Self-Directed IRA Plans for Small Business Owners

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ereader_news_800_wht_8849There’s a lot of press out there about the Self-Directed IRA.

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)

gold_nest_egg_ribbon_800_wht_2725(1)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.

[tweetthis twitter_handles=”@iraexpert” hidden_hashtags=”#SelfDirectedIRA”]There’s a lot of press out there about the Self-Directed IRA…[/tweetthis]

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.

SIMPLE IRAs

These plans are sort of a 401(k) lite, for employers with fewer than 100 businesses. business_woman_holding_briefcase_17207Employees 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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With Tax Year 2013 In the Bag, Let’s Review Self-Directed IRA 2014 Contribution Limits

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2014 Contribution LimitsApril 15th has come and gone. Which means if you haven’t maxed out your allowable Self-Directed IRA contributions for 2013, it’s too late. But it’s not too late to take full advantage of the power of tax deferral or tax-free growth (for Roth accounts) for tax year 2014.
Let’s take a moment to review what’s allowable this year:

2014 contribution limits for traditional IRAs are $5,500 for the year – actually, through next April 15th, provided you meet the income requirements. The income thresholds are tougher to meet if you are covered by a workplace retirement plan, however.
Catch-up contributions

If you are 50 or older, or you will turn 50 by the end of the calendar year, however, you’re eligible to throw in another $1,000 in catch-up contributions. So that means your limit for 2014 is $6,500.

The same limits apply to the Roth IRA, though the income limitations are much more generous: Single taxpayers can make a full contribution up to an adjusted gross income of $114,000, and the allowable contribution phases out at $129,000.

If you’re married and file jointly, you can make the full $5,500 contribution (plus allowable catch-up contributions) up to an AGI of $181,000, after which time your allowable contribution phases out gradually until it reaches zero at $191,000 for the year.

Rollovers from other qualified tax-deferred retirement plans, such as 401(k) plans, are unlimited for the traditional IRA. Some limitations may apply to rollovers from tax-deferred plans to Roth IRAs, since the income you realize counts against you when it comes to the adjusted gross income contribution phaseouts.

SEPs or Simplified Employee Pension Plans

While most of the press you read refers to Self-Directed IRAs, remember that you can also establish a Self-Directed SEP IRA. These have all the advantages of a self-directed traditional IRA, with the additional advantage of a much higher contribution limit.

For 2014, your allowable maximum dollar allocation to a SEP IRA, whether it’s a Self-Directed SEP IRA otherwise, is $52,000. That’s a $1,000 increase over last year, so if you were making regular monthly contributions to max out your contribution, it’s time to increase those contributions. The maximum compensation limit, overall, is $260,000, which is a $5,000 increase from tax year 2013.

You have until April of 2015 to make contributions for tax year 2014 SEPs. If you filed for an extension, you can still make the contribution until the date the tax return is due.

Likewise, as of the date of publication, it is still not too late to make a SEP contribution for tax year 2013, either, if you filed for an extension and your return is not due yet.

Self-Directed SIMPLE IRAs

You can create a Self-Directed SIMPLE IRA, too, if you meet the requirements. This year’s contribution limits are unchanged from last year at $12,000. If you meet the age requirements for cat-up provisions, your allowable contribution is $14,500.

SIMPLE IRAs are tricky in that they have two separate contribution deadlines, so pay attention: The contribution deadline for employee contributions is year-end. The deadline for employer contributions is April 15th of 2015.

Self-Directed Solo 401(k)s

Self-Directed 401(k)s – usually Self-Directed Solo 401(k)s, or ‘one participant 401(k)s – are increasingly popular in our industry thanks to their relatively high contribution limits and tax advantages. You can contribute up to $17,500 to a solo 401(k) per year. Technically, this is a deferral of compensation. If you’re self-employed, you are deferring the realization of “earned income” by diverting some of what you earn to a 401(k). And you can actually defer everything – 100 percent of compensation – up to $17,500 per year for 2014. If you qualify for catch-up contributions, your limit goes up to $23,000.

On top of this, if you are your own employer, you can also to defer up to 25 percent of compensation under the ‘nonelective’ heading. Note that in calculating this amount, you have to deduct contributions for yourself from your overall compensation, as well as one half of your self-employment tax. For more information, see IRS Publication 560, Retirement Plans for Small Business

Better yet, give us a call at 1-866-7500-IRA(472) and we’ll walk you through the calculations, including whether you would be better off in a self-directed SEP IRA or a Solo 401(k) plan. We look forward to serving you.

 

 

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Alternative self-directed IRA Investments for the Self-Employed and Small Business Owner-Part 2

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SIMPLE IRA Solo 401KFor those at higher income levels, traditional IRAs can be problematic, because of the strict income limits on these accounts. If you have an income over a certain amount, your ability to deduct contributions to traditional self-directed IRAs is reduced or eliminated. You can still make traditional self-directed IRA contributions on a non-deductible basis, but the overall $5,500 limit on IRA contributions ($6,500 for those over age 50) is still limiting for successful self-employed people and small business owners.

Solo 401(k)s

Under some circumstances, creating a Solo 401(k) plan can enable you to set aside even more money on a pre-tax basis than you can in a traditional self-directed IRA. In addition to the potentially higher contribution limits, there are other important potential benefits to creating a self-directed 401(k) as well:

Under Some Circumstances, Exempt from UDIT Taxes. UDIT, or Unrelated Debt Income Tax, is a special kind of tax the IRS imposes on tax exempt entities and retirement plans. Specifically, it is a levy on any income the plan realizes that is attributable to borrowed money, as opposed to your own contributions. 401(k) plans may be exempt from this requirement.

Loans. You can set up your 401(k) plan to allow for plan loans. This can be an important source of short-term capital for small business owners: Loans from 401(k) plans don’t require a credit check. You just have to pay the loan back to your 401(k) to avoid penalties.

Designated Roth Accounts. As of 2006, 401(k) plan sponsors have been allowed to create designated Roth accounts within their plans. Contributions to these accounts are not tax deductible, but the growth in these accounts is tax free. There are also no required minimum distributions to worry about.

SIMPLE IRAs

If you have more than just a couple of employees, you may want to consider a self-directed SIMPLE plan. These plans may make sense under the following circumstances:

  • You have fewer than 100 employees
  • Your business consists of more than just you and your spouse and one or two low-wage earning employees.
  • You need a retirement plan to help you attract and retain talent in the marketplace.
  • You don’t want to commit to funding a fixed amount towards employee’s plans every year.

As of 2013, employees – including owner employees – can defer taxes on up to $12,000 each year. Those over age 50 can contribute an additional $2,500 on a tax-deductible basis. You can also contribute another 3 percent of your compensation each year as an employer contribution.

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

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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 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

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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!

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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.

Jim Hitt, CEO of American IRA, LLC, A National Self-Directed IRA Provider, Shares Important Steps To Maximize Retirement Planning

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Jim Hitt, CEO of American IRA, LLC, a national self-directed IRA provider, shares important steps to maximize retirement planning. Proper planning is key to enjoying those retirement years. Lack of planning is a great way to end up eating peanut butter sandwiches every meal (yes, everyone loves peanut butter sandwiches still eating them every meal is a bit much!) and soaking your feet in that $10 toddler swimming pool trying to keep cool!

Many people have difficulty planning for retirement because they are not sure where to begin.

The Time Element

The first thing that must be considered when planning for retirement is the “time element” in other words how old the person is now and how many years are left before they plan to retire. The longer the time between their current age and their retirement age, the more risk their portfolio can withstand. Though a point of caution to keep in mind is that the goal is to grow the retirement account; thus, risk should always be carefully weighed as a big loss in the retirement account even at an early age is still a loss that one should avoid if possible.

Expected Spending Habits

The second thing each person should consider is their expected spending habits during retirement. Keep in mind that lots of people underestimate this amount which leads to financial hardships in their retirement years. Be honest about this when forecasting those estimates. Realistically, most people ‘who have planned properly’ spend more each year during those retirement years than they spent each year they worked. The reason for this is pretty simple; retirees have more time to do the ‘fun things’ in life and thus tend to spend more money during their retirement years.

Pre-tax and After-tax Retirement Accounts

The third consideration for taxable retirement accounts is to be sure each person is forecasting their funds based on those after tax distributions. This may sound like the easiest step in planning…still it is difficult to know what the future tax rates will be…a good rule of thumb is to overestimate the tax burden and plan for that overestimated amount. Of course, those who have Roth IRA accounts will not have to worry about this as they paid their taxes on that account when they funded it and will not have to pay taxes on any of their distributions.

Diversification

The fourth important rule of thumb is to diversify their retirement portfolio. Diversification helps to protect the retirement fund from the ups and downs of economic times. At American IRA, LLC, people can use their self-directed retirement accounts to invest in real estate, private lending, limited liability companies, precious metals and much more!

The Power of Compounding

A final point that is often overlooked is the power of compounding interest. A person who participates in hard money lending within their IRA generally receives interest rates between 7% and 10%. Most banks are currently offering less than 1% interest on savings accounts and 3% or less on CDs. Here’s a comparison of how that interest compounds over time using $50,000:

$50,000 at 1% Compounded Once Annually for 30 years equals $67,392.45

$50,000 at 7% Compounded Once Annually for 30 years equals $380,612.75

It is easy to see the growth potential of investing with a retirement account versus letting funds sit in a savings account!

Jim Hitt concludes, “Careful planning is critical to the onset of a happy and full-filling retirement. Self-directed IRAs provide people with the largest amount of flexibility, choice, and control over what they invest in and how much risk they put their portfolio in. When people wonder what to invest in, it depends on what they are currently doing; what their area of expertise is; what their comfort level is with risk. If they are comfortable with real estate investing, then it makes sense for them to use their real estate expertise to grow their retirement funds. For example, they can buy a rental property within their retirement fund and allow that property to contribute rental income to the retirement fund. At the same time, they can keep some mutual funds and perhaps even some CDs in their retirement account. This mix would give them a nice safe yet diverse retirement portfolio.

Another important point that many people over look is their loved ones. I have seen many parents and grandparents who want to help their children and grandchildren with college tuition and thus sacrifice their retirement funds to do so. Coverdell Education Accounts are a great way of saving for your loved one’s tuition expenses. Another little known fact is that Roth IRAs can be used for tuition expenses. I urge everyone to think through not just your retirement plans, but also, what you may want to do for your loved ones during your retirement and what you want to leave your loved ones in your Will. Thinking this through early and building your retirement account to cover all those things will allow you the happiest retirement years.”

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 withinvestments 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.