Rhode Island Self-Directed IRA

Rhode Island Self-Directed IRA

Rhode Island Overview

The Ocean State is renowned for its costal beauty, its rich historical heritage, and for some fantastic seafood.

It is not, however, renowned as a great place to hang your hat in retirement. The combination of high taxes and a high cost of living tends to chew rapidly through retirement portfolios – a set of circumstances that earned Rhode Island the dubious distinction of being named by WalletHub.com as the worst retirement destination in the country.

On the plus side, both Boston and New York City are easily reachable by train, and so there’s lots to do. Providence is connected to Boston by commuter rail, as is Rhode Island’s biggest airport.

Rhode Island does not have any golf courses that made Golf Digest’s America’s 100 Greatest Course list. But golfers can find some quality play at Newport Country Club, Wannamoisett Country Club, Shelter Harbor, The Carnegie Asset Club in Portsmouth and Sakonnett Golf Club in Little Compton.

Why a Rhode Island 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 Rhode Island 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, Rhode Island Self-Directed IRA come with all sorts of investment protections.

Understand Your Rhode Island 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 Rhode Island 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 Rhode Island 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 Rhode Island 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 Rhode Island 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 Rhode Island Self-Directed IRA Owners

Cost of living is quite high, with housing costs 44 percent more expensive than the national average according to Sperling’s Best Places. Transportation and utility costs are also much more expensive than elsewhere in the U.S., though New England states tend to be expensive. It is, however, somewhat cheaper than its two neighbors, Connecticut and Massachusetts.

It’s a small state, so everywhere you go is near the ocean, or near Boston.

Military Retirement Income


State income taxes on Rhode Island Self-Directed IRA Income

Rhode Island hits retirement income hard, offering no special deductions or exemptions. The first dollar of taxable income is taxed at 3.75 percent, as of 2019, and the tip bracket for all filers is taxed at 5.99 percent.

There is a standard deduction as of 2019 of $8,525 for single filers and married individuals filing separately, $12,800 for heads of household and $17,050 for married couples filing jointly and qualifying widow(ers), up to a total modified AGI of $199,000. At that point the standard deduction begins to phase out and disappears completely at a modified $221,800 as of 2019.

Up to half of Social Security benefits are taxable as income, to the extent they are taxable under federal rules. Only five other states tax Social Security benefits.

Military retirement benefits are fully taxable in Rhode Island. However, Railroad Retirement benefits are exempt from state income taxes.

Rhode Island sales taxes

Rhode Island consumers pay a statewide sales tax of 7 percent, which is higher than the national average. There are no local sales taxes, so you will pay the same 7 percent anywhere in the state, except there’s an extra percentage point of tax tacked on to food and beverages.

However, a number of important categories are exempt from the Rhode Island state sales taxes, including food, footwear and clothing costing less than $250, medical items and goods for resale.

Note: Most candy is taxable, because Rhode Island does not consider candy to be food – unless it contains flour. So, Kit-Kats and Twix bars would qualify. But a regular Hershey Bar would not.

Rhode Island Self-Directed Real Estate IRAs and property taxes.

Rhode Island’s property taxes are also on the high side. The effective 1.65 percent property tax rate is the 11th highest in the country, according to data from SmartAsset.com. There is a limited tax relief credit worth up to $350 available to homeowners over age 65 who earn below $30,000 per year, but this is not much comfort to Rhode Island Self-Directed Real Estate IRA investors.

Property taxes are quite high – 1.65 effective rate – the 11th highest in the country, according to Smart Asset.com. Expressed as a percentage of annual income, Rhode Island’s property taxes are the seventh highest in the state, according to Tax-rates.org.

Rhode Island Estate and Inheritance Taxes

Rhode Island is one of the few states in the U.S. that imposes its own estate tax, and the threshold is far below the federal level, which means a much bigger percentage of Rhode Island residents will face potential estate tax liability.

As of 2019, the Rhode Island estate tax affects estates worth more than $1,561,719

The maximum rate is 16 percent as of 2019. There’s an estate tax credit worth $68,350 as of 2019 as well, with future adjustments pegged to the Consumer Price Index for All Urban Consumers (CPI-U).

For questions about the estate tax, contact the Division of Taxation’s Excise & Estate Tax section from 8:30 a.m. to 3:30 p.m. business days: Call (401) 574-8829 and select option # 8.

Other Rhode Island Taxes

Rhode Island imposes a tax of 52.40 cents per gallon of gasoline and 58.40 cents per gallon of diesel fuel. Additionally, there’s a cigarette tax of $3.75 per pack of 20.

Benefits of Retiring in Rhode Island

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

A Rhode Island 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 IRA 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 Rhode Island 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 Rhode Island Self-Directed IRA solutions, talk to our valued partner TurnKey IRA.