Archive for February, 2014

How Much Money Should You Have in Your Retirement Accounts?

Monday, February 17th, 2014

How much do you need to retire

Saving for retirement can seem so frustrating and out of your hands. There are so many things you can do to make sure you are involved with your own retirement. You can even invest your retirement how you want with a with a self directed account. Self directed accounts can be IRA or 401Ks. What is great about a self directed account is that you can invest in things like real estate and gold. There is plenty of other things you can use your IRA to invest in with a self directed account. If you are worried about invest in the stock market then a self directed account is a great option. Once you have a self directed account then what? Start investing!! Even when investing with a self directed account it is important to remember about your end goal of securing a great retirement.

We have extensively gone over retirement and how to prepare for that ever so exciting, yet potentially stressful time. The more you are prepared for retirement the less stressful it will be. Why is it stressful? It is stressful because if you haven’t prepared well enough then you may be wondering if you have enough money in your retirement accounts? This is what most of us worry about. With a self directed account it isn’t always about how much money is in your accounts but what are your assets worth?  Either way knowing you have enough to get through your retirement without running dry is important. Today we will be discussing how much money you will need when you actually do retire.

As knowing a perfect figure can be quite tricky and each situation can rule different outcomes it is wise to sit down with a financial planner to make sure you are on the correct track for your situation. A few of the factors that need to be considered when looking at your situation are:

When You Retire

When you retire can have a huge impact on your retirement income. Just speaking of when you will start collecting social social security between 62 to 70 can be dramatic. Say you earned $50,000 a year and turned 62 in 2013. You could collect roughly $1,011 a month as a single. If you waited until 66 you would be able to collect roughly $1,420 a month (in today dollars). If you started collecting at 70 you would collect roughly $1,972 a month (as before it is in today dollars).

Where you Retire

$300,000 can go a lot farther in places like Daytona Beach, Florida, Pocatello, Idaho, Greenville, S.C. than it can in San Francisco, California, or New York, New York. Make sure you know the cost of living where you are retiring. You may find that you need to adjust your savings plan depending.

What You Plan To Do While Retired

This is an obvious but often overlooked aspect of retirement. If you plan to continue the same lifestyle that you typically had before retirement you should be ok. If you plan to travel and do things that you never did while working you may need to boost your retirement savings plan.

How Long You’ll Live

This is another huge thing to be aware of when retiring. Of course we never know what is going to happen but you should plan for the long haul. There are different ways you can judge how long you will live. There are expectancy calculators and the IRS has a table to guestimate how long you will live. Using those guestimates you’ll be able to know how long you’re going to need money which will be a great insight to figuring out how much you’ll actually need.
With so many variables that go into figuring out how much you actually need is it even possible to have any idea what I should be saving now? Yes, it is very possible to have a good idea of what you need. There are plenty of calculators that help you with your retirement. There is also a general rule of thumb that can give you a good starting point.
  • Age 35: Have saved as much as your current salary.
  • Age 45: Have three times your salary saved.
  • Age 55: Save at least five times your salary.
  • Age 67: When it’s time to retire, a great goal is to have saved at least eight times your ending salary.
This is a great starting point and if followed can give you a very solid basses for your retirement. It still doesn’t beat out getting as detailed as possible though. Look at every aspect of your life and figure exactly how much you spend and do your best to figure out future spending. Again, the more detailed detailed the plan the better. If you follow that detailed plan you are much more likely to be able to go through retirement lasting on your own money. you need to very wise to dig as deep as you can and to get as detailed as possible.


Self Directed IRA Accounts – Roth IRA

Friday, February 14th, 2014

Roth IRA

With more than one retirement account option it can be hard to know which account would be best for you. If you are setting up your first or fifth retirement account it can be hard to know which is best for you. The main types of retirement accounts are: Traditional IRA, Roth IRA, 401K plans, 403B plans, SIMPLE IRA plans, SEP plans. Understanding the differences between these types of accounts will help you decide which is right for you. It is also important to know how each one of these differs when you are setting up a self directed IRA or a self directed 401k. Today we will be talking about the basics of a Roth IRA.

Roth IRA Basics

A Roth IRA gives you the ability to save and invest your after-tax dollars, let the investment grow completely tax free, and withdraw your principal and earnings tax-free if the Roth has existed for at least five years. For certain reasons you may be subject to a 10 percent penalty on the earnings if taken before age 59 ½. In other words, once your after-tax dollars go into the Roth, neither those dollars nor any future earnings on the dollars are ever taxed again, a very powerful feature. And, unlike the Traditional IRA, there is no 70-½ years age limit on making contributions, you may make contributions at any age. One thing to remember is that you must have income in order to contribute.  You can’t contribute more than you make nor more than the maximum contribution limit.


The deadline to contribute to a Roth IRA for a particular tax year is generally April 15 of the following year. When this date occurs on a weekend or a legal holiday, the following business day becomes the deadline. Tax return extensions do not extend this deadline, it’s always April 15th of the following year. When an individual makes a contribution to his or her Roth between January 1 and April 15, for the previous tax year, this is frequently referred to as a “carryback contribution”. See the page 4 topic “Contribution Rules For Both Roth and Traditional IRAs” for contribution limits.

Withdrawals a.k.a. Distributions

You may make tax-free and penalty-free withdrawals from your Roth IRA if you meet two conditions. First, your Roth IRA must have been open for a minimum of five years. Second, the withdrawal must be made because of the occurrence of one of the following events:
  • You have reached age 59-½
  • The only other way you can take any withdrawls is if you meet the IRS provision which allows partial withdrawals to begin at almost any age and to continue for a specific time frame. This provision is called a 72(t). Some of the exceptions are
    • Your death
    • A disability you incur
    • Your first home purchase
Check out the IRS website for more information about a 72(t)
Distributions or withdrawals that meet the above requirements are referred to as “qualified distributions”. While you may take distributions from your Roth IRA at any time, distributions which are not qualified distributions may be subject to taxes (and in some cases early distribution penalties) to the extent they exceed your combined contributions to the Roth IRA.
You are not required to take withdrawals at age 70-½ or any other age as you are with a Traditional IRA, another very powerful feature. You can leave everything in the Roth, continuing to grow tax free, and pass the Roth after your death on to your heirs also income tax free. However, the amount left in the Roth after death will be subject to estate or other death taxes if the estate is large enough to hit the taxable minimums.

Author: , Self Directed IRA Professional
[email protected]

Know your IRA Lingo: Rollover vs. Transfer

Wednesday, February 12th, 2014

Rollover vs Transfer

It can seem a little overwhelming trying to figure out if you are doing a rollover or a transfer. In theory, they are very similar and are very easily confused. Because there are differences and if handled incorrectly costly difference you will want to make sure know the difference between a rollover and a transfer. Again both a rollover and a transfer can seem very similar but they are not. We are here to help you through the process. If you have any questions or concerns about a rollover or transfer of your self-directed IRA, IRA or 401k then we are here to help. Now, let’s get into what separates a rollover and transfer.


Also known as, IRA rollover, 401k rollover. A rollover is when you take from one retirement account (it can be an IRA or 401k) and move it to another retirement account (again it can be an IRA or a 401k).

One major thing to remember with a rollover is that you the account owner are given the asset (money) before it goes into the new retirement account. It is considered a tax-free distribution. However, you must put this distribution into the new retirement account within 60 days of receiving it. If you don’t put the money into the new retirement account within 60 days a myriad of negative consequences will come.

The negative consequences come in the form of tax penalties. First, it will be considered a withdrawal/distribution and becomes taxable. That is not all, if you are under the age of 59 1/2 you will get tacked on a 10% penalty for a premature withdrawal. You will need to have a paper trail to verify that the funds were deposited within the 60 days.

Another important thing to note is that you can only do one IRA rollover a year. Why? It is best explained with an example. Say you did an IRA rollover and were given the money from your previous retirement account. You then have 60 days to put it in the new account. Before those 60 days, you take the money to Vegas and double your money. It is still within the 60 days so you put the original amount into the new retirement account and have doubled your money. They don’t want you to continue to do this over and over again, which is why they only allow it to happen once a year. Nor is it a wise decision to do anything else with your money besides putting it into the new retirement account. You wouldn’t want to get to the 60 days and not be able to deposit the money into the new account.


Also known as an IRA transfer, 401k transfer or trustee to trustee transfer. A transfer is when you take from one retirement account (IRA, 401k, etc) and move it to another retirement account (IRA, 401k, etc). Typically a transfer is a much easier process than a rollover because of one main aspect, you aren’t getting the money. With a transfer, you typically are transferring from custodian to custodian and so there are no tax penalties. You can do transfers like this as many times as you want each year.

Hopefully, we have spelled out the main differences enough that you won’t have to wonder the next time you are in the process of either an IRA rollover or transfer. As always we are here to help you with self-directed IRA and will answer any questions you may have in regards to these accounts.


Self-Directed IRA Rules – Indirect Benefit

Friday, February 7th, 2014

Indirect Benefit

Investing in a Self-Directed IRA is a great alternative to investing in traditional investments such as stocks, bonds, and mutual funds. Through a Self-Directed IRA, you can invest in more non-traditional investments such as real estate, private placements, gold and silver, loans, and other hard assets.

Many individuals shy away from investing in Self-Directed IRAs because they don’t understand basic self-directed ira rules, don’t know what they can invest in, think the fees are too high or have been discouraged by their financial advisor.

Most clients understand with a Self-Directed IRA that they cannot invest with a related party. To learn more about related parties read more at, Disqualified Persons in Regards to Self-Directed IRAs and 401ks.  One self-directed IRA rule which is less understood and can be difficult to consult on is receiving or giving an indirect benefit from your IRA.

The IRS has made it clear that they do not want you to receive or give a direct or indirect benefit from or from your IRA.  A direct benefit that you could receive from your Self-Directed IRA could be living in the property that your IRA owns or receiving a salary from the management of your IRA assets.  Examples of providing a direct benefit to your IRA could be providing “sweat equity” to fix up a property when normally that work would be hired out.  Indirect benefits could be a number of different benefits.  Below, I will list some of the indirect benefits you could receive from your IRA that would be prohibited:

  1. You may not be living in a property that your IRA owns but if you use that property for personal use, even for a short period of time, it could be disqualified
  2. Leasing out space to another customer and then having that customer sub-lease part of the space back to you
  3. Buying raw land and using that land for your own personal use (i.e. hunting on land your IRA owns)
  4. If you want to invest in an investment that requires a certain initial amount (i.e. $100,000) and you don’t have enough personal funds to invest in that investment but with the combination of personal and IRA funds you do have enough money, it could be disqualified
  5. You cannot personally pay for expenses that your IRA should be paying for, this would be an indirect benefit you would be providing your IRA
  6. If you are buying real estate and are personally going to get a loan for a portion of the property, you cannot have the bank collateralize the IRA’s portion that it owns.  The bank can only collateralize your portion of the property
  7. You cannot loan funds to an unrelated party and then have that person turn around and loan the funds back to you

If you have any more questions about Self-Directed IRA Rules or if you think you could be entering into a prohibited transaction feel free to call, email or comment below. We are here to help you invest in the retirement you have always wanted. Set up an account today.

Author: , Self-Directed IRA Professional
[email protected]