New York Self-Directed IRA

New York Self-Directed IRA

New York Overview

Although the Empire State has a reputation among small business owners and developers of being rough with taxes, it has a lot of attraction for some retirees. And of course, there’s no city like New York – still the greatest big city in the world.

That’s not to say there are not problems when it comes to retiring in New York. The state ranked the worst in the country according to a recent Bankrate survey, with low marks for taxes, health care quality and the cost of living.

But retirees do get some breaks, and it can be a good spot for those of you retiring mostly with income from state and municipal pensions. New York provides favorable tax treatment for Social Security income and for a limited amount of pension or retirement income. However, above these exemptions, most New Yorkers have to contend with a combination of a high cost of living, plus relatively high state taxes on income, property, sales and even a state estate tax.

In the New York City Metro area, the cost of living is more than twice the national average, according to Sperling’s Best Places, while the cost of living in the state of New York averages 29 percent higher than the national average. The housing cost is the primary driver of New York’s high cost of living, with an average single family home now selling for $282,000, as of January 2019, compared to the national average home price of $216,200.

However, the cost of living is much more manageable the further you get away from the New York City metro area and its commuters. You can live very reasonably in the Catskills and in lovely smaller towns like Saratoga Springs, East Durham, New Palz and Ithaca, and further north and east in cities like Rochester.

Why a New York 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 New York 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, New York Self-Directed IRAs come with all sorts of investment protections.

Understand Your New York 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 New York 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 New York 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 New York 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:

  • 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 New York 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.

Tax and Financial Considerations for New York Self-Directed IRA Owners

While New York has a substantial state income tax, it does exempt all Social Security income from that tax. Furthermore, income from private pensions and retirement accounts is deductible against your state income taxes up to $20,000.

Pension income from the federal government, New York State or a municipality within the State of New York is also tax-free.

Above that exemption, New York applies a state income tax of 4 percent at the lowest, with marginal brackets gradually increasing to 6.65 percent on income over $80,650, and 8.82 percent on income over $1,077,550, as of 2019. These income tax rates are among the highest of any state.

New York’s income tax rates are effectively larger than they appear, because New York considers all capital gains to be income, and taxes gains accordingly.

State income taxes on New York Self-Directed IRA Income

Income from IRAs, including Self-Directed IRAs, qualifies for the annual exemption of income up to $20,000. However, there is no income tax on distributions from Roth IRAs (provided the assets have been in the Roth IRA for at least five years.)

New York sales taxes

There’s a state sales tax of 4 percent, and municipalities typically add their own sales tax on top of that amount. Groceries are typically exempt, as are clothing items of $110 or lower. The average state sales tax rate, averaging all effective city and county sales taxes, is about 8.49 percent.

In New York City, the city sales tax is 4.5 percent, and there’s an additional Metropolitan Commuter Transportation District surcharge of 0.375 percent, for a total sales tax rate of 8.875 percent.

New York Self-Directed Real Estate IRAs and property taxes.

Base property taxes in New York tend to be high, averaging 1.65 percent, though tax rates in New York City’s Five Boroughs average just about half that rate. However, rent control is common in New York City, which represents a substantial indirect tax on landlords. Nevertheless, property values in New York City are high, as it’s among the most expensive housing markets in the country.

New York Self-Directed Real Estate IRAs will have to pay the full property tax on their own investments. But for individuals who live in their own homes, the STAR property tax exemption exempts the first $30,000 in property value from school taxes for those with incomes of $500,000 or below.

For those over 65, there’s an enhanced STAR exemption, which exempts the first $66,800 in home value from school taxes (though not general city or county taxes) if their income is $86,000 or less, as of January 2019.

New York Estate and Inheritance Taxes

New York charges an estate tax of between 5% and 16% percent on assets in estates over an exemption amount of $5.25 million.

Other New York Taxes

New York’s gasoline taxes are among the highest in the country. There’s also a tax of $4.35 per pack of cigarettes, with New York city adding an additional $1.50.

Benefits of Retiring in New York

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