Hawaii Self-Directed IRA

Hawaii Self-Directed IRA

Hawaii Overview

The Aloha State is one of the most beautiful places in the country, and it’s beautiful all over the state. You do not have to go to a national park to appreciate the natural beauty of the Islands. It’s all around you, wherever you go – and rainbows are a near daily occurrence in most areas – especially the valleys and the Windward sides of the islands.

The cost of living is high, as are state income taxes and the general excise tax that drives up even the price of groceries at the supermarket. See below for further information. However, because public pensions and Social Security income are exempt from Hawaii state taxes, it is a popular retirement spot for career government workers and military whose incomes are all or mostly from public pensions and Social Security.

Cost of living is very high on Oahu and most of Maui. Even areas that used to be considered affordable, like Haleiwa on the North Shore of Oahu, are getting very pricey. However, you can find some more affordable housing on the Big Island of Hawaii and the rural island of Moloka’i.

There’s lots of world-class golfing in the islands, including several good courses for those with access to military bases. Some great clubs include Ko’olau Golf Club in Kaneohe. When you get done golfing, go to Honey’s restaurant for puupuus for world-class Hawaiian music from the best artists in the islands. Nanea Golf Club in Kailua-Kona on the Big Island. Kapalua on Maui, Manele Golf Course on Lanai, Mauna Kea Golf Club on the Big Island, Makai Golf Club on Kauai, and Turtle Bay Golf Club in Kahuku, on the North Shore of Hawaii.

Surfing and fishing are both second to none, and you can fish very well from just about all of Hawaii’s shores and piers, even if you do not have access to a boat.

Why a Hawaii 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 Hawaii Self-Directed IRA means freedom, opportunity, and self-determination. It means not being satisfied that the “market” is the only market that exists. It doesn’t 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, Hawaii Self-Directed IRAs come with all sorts of investment protections.

Understand Your Hawaii 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 Hawaii 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 Hawaii 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 Hawaii 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 Hawaii 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 Hawaii Self-Directed IRA Owners

The major consideration for those considering retiring in Hawaii is the cost of living – especially for those not living on public pensions, which unlike Hawaii Self-Directed IRAs and private pensions, enjoy tax-exempt status under Hawaii’s income tax code.

According to Sperling’s Best Places, Hawaii’s cost of living is about 86% higher than it is in the country at large. The biggest driver of Hawaii’s cost of living is housing: The median home price in Hawaii according to Sperling’s is $602,100, which is nearly three times the national average of $216,200 as of April 2019. If you want to live on Oahu, the most populated island by far, which comprises Honolulu County, your cost of living will be even higher.

Transportation costs are high for Hawaiians, as well, though Honolulu County has an excellent bus system that many people use. In many areas you can live well without owning a car if you choose.

Military Retirement Income

Military retirement income is not taxed. Moreover, Hawaii’s many military bases, AAFES, Naval Exchange and MPX outlets, quality VA hospital and access to several commissaries around the Island of Oahu make the Aloha State a popular retirement spot for career military members.

State income taxes on Hawaii Self-Directed IRA Income

Hawaii has one of the most onerous income tax regimes in the country. As of April 2019, Hawaii has state income tax rates ranging from 1.4% to 11%, with the top bracket applying to single people with incomes of $200,000 and over, and married couples with incomes of $400,000 and over.

However, Social Security income is not subject to Hawaii state income taxes.

Hawaii 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, as is public pension income. But income from private pensions, IRAs, Hawaii Self-Directed IRAs and 401(k)s is fully taxable.

Hawaii sales taxes

Hawaii has a general excise tax of 4% statewide. Honolulu County adds another 4.5%.

If this were just a sales tax, it would be among the lower ones in the country. But it’s not. As an excise tax, it applies to multiple transactions between the harbor and the cash register. So, while the consumer only sees the last 4% to 4.5% in taxes on a gallon of milk, several layers of tax on each middleman who handles the product can drive the cost of consumer goods up substantially.

Hawaii does not exempt food or groceries from the general excise tax, but it does exclude prescription drugs.

Hawaii Self-Directed Real Estate IRAs and property taxes.

Hawaii’s property tax rate ranks among the lowest in the country. But because house prices in Hawaii are so high, the average property tax actually paid is also extremely high.

However, the low tax rate makes Hawaii a relatively friendly jurisdiction for Hawaii Self-Directed Real Estate IRA investors who can handle the high cost of entry into the market.

Hawaii Estate and Inheritance Taxes

Hawaii has an estate tax assessed as follows:

For Hawaii residents, the estate tax ranges from 0.8% to 16%, applicable to estates over $5.49 million (twice that for married couples). The top rate applies to estates over $10.1 million.

Other Hawaii Taxes

Hawaii imposes fuel taxes of 62.79 cents per gallon of gasoline and 66.23 cents per gallon of diesel fuel.

There’s also a $3.20 tax per pack of 20 cigarettes, making Hawaii a decidedly expensive state for smokers.

Benefits of Retiring in Hawaii

If you are interested in seeking retirement in Hawaii, or if you simply want to think about it as a long-term option, you might consider a Self-Directed IRA. A Hawaii 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 Hawaii? 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 Hawaii 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 Hawaii 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 Hawaii 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 Hawaii 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 Hawaii Self-Directed IRA solutions, talk to our valued partner TurnKey IRA.