Connecticut Self-Directed IRA
Connecticut has a beautiful 100-mile-long coastline that’s tremendously attractive for retirees who want to stay within easy reach of New York City but who want to live near the ocean. There’s plenty of seafood, naturally, and Boston and New York City are both easily accessible.
New Haven, Connecticut has a storied place in American culinary history: The hamburger was created at Louis’s Lunch in 1900, and the city is still renowned far and wide for its delicious local pizza variant (think clams!).
The cost of living is substantial, but if you are planning on working into retirement, wages are also relatively high, so you can take the edge off of the prices, though the state will also take the edge off of your income thanks to its high combination of income, sales and property taxes.
For big-league professional sports, it’s slim pickings, but you can get in some great rounds of golf at the Stanwich Club in Greenwich, the Country Club of Fairfield, The Course at Yale, New Haven, Wee Burn Country Club in Darian, New Tamarack Country Club in Greenwich and Bull’s Bridge Golf Club in South Kent.
Connecticut is home to a lot of well-to-do golfers, so plan ahead to get a good tee time.
Yachting enthusiasts should investigate the Indian Harbor Yacht Club and the Norton Yacht Club.
Connecticut has a reputation for being quite pricey, and it’s true… but you can still live on a reasonably modest income in towns like East Lyme/Niantic, Middletown and New Milford
Why a Connecticut 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 Connecticut 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, Connecticut Self-Directed IRAs come with all sorts of investment protections.
Understand Your Connecticut 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 Connecticut 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 Connecticut 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 Cannot Do with a Connecticut 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 is 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:
- 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.
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 Connecticut Self-Directed IRA with American IRA. Make sure to put thought into the type of account you would 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 Connecticut Self-Directed IRA Owners
Connecticut is one of the least tax-friendly jurisdictions in the country when it comes to retirees. In fact, a recent Kiplinger survey ranked the Nutmeg State among the worst in the country when it came to tax friendliness for retirees. The Nutmeg state does not exempt any significant forms of retirement income except for Social Security, and even that exemption does not apply to everybody. The state has relatively high-income tax rates overall, especially at higher income levels. It also has some of the highest property taxes in the country, as well.
The high taxes contribute to and magnify an already high overall cost of living: According to Sperling’s Best Places, Connecticut is nearly 20 percent more expensive to live in than the rest of the country, on average. Housing prices are particularly high, and the median house price for a single-family home, $236,100, as of January of 2019, is substantially more than the national median price of $216,200.
Military Retirement Income
Military retirement income has been exempt from Connecticut state income taxes since 2015.
State income taxes on Connecticut Self-Directed IRA Income
As of January 2019, Connecticut has state income tax rates ranging from 3% to 6.9%, with the top bracket applying to single people with incomes of $500,001 and over, and married couples with incomes of $1,000,001 and over.
Social Security benefits are taxable for those seniors with adjusted gross incomes of $50,000 or less ($60,000 for married couples and heads of household, so there’s a significant marriage penalty built into the tax code).
Connecticut Self-Directed IRA income is taxed as ordinary income, as is income from public and private pensions. However, military retirement income is exempt from state taxes.
Connecticut sales taxes
Connecticut imposes a statewide sales tax of 6.35%, with no additional taxes from local municipalities. However, a tax rate of 7.75% applies to the following: the sale for more than $50,000 of most motor vehicles, the sale for more than $5,000 of jewelry (whether real or imitation), the sale for more than $1,000 of an article of clothing or footwear intended to be worn on or about the human body, a handbag, luggage, umbrella, wallet or watch.
The sales and use tax rate for the sale of computer and data processing services is 1%.
Exemptions include bicycle helmets, child car seats, college textbooks to full and part-time students, food from vending machines and meals delivered to the disabled or homebound, certain medical equipment, prescription drugs, and shoe repair services, which must have quite a lobby in Hartford.
Connecticut Self-Directed Real Estate IRAs and property taxes.
The average property tax rate paid in Connecticut is over $5,000 per year. The average effective tax rate is over 2 percent, which is the fourth highest in the country. However, there is a modest break for homeowners over age 65 and with incomes of less than $35,000 per year ($43,000 for married couples). The credit is worth $1,250 for married couples and $1,000 for single individuals – again building a substantial marriage penalty into the state tax system.
However, Connecticut Self-Directed Real Estate IRA properties do not qualify for that benefit, which means rental properties have quite a tax hurdle to overcome before renting them out becomes profitable.
Connecticut Estate and Inheritance Taxes
Connecticut imposes an estate tax on assets over $2 million – a much lower threshold than the federal exemption as of 2019. The tax rate on assets over $2 million runs from 7.2% up to 12%.
Other Connecticut Taxes
Connecticut imposes fuel taxes of 58.25 cents per gallon of gasoline and 66.10 cents per gallon of diesel fuel.
There’s also a $4.35 tax per pack of 20 cigarettes, making Connecticut a decidedly expensive state for smokers.
Benefits of Retiring in Connecticut
If you are interested in seeking retirement in Connecticut, or if you simply want to think about it as a long-term option, you might consider a Self-Directed IRA. A Connecticut Self-Directed IRA will allow you to handle plenty of different investments under your own control—all while enjoying the tax protections of retirement accounts.
Are you interested in retiring in Connecticut? Want to learn more about how to take advantage of all of the retirement capabilities you have? Then it’s time to think about a Self-Directed IRA. Continue browsing this website to learn more about a Connecticut Self-Directed IRA or contact us at 828-257-4949 to learn more about how you can secure a retirement for yourself.
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 Connecticut 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 Connecticut 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 Connecticut 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).