Iowa Self-Directed IRA

Iowa Self-Directed IRA

Iowa Overview

The Hawkeye State is generally friendly for retirees, overall, with a low cost of living and substantial tax benefits for those relying on income from traditional retirement sources, such as annuities, pensions, military retirement income and Iowa Self-Directed IRAs. There is a state sales tax which is slightly higher than those in the rest of the country at large, which may put a crimp on consumption, though food and drugs are generally exempt from it.

There’s some great food in Iowa – though they fry things an awful lot.

Morel mushrooms are delicious and plentiful. But you will want to do your homework before collecting them from the ground yourself, because they look similar to other local wild mushrooms which can be poisonous and even lethal.

The weather is typically midwestern: Pleasant and warm in the summer, with icy-cold winters.

There is a thriving arts scene in most of Iowa’s bigger towns, and lots of theatre to enjoy. Theatre fans will love the Englert Theater in Iowa City. If you are a writer, or a hopeful, you will love being near the University of Iowa and the highly-esteemed Iowa Writers’ Workshop.

Golfers can play some excellent courses at The Harvester Golf Club (Rhodes), Des Moines Golf and Country Club North and South (both in West Des Moines, Glen Oaks Country Club (also in West Des Moines), Cedar Rapids Country Club, Spirit Hollow in Burlington, Blue Top Ridge at Riverside and Davenport Country Club in Pleasant Valley.

And of course, there are loads of premium areas for hunting and freshwater fishing throughout the state.

The best thing about Iowa, however, is undoubtedly the people; The worst thing about Iowa is probably the influx of presidential hopefuls, their staffs and hordes of media that arrive in Iowa every four years like a roving horde of locusts.

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

Understand Your Iowa 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 Iowa 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 Iowa 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 Iowa 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 Iowa 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 Iowa Self-Directed IRA Owners

Iowa’s cost of living is quite low, relatively speaking – especially in the rural areas of the state, which constitute most of it. The cost of living is about 11 percent lower than the national average, according to Sperling’s Best Places. The average home is quite affordable for Self-Directed Real Estate IRA investors and those on limited incomes, with homes selling for $137,600, on average, compared to more than $216,000 in the country as a whole.

All told, the cost of shelter is about 25 percent lower in Iowa than it is in the rest of the country. However, health care spending is high, according to Sperling’s: roughly 18 percent higher than in the rest of the country.

Military retirement income

Military retirement income is not taxed in Iowa.

State income taxes on Iowa Self-Directed IRA Income

Iowa has a graduated state income tax that begins at 0.36 percent and rises to 8.98 percent. As of 2019, the top bracket applies to income over $71,910 for all filers.

Social security income is not taxed.

If you are age 55 or older, pension and annuity income, self-employed retirement plans, Iowa Self-Directed IRAs, deferred compensation and other retirement sources of income may be eligible for an exclusion of up to $6,000 for individuals and up to $12,000 for couples.

Iowa sales taxes

The statewide sales tax rate is 6 percent, with almost all counties opting to add another 1 percentage point, for a total of 7 percent. Food, prescription drugs and some OTC medications are exempt from sales tax.

Iowa Self-Directed Real Estate IRAs and property taxes.

Property taxes are relatively high, with an effective tax rate averaging 1.5 percent. But house prices are much lower than they are elsewhere in the country, so the overall tax burden is low. However, the property taxes do throw a wet blanket on returns from rental properties, in or out of Iowa Self-Directed Real Estate IRAs.

For your own personal owner-occupied residence in Iowa, you may be eligible for a homestead tax credit of $4,850, which is subtracted from your home’s assessed value. This is typically worth $100-200 or so for the average homeowner in Iowa.

Iowa Estate and Inheritance Taxes

Iowa is one of a handful of states that imposes a tax on inheritances, with rates starting at 5 percent and rising on a graduated scale up to 15 percent. The top rate is applicable to inherited amounts over $100,000. An exemption of $25,000 applies – which means inheritances below that level are not subject to the inheritance tax.

There’s no gift tax in Iowa, but “deathbed gifting” is likely to be subject to the inheritance tax: The state has a three-year “lookback” period, which means that gifts within three years prior to the giver’s death are counted as inheritances for the purposes of determining the state inheritance tax.

Other Iowa Taxes

Iowa gas taxes total a 49.10 cent/gallon tax on gasoline and a 56.90 cent tax on diesel fuel.

The cigarette tax amounts to $1.36 per pack of 20.

Benefits of Retiring in Iowa

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