The problem with the IRA, however, is that while you can roll over as much money that’s already in other qualified retirement plans as you as you want you can only contribute a relatively small amount of new money each year. In 2015, most people can contribute up to $5,500 into a traditional or Roth IRA, provided they meet the income qualifications (double that amount to account for spousal IRAs, in the case of married couples where one spouse has less than $5,500 in earned income.
There is a special ‘catch-up’ provision that allows individuals age 50 or older to contribute an additional $1,000 per year. But that still leaves Self-Directed IRA holders with a relatively small amount of allowable IRA contributions each year.
Many of our clients find that while they are very attracted to the idea of taking personal control over their retirement investments rather than delegate it to some mediocre mutual fund or money manager they’ve never met, they would like to contribute substantially more money to the strategy.
Fortunately for them, there’s a solution: the option of self-direction also extends to a number of other retirement plans.
Let’s take a look at some options:
Simplified Employee Pension plans (SEPS)
These plans allow employers to make substantial contributions toward employees’ retirement security, but they are much easier to set up than large 401(k) and other plans. These plans are very popular among owner-employees of very small companies with no or few full-time employees other than the owner, because they allow for a contribution of up to 25 percent of compensation, or $53,000 per year (whichever is less). In most cases, that is substantially more than an IRA alone will allow.
Moreover, contributions to a SEP do not negatively affect your eligibility for contributions to an IRA. You can do both.
Solo 401(k) Plans
These are 401(k) plans that are specially designed for very small companies with just one or two owner/employees – commonly a married couple. These plans allow for both employee and employer contributions, and in many cases allow for even greater allowable contributions than the SEP. These plans are much easier and cheaper to establish than traditional pension plans and full-scale 401(k) plans, and also allow for substantial asset protection against the possible claims of creditors.
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The Solo 401(k) is also available in a Roth option. That means you can make contributions on an after-tax basis, and assets grow free of federal income taxes for as long as you live. They are also not subject to required minimum distributions.
These plans are sort of a 401(k) lite, for employers with fewer than 100 businesses. Employees can make pretax contributions to these plans, and employers can make matching or flat-rate contributions on employees’ behalf (subject to certain rules).
We have hundreds of small business owner clients nationwide that use accounts like these to help them direct tax-advantaged retirement dollars at potentially lucrative but unconventional IRA assets like direct ownership of real estate, gold and precious metals, tax liens and certificates, farms and ranches, partnerships and LLCs, closely held businesses, foreign assets, oil and gas, non-traded securities, private placements, venture capital and much more.
If you think you can benefit from this kind of freedom within your retirement investments, and you want to take more control over your own retirement assets, please call us right now at 866-7500-IRA(472). Or visit us online at www.americanira.com for much more information about all aspects of self-directed retirement investing.
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