Colorado Self-Directed IRA

Colorado Self-Directed IRA

Colorado Overview

Colorado is widely regarded as a retiree-friendly jurisdiction. It’s a state of cool climate in most of the state, and breathtaking Rocky Mountain scenery. Ski fans will love it, and there is plenty of other outdoor activity, including fresh-water fishing, hiking, camping, climbing, and RV living.

Denver and Aspen are quite pricey – Aspen, especially, is a sought-after vacation and resort spot. But there are lots of places with more modest costs of living throughout the state.

Health care is also very good in Colorado, with the state’s large population of retirees supporting loads of health care services.

Denver is a major air transportation hub, centered near the middle of the country, and it’s easy to get to the grandkids anywhere in the country if you like.

Golfers will love the great courses at Castle Pines Golf Club in Castle Rock, Ballyneal Golf Club in Holyoke, Cherry Hills Golf Club, Colorado Golf Club in Parker and Sanctuary at Sedalia.

Because of the wooded terrain and dry climate in much of the state, Colorado is prone to forest fires, and its many valleys and canyons are prone to flash flooding, so do not skimp on insurance.

Why a Colorado Self-Directed IRA?

Stocks. Mutual funds. CDs. Bonds.

For years, you have heard that these are the types of investment vehicles through which to secure your retirement. The stock market tends to appreciate over the long haul, after all, and bonds are conservative and low on risk. Mutual funds have popped up in recent decades as one of the most popular investment vehicles as well, closely monitoring certain aspects of the stock market.

What most people do not know is that these are not the only investment types available for retirement.

In fact, if you choose self-direction, you will find that the IRS allows for all sorts of different types of investments in a retirement account. You can invest in gold and precious metals, real estate, private companies, and more. There are a few select limits on the sorts of investments you can make, but the good news is: you often have more legal options than you have limits.

For many people, a Colorado Self-Directed IRA means freedom, opportunity, and self-determination. It means not being satisfied that the “market” is the only market that exists. It does not mean you have to switch away all of your old investments. But if you want to invest in real estate or gold to help ensure a secure retirement, those options are indeed open…

And, like other IRA types, Colorado Self-Directed IRAs come with all sorts of investment protections.

Understand Your Colorado Self-Directed IRA Plan Options

Let’s take a moment to consider the various retirement account types:

  • Traditional Self-Directed IRA: A retirement account in which you can invest pre-tax or after-tax dollars, and in which your investments grow tax-deferred, meaning you will pay taxes on them once you begin withdrawing them. When you start making retirement withdrawals–defined as withdrawals after you turn 59.5 years old–the money is treated as income.
  • Self-Directed Roth IRA: Similar to a Traditional IRA, except you make after-tax dollar contributions so you are paying taxes on the front end. This allows your investments to grow tax-free. After the account has been established for 5 years and after you turn 59.5, your withdrawals are tax and penalty-free.
  • Traditional 401(k): A qualified plan that allows employees to make pre-tax elective deferrals. Business owners who want to self-direct can use these as well and allow employees to self-direct their accounts.
  • Self-Directed SEP IRA: Simplified Employee Pension that allows employers to make contributions to the retirement of their employees. An employer can also contribute to their own retirement with a Self-Directed SEP IRA.
  • Self-Directed SIMPLE IRA: Savings Incentive Match Plan for Employees. A “tax-favored” plan that small businesses and individuals can set up for their employees.
  • Self-Directed Solo 401(k): A 401(k) plan that a self-employed individual can use for retirement that offers high contribution limits.

As noted throughout, these same accounts offer a high degree of self-direction if you want to direct your own accounts.

A Variety of Investments

One of the chief benefits of directing your own retirement account is that you get to choose your investments from a wide range of options:

  • Real estate: Apartment buildings, commercial property, retail space, raw land, etc. If you want to earn an immediate income for your retirement account with your investments, rent can be one of the most powerful ways to ensure that. You can also use leverage in a Colorado Self-Directed Real Estate IRA when using non-recourse loans.
  • Private IRA Lending: You can negotiate the terms, interest rate, and length of the loan, as well as other variables like the monthly payment amounts and whether the loan is secured or unsecured.
  • Private companies: Public stocks are what most people think of as “investments,” but there are also private stocks to consider. There is a lot of opportunity for growth in private company stock, but also plenty of risk to consider.
  • Tax liens: With a high rate of return, these investment types are ideal for self-directing investors with smaller accounts.
  • Precious metals: Gold, silver, platinum, palladium. These metals are famous as a “hedge” against economic downturn, which is why many people turn to them as a way to avoid putting all of their eggs in the stock market basket.
  • Single Member LLC: An investor can create an LLC to be owned by their Colorado Self-Directed IRA, managing it themselves. This gives a significant degree of protection; however, you will likely want to consult with a professional to learn how to do this properly.

What You Can’t Do with a Colorado Self-Directed IRA

As fun as it is to talk about the various options you can have with a self-directed retirement account, it should be noted that there are certain limits, as well. You cannot self-direct a retirement account to invest in life insurance, collectibles like art, gems/jewelry, coins, alcoholic beverages, and tangible personal property. As enticing as it might be to put that wine cellar under a Self-Directed IRA protection, it’s simply prohibited–so look for your protected retirement investments elsewhere.

Who You Cannot Do Business With

A disqualified person is anyone the Self-Directed IRA has decided is not “arm’s length” from the IRA.  Your IRA cannot engage in any transactions with these individuals or you risk the tax-status of your IRA.

A Disqualified Person is:

  • You
  • Your spouse
  • Any of your lineal ascendants or descendants (parents, children, grandchildren, and the spouses of children, grandchildren, etc. – including legally adopted children).
  • Any investment providers or fiduciaries of the IRA.
  • Any entity (a corporation, LLC, trust, etc.) where a disqualified person owns more than 50%.
  • Any entity (like previously listed) where the IRA account holder is an officer, director, a 10% or more shareholder, or a highly compensated employee.

Getting Started with American IRA

Although we have thrown a lot of abbreviations and words at you, you should know that self-directing your retirement is not as complicated as it might sound. The steps are very simple:

  • Open a Colorado Self-Directed IRA with American IRA. Make sure to put thought into the type of account you’d like to open; review the options available to you and select the one that makes the most sense for your individual situation.
  • Fund your account. This is where the options can throw people off. Let’s take a look at them quickly:
    • Contribution: Simply putting money into the account throughout the year. This is what a lot of the funding will look like once the account is already opened.
    • Conversion: Withdrawing part or all of the cash/assets from a Traditional IRA and putting them into a Roth IRA is called a conversion. Once the cash/assets are distributed, you have 60 days to put them in the Roth IRA account.
    • Rollover: A tax-free distribution of cash/assets from one account to be put in another retirement account. You are permitted one rollover per year.
    • Transfer: Transferring cash/assets directly from one retirement account to another retirement account. Because you do not take direct possession of the cash/assets, you are allowed unlimited transfers and there is no tax.

How it Works

1.)  Open an American IRA Self-Directed IRA

  • Select the type of account that you would like to open.

2.)  Fund Your Account

  • Move money into your account by transfer, rollover or contribution.

3.)  Select an Investment

  • Find an asset you want your IRA to purchase and submit an Investment Form. American IRA will work with you and your professionals for a smooth closing.

4.)  Review the Instructions

  • Visit the “How it Works” page on our website to review the instructions for the asset you want to purchase and submit the paperwork required for the investment you have chosen.

5.)  Provide Payment Authorization

  • Submit Payment Authorization Forms for expenses that pertain to the asset your IRA has purchased.

6.)  Submit Deposit Coupons

  • Deposit income generated from the asset your IRA purchased by submitting a Deposit Coupon along with the funds.

Financial Considerations for Colorado Self-Directed IRA Owners

Colorado as a whole is rather expensive, with an overall cost of living about 31 percent higher than the national average, according to Sperling’s Best Places. It is mostly housing driving up the cost of living: Homes in Colorado average 92 percent more expensive than homes in the rest of the country, with the median home cost coming in at $359,300, compared to $216,200 in the rest on the country as of early 2019.

Transportation costs tend to be high, as well – 18% greater than the national average.

Military Retirement Income

Persons who were 55-64 years of age as of December 31 may exclude up to $20,000 of their military retirement benefits received during the calendar year. Persons who were 65 years of age or older as of December 31, may exclude up to $24,000 of their military retirement benefits received during the calendar year.

State income taxes on Colorado Self-Directed IRA Income

Colorado income tax is a flat 4.63% of Colorado taxable income. Those ages 55 and up may be eligible for a subtraction of up to $20,000 from pension and annuity income, which includes IRAs, pensions, annuities, disability pensions and Social Security benefits.

The subtraction goes up to $24,000 for those ages 65 and up.

It does not apply to lump sum distributions, privately purchased annuities that have not fully matured, or income subject to IRS early distribution penalties.

Social Security income not taxed by the federal government is not added back to adjusted gross income for state income tax purposes.

There’s also a tax credit of up to $150 per policy to offset premiums paid for a qualifying long-term care insurance policy.

Capital gains are generally taxed as income in Colorado.

Colorado sales taxes

The Colorado statewide sales tax is a low 2.9%. But local governments add additional tax. The average combined state and federal taxes of 7.52%, with a high of 11.2%. Groceries and medicine are exempt from sales tax.

Colorado Self-Directed Real Estate IRAs and property taxes.

Property taxes in Colorado are among the lowest in the country, with an average effective rate of 0.51%, according to ATTOM Data Solutions. However, the state still collects a fair amount, because overall house prices in Colorado are the fifth highest in the country.

As of early 2019, property taxes are highest in Boulder ($3,506), Denver ($2,529), Fort Collins ($1,968), Greely ($1,520) and Colorado Springs ($1,296). Property taxes are lowest in Fremont and Pueblo Counties, where they are both below the $1,000 mark.

Seniors may qualify for a homestead exemption of up to 50 percent of the first $200,000 in appraised property value. To qualify, you must have lived in the home at least 10 years.

Colorado Estate and Inheritance Taxes


Other Colorado Taxes

Colorado taxes gasoline at 40.4 cents per gallon and diesel fuel at 44.9 cents per gallon. Cigarettes are taxed at 84 cents per pack of 20.

About American IRA, LLC

American IRA, LLC is one of the leading third-party administrators for self-directed retirement accounts in the United States.  The custodian New Vision Trust Company is a South Dakota regulated trust company.   Founder and president Jim Hitt has been investing his own personal assets in Self-Directed IRAs, including Self-Directed Real Estate IRAs, for more than 35 years, and has helped thousands of others declare independence from Wall Street investment companies with their high fees and limited investment menus and become successful Self-Directed IRA investors.

American IRA has offices in Asheville and Charlotte, North Carolina, and Atlanta, GA, but we serve investors from all over the United States and even expats who want to realize the benefits of self-directed retirement investing techniques in Colorado Self-Directed IRAs, Self-Directed Roth IRAs, Self-Directed SEP IRAs, Self-Directed SIMPLE IRAs and even Self-Directed CESAs and Self-Directed HSAs.

A Colorado Self-Directed IRA with American IRA, LLC can help you achieve greater diversification by making it easier to invest in alternative asset classes not commonly available from large investment companies. Self-Directed IRAs also allow you to take more direct control of your retirement assets, while minimizing exposure to needlessly high expense ratios, commissions, wrap fees, 12-b-1 fees and AUM fees commonly charged by Wall Street investment companies. Our much more efficient flat-fee, menu-based fee schedule frequently allows investors to save thousands in fees each year – particularly with larger accounts and buy-and-hold investors.

With a Colorado Self-Directed IRA from American IRA, LLC, you can quickly and easily invest in alternative asset classes like direct real estate ownership, tax liens and certificates, mortgage lending, precious metals, and much more.

To get started, click here to open an account, or call American IRA today at 866-7500-IRA(472).

For other easy Colorado Self-Directed IRA solutions, talk to our valued partner TurnKey IRA.