, you must make the contribution by the due date of your tax return for the year, including extensions.

What About Schedule C Business Owners?

Some self-employed individuals – the truly self-employed, as opposed to those who are owner-employees of their own corporations – assume that they cannot open a Solo 401(k) plan or other small-business retirement plan. This is incorrect: There is nothing in the law that prohibits you from creating and contributing to these plans, making fully tax-deductible contributions.

If you file your income taxes using a Schedule C to report business expenses, you can still contribute to any of these plans. However, calculating your maximum contribution is a little different for self-employed individuals, because you must take into account the fact that you must pay self-employment taxes. In practice, then, after self-employment taxes are accounted for, most self-employed business owners can only contribute about 20 percent of your net Schedule C income into a SEP IRA.

Getting Started

For more information on this or any type of self-directed IRA account, please feel free to contact American IRA, LLC via e-mail [info@americanira.com] or via phone [1-866-7500-IRA(472)], or visit our website [www.americanira.com].

 

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Self-directed IRAs Too Good To Be True? Is This Dead On or Dead Wrong? Jim Hitt, CEO Of American IRA-National Self-Directed IRA Provider Responds To USA Today Article

Self-directed IRAs too Good to be True? Is this dead on or dead wrong? Jim Hitt, CEO of American IRA-national self-directed IRA provider responds to the USA Today article “Investing: Are self-directed IRAs too good to be true?” Jim Hitt says, “You Decide,” isn’t that what America is all about?

The article says “Just because you can do something doesn’t mean that you should. You may be capable of cross-breeding trout with electric eels, for example but you probably shouldn’t”. Cross-breeding trout with electric eels might not be a good idea but cross-breeding donkey’s with horses resulted in a new breed…mules. Mules are sure-footed, hardy, and calmer than horses and less stubborn and smarter than donkeys. Benjamin Franklin experimented with a kite and lighting and this experiment began our understanding of electricity. There are many examples in history of ‘experiments’ that resulted in the modernizations and life improvements that everyone now enjoys.

Jim Hitt interjects, “Just because you can doesn’t mean you should but if you never try then you will never know what great things can happen. I have been an investor for more than 30 years and I can tell you that those who try the hardest, those that do their due diligence and make intelligent investment choices are the ones that experience the greatest success.”

David G. is a client of American IRA who grew a Roth IRA from $6,800 to $293,000 in five short years. This success was achieved by David’s continuous prospecting and tireless advertising along with some very carefully done due diligence. With great work came great success in David’s case.

As the USA Today article says “You can put many types of investments in self-directed IRAs.” There are very few restrictions on the types of investments allowed in a self-directed IRA. A self-directed IRA account can invest in a variety of assets such as real estate, private lending, limited liability companies, precious metals and much more!

The article also goes on to warn about the possibility of scams involving self-directed IRA investments. Jim Hitt comments “Risk is not isolated to self-directed IRA investments. Even the professionals missed the $50 billion Bernie Madoff scam and the $7 billion Allen Stanford scam. I would much rather do my own ‘due diligence’. Whether you are investing inside an IRA or outside an IRA, the risk of scams and bad investments is the same. The only thing that changes is where you are pulling your funds from for the investment. Investing, regardless of whether it is inside an IRA or not, requires careful due diligence and consulting with professionals to ensure that your hard earned money is protected. As for the fact that the article calls out there are tax advantages and disadvantages…that is entirely true and that is exactly why you should consult with a tax professional to see if investing with a self-directed IRA fits the investment you have in mind. In most cases you will find that investing inside an IRA is a much more beneficial choice.”

About:

American IRA, LLC was established in 2004 by James C. Hitt in Asheville, NC.

The mission of American IRA is to provide the highest level of customer service in the self-directed retirement industry. Mr. Hitt and his team have grown the company to over $250 million in assets under administration by educating the public that their self-directed IRA account can invest in a variety of assets such as real estate, private lending, limited liability companies, precious metals and much more!

As a self-directed IRA administrator they are a neutral third party. They do not make any recommendations to any person or entity associated with investments of any type (including financial representatives, investment promoters or companies, or employees, agents or representatives associated with these firms ). They are not responsible for and are not bound by any statements, representations, warranties or agreements made by any such person or entity and do not provide any recommendation on the quality profitability or reputability of any investment, individual or company. The term “they” refers to American IRA, located in Asheville, NC.

Jim Hitt, CEO Of American IRA-A National Self-Directed IRA Provider, Shares Information Regarding The Use Of The Crowdfunding Exemption In The JOBS Act

Jim Hitt, CEO of American IRA-a national self-directed IRA provider, shares information regarding the use of the Crowdfunding exemption in the JOBS Act. The North American Securities Administrators Association (NASAA) have issued an important warning investors should be aware of in relation to crowdfunding.

Here is the NASAA warning:

The NASAA is concerned with the threat of potential con artists, claiming to be crowdfunding brokers or to represent online portals through which future deals must be conducted. “Be aware of unscrupulous persons offering to take fees from you now to help you raise capital over the Internet,” the alert reads. The offers could be a scam because the law has not been implemented yet, said regulators.

For those unfamiliar with crowdfunding, here’s a quick definition: According to accountingtoday.com, “Crowdfunding is the ability for a large group of people to band together and make small investments that collectively are enough to fund a startup company.”

Jim Hitt says, “A self-directed IRA can be used as a funding source for crowdfunding.”

Most crowdfunding is done via the internet via websites such as Kickstarter, Circleup, and Fundable. This is an interesting funding approach that has launched many start up companies of varying success levels. The key with this as with any investment is for people to do their due diligence before investing their hard earned money.

Jim Hitt concludes, “The crowdfunding law has not been implemented yet and looks as though it is a long way off with some experts estimating April 2013 as the earliest date. I can’t stress enough to make sure you do your due diligence and consult with experts before participating in any crowdfunding opportunities.”

About:

American IRA, LLC was established in 2004 by James C. Hitt in Asheville, NC.

The mission of American IRA is to provide the highest level of customer service in the self-directed retirement industry. Mr. Hitt and his team have grown the company to over $250 million in assets under administration by educating the public that their self-directed IRA account can invest in a variety of assets such as real estate, private lending, limited liability companies, precious metals and much more!

To learn more about American IRA, LLC and self-directed IRAs/self-directed Solo 401(k)s, please contact our office at 1-866-7500-IRA(472).

As a self-directed IRA administrator they are a neutral third party. They do not make any recommendations to any person or entity associated with investments of any type (including financial representatives, investment promoters or companies, or employees, agents or representatives associated with these firms ). They are not responsible for and are not bound by any statements, representations, warranties or agreements made by any such person or entity and do not provide any recommendation on the quality profitability or reputability of any investment, individual or company. The term “they” refers to American IRA, located in Asheville, NC.

American IRA, LLC Announces the Opening of Its Atlanta, GA Self-Directed IRA Training Center!

American IRA, LLC announces the opening of its Atlanta, GA Self-Directed IRA Training Center! Jim Hitt, CEO of American IRA, LLC says “We have locations in Asheville and Charlotte and are now adding a location in Atlanta.”

Our Atlanta location will be the venue for numerous training events throughout the year.

Details of the training offered:

  • There will be training for both current clients and those interested in learning more about self-directed IRAs and/or American IRA, LLC.
  • The training will be offered via seminars and classes.
  • The American IRA staff will host private training for groups upon request tailored to the needs of each particular group.
  • Training will cover all levels from self-directed IRA beginners, intermediate, advanced, and creative techniques.

We already have interested parties requesting training at this location for their groups and welcome anyone that is interested in training to contact the American IRA, LLC office with their request.

Training center location: 100 Glendalough Court, Suite D2, Tyrone, GA 30290

Watch our events page for upcoming training opportunities or sign up for our educational e-mail list.

About:

American IRA, LLC was established in 2004 by James C. Hitt in Asheville, NC.

The mission of American IRA is to provide the highest level of customer service in the self-directed retirement industry. Mr. Hitt and his team have grown the company to over $250 million in assets under administration by educating the public that their self-directed IRA account can invest in a variety of assets such as real estate, private lending, limited liability companies, precious metals and much more!

To learn more about American IRA, LLC and self-directed IRAs/self-directed Solo 401(k)s, please contact our office at 1-866-7500-IRA(472).

As a self-directed IRA administrator they are a neutral third party. They do not make any recommendations to any person or entity associated with investments of any type (including financial representatives, investment promoters or companies, or employees, agents or representatives associated with these firms ). They are not responsible for and are not bound by any statements, representations, warranties or agreements made by any such person or entity and do not provide any recommendation on the quality profitability or reputability of any investment, individual or company. The term “they” refers to American IRA, located in Asheville, NC.