Illinois Self-Directed IRA

Illinois Self-Directed IRA

Illinois Overview

Thanks to the cultural and commercial center of Chicago, Illinois gets high marks for arts activity, and can boast the third-highest number of theaters per capita in the country, ranking only behind New York and California.

Illinois ranks very well for access to health care, as well – 11th in the country.

Illinois also ranks very high for sports fans, with the Cubs, Bears, Blackhawks and Bulls bringing in storied histories and big crowds. Lots of smaller towns also have Frontier-league baseball teams, as well.

Chicago also features The Fire, a Major League Soccer Franchise, the Red Stars, a professional women’s soccer team, the Chicago Sky, a pro women’s basketball team, the Bandits, a pro fast-pitch softball team, and also the White Sox.

Winters can be very cold, and summers around Chicago can get very muggy and humid, thanks to the effects of Lake Michigan.

When the weather permits, though, golfers can find beautiful courses at the Chicago Golf Club in Wheaton, Butler National Golf Club in Oak Brook, Medina Country Club, Canyata Golf Club in Marshall, Shoreacres in Lake Bluff and Olympia Fields Country Club (North) in Olympia Fields, each of which have been designated as among America’s 100 greatest golf courses by Golf Digest magazine.

Why an Illinois 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, an Illinois 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, Illinois Self-Directed IRAs come with all sorts of investment protections.

Understand Your Illinois 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 Illinois 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 Illinois 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 an Illinois 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 an Illinois 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 Illinois Self-Directed IRA Owners

Illinois ranks rock-bottom when it comes to tax-friendliness, according to a recent study from WalletHub that ranks states based on their affordability on a fixed retirement income. But there are other considerations to compensate for Illinois’ high tax burden, which pushed the state to the middle of the pack, ranking 28th overall in WalletHub’s “Best and Worst States to Retire In” list.

High costs of living make it difficult to live near Chicago, Illinois, but the cost of living is much more reasonable once you get away from the big city. Overall, the cost of living in Illinois is very close to the national average, according to Sperling’s Best Places.

The median home price in Illinois is $172,800, also according to Sperling’s, and $225,500 in Chicago.

Military retirement pay:

Not subject to Illinois state taxes.

State income taxes on Illinois Self-Directed IRA Income

Illinois recently increased its individual income tax rate from 3.75 percent to 4.95 percent, though there are a number of deductions: Medical insurance premiums and long-term care insurance premiums are both deductible against Illinois state income taxes.

Illinois is also relatively friendly towards distributions from retirement plans, including Self-Directed IRAs: Distributions from qualified retirement plans and IRAs are free of Illinois state taxes (though you will still pay federal income taxes). Conversions to Roth IRAs are free of state income tax as well.

Illinois also does not tax railroad retirement income, state or local government deferred compensation plans, government retired or government disability plans, military pensions and the federally-taxed portion of Social Security income.

Illinois sales taxes

The Illinois state sales tax is 6.25 percent, ranking the 13th highest in the country. Local governments frequently add an additional sales tax of 2.45 percent, on average, to transactions, pushing the average sales tax rate to 8.70 percent, according to data from The Tax Foundation.

Illinois does exempt a number of categories of goods and services from state sales tax. You can get a list here.

Illinois Self-Directed Real Estate IRAs and property taxes.

Illinois has some of the highest property taxes in the country. Its average 2.32 percent property tax rate ranks 2nd in the nation, according to research from – almost twice the national average. This makes Illinois a difficult environment for Illinois Self-Directed Real Estate IRA investors, since Real Estate IRAs offer no advantage when it comes to property taxes.

Some areas are seeing average annual property tax bills of up to $6,000. The highest effective property tax rates are in Winnebago County (2.97%), Kane County (2.72%), Stephenson County (2.66%), Lake County (2.84%), Will County (2.67%) and McHenry County (2.90 percent).

Illinois Estate and Inheritance Taxes

Illinois imposes an estate tax of up to 16 percent on estates above $4 million. The rates are graduated and begin at 0.8 percent for the first $40,000 in taxable assets above the exemption amount and rise gradually from there.

Other Illinois Taxes

Illinois imposes a gasoline tax of 52.41 cents per gallon (59.72 cents for diesel fuel), and a tax of $1.98 per pack of 20 cigarettes.

Benefits of Retiring in Illinois

If you are interested in seeking retirement in Illinois, or if you simply want to think about it as a long-term option, you might consider a Self-Directed IRA. An Illinois 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 Illinois? 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 an Illinois 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 Illinois Self-Directed IRAs, Self-Directed Roth IRAs, Self-Directed SEP IRAs, Self-Directed SIMPLE IRAs and even Self-Directed CESAs and Self-Directed HSAs.

An Illinois 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 an Illinois 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 Illinois Self-Directed IRA solutions, talk to our valued partner TurnKey IRA.