Posts Tagged ‘ira investing’

Warning Signs that Your Retirement Savings are off Track

Monday, April 16th, 2018

warning signs

You know that little voice in your head that’s been bothering you lately? It’s telling you that you may not have enough for retirement, right? Well, you’re not alone. Here in America, 75% of us that are over 40 actually are significantly behind on our retirement savings. So how can you tell that you’re off course? We’ve got you covered.

1. You’re only saving through a 401K

If you’re lucky enough to have an employer that offers a 401K, and even luckier to be able to make monthly contributions, then you’d think you’d be in the clear, right? Unfortunately, that’s not the case. A 401K is not meant to be your only means of retirement saving, it’s only meant to be one tool for savers. Opening an IRA may be the right option for you in order to be fully prepared for your retirement, it allows your money to grow tax-deferred if in a traditional IRA, and tax-free if in a Roth.

2. You aren’t matching contributions

Now, if you have a 401K, and your employer has a match program, but you’re not taking full advantage of it, you have to reevaluate your contributions. That’s free money that you’re missing out on. The average employer contribution is around 6%, up to a certain amount. Get in touch with your company’s HR team, and make sure that you’re contributing enough.

3. You’re unsure of how much to save

One reason this is such an issue is that the amount that one person will need at retirement is different from another person, and also depends on when you start saving. If you started saving in your 20’s, 10% of your gross income is standard, but if you’re 30+, 15%-25% is ideal. Calculate the end total of what you will need based on your income with the Social Security Quick Calculator.

The most important thing to remember when it comes to saving for retirement is just to save. Save. Save. And Save. And contact us today if you want to open an IRA.

Q&A: Partnering Your IRA with Real Estate

Wednesday, March 14th, 2018

IRA with real estate - square

Why real estate? What are the benefits?

For one, you’re diversifying your retirement portfolio, and getting it out of the stock market where it’s tied to the ups and downs of the same market that we saw lose $2 trillion in 2008. Your IRA is also more secure since it’s backed by tangible real estate, where the returns can provide a stable source of income that goes directly back to your real estate IRA, where it will wait for you come retirement.

If I invest in a home with my real estate IRA, can I live in it?

Unfortunately, no. IRS rules prohibit certain people related to the IRA owner, including the IRA owner, from living on the premises. The rules are there to prevent what’s known as “self-dealing”, to minimize conflicts of interests, that could adversely affect your IRA.

Disqualified persons?

A disqualified person would be:

  • The real estate IRA owner
  • The real estate IRA owner’s spouse
  • Ancestors
  • Lineal descendants
  • Spouses of lineal descendants
  • Investment advisors
  • Fiduciaries
  • Any business entity (LLC, Corporation, Partnership, Trust) in which any of the disqualified persons previously mentioned has a 50% or greater interest

What are prohibited transactions?

Prohibited transactions include the following:

  • The selling or leasing of any property between a plan and a disqualified person
  • Lending money or another extension of credit between a plan and a disqualified person
  • Furnishing goods, services, or facilities between a plan and a disqualified person
  • Transferring or using by or for the benefit of, a disqualified person the income or assets of a plan
  • Dealing with income or assets of a plan by a disqualified person who is a fiduciary acting in their own interest or for their own account

Do I need an LLC to purchase the real estate?

No, you don’t need an LLC to purchase the real estate, so long as it’s possible for you to purchase the real estate directly through your self-directed IRA custodian. When done this way, all rent checks and expenses will be paid to and through the custodian. However, if you would like checkbook control over your IRA, meaning you will be the one to collect the rent and pay all the expenses, then you need to set up an IRA LLC.

What’s checkbook control?

Checkbook control is just as it sounds, it’s a checkbook that you control. It means that you have signing power over your IRA so that you no longer need to go through your custodian to get funds moved around. So if you need to call a plumber to get something fixed on your property, you can pay them then and there, and the cost will be debited from your IRA. It’s essentially cutting out the middleman, making your IRA more efficient.

What you Need to Know About REITs Before Diving in

Monday, December 11th, 2017

 

You may or may not know that REITs (real-estate investment trusts), that invest in all sorts of commercial real estate, have been a favorite of investors for years. So let’s go over why it’s a favorite.

Get used to volatility

REITs can definitely play it hot and cold, and aren’t a set it and forget it type of asset. They require vigilance and a careful eye, which may be a big deterrent for some investors. REITs tend to only move in drastic ways, in either direction, which also mimics how they trend for investors. So expect big ups, and followed by downs, and not a lot of in between.

They’re not for short-term investors

Because of their volatility, REITs are for those who play the long game. Those who plan to let their money and assets work for them. They perform best when given the time. Long periods of time. From 1975 to 2014 REITs had an annualized return of 14.1%, so when it’s compared to performances by the S&P at 12.2%, it’s easy to see their appeal. So give them time to shine.

Buy internationally

Now it’s possible to invest in international REIT funds; some are global; others own only properties outside the U.S. These multinational funds don’t have long return histories, but the experts who follow them believe that combining U.S. and international real estate investments will produce higher returns than the S&P 500 index, along with currency diversification.

Distributions are taxed as income

REITs can be tricky at tax time. By law, REITs must pass 90% of their income through to shareholders, who are liable for taxes on that income without the benefit of a favorable capital-gains tax rate. The distributions are taxed as ordinary income, in other words. That’s not great news for investors in high tax brackets.

However, there’s a good side to this arrangement. REITs’ income is taxed only once, at the shareholder level. This is unlike corporate dividends, which are taxed once at the corporate level and then taxed again to shareholders. Hence the term “double taxation”.

Because of this, REITs are best suited for tax-deferred entities such as IRAs and 401K accounts.

The Main Six Self-Directed IRA Real Estate Rules

Monday, July 24th, 2017

It needs to be stated that there are definitely more self-directed IRA real estate rules to follow. These are just a handful of rules to get you started on thinking about real estate. Is it right for you? Do you suppose you can easily follow these rules?

Keep it separate

You and your IRA have to remain as two separate entities. Therefore, on all paperwork on your investments, your IRA is solely named. To also keep everything 100% IRS compliant, your IRA administrator helps you with documents and any sort of legal paperwork.

Funding real estate

The real estate property can be bought 100% by your IRA. Regardless if you have $50,000 in your IRA, and you need $100,000 to buy a property, the other half of the money can be loaned to your IRA. However, payments for that $50,000 loan will be paid by your IRA as well. Never by you personally.

Overnight stays

You also cannot stay overnight in the property. Period. Even for one night. If you violate this rule, there’s a chance that your IRA could result in serious tax consequences. This includes any and all personal use for vacations by yourself, or by your family. Think of it this way: your IRA owns the property, not you personally.

Disqualified persons

As mentioned above, the property cannot be used by you or your family. So who specifically are we referring to? Yourself, obviously, your spouse, your children or parents, including any in-laws. They are what the IRS refers to as Disqualified Persons. These same people cannot conduct any business with you or your IRA, and they cannot directly benefit from the property. Say there’s a repair needed, like plumbing, and your father-in-law has a plumbing company, he, unfortunately, cannot do the work needed, because he’s disqualified.

Repairs and fees

All services must be paid through to the IRA. Again, using the plumbing example, if there’s $300 worth of plumbing repairs needed, that money must come directly from your IRA. Utilities are paid with your IRA, or if there are HOA fees due, those also must be paid for by the IRA.

The money coming in

Finally, rent deposits, rent checks, any capital gain, is all funneled back into your IRA. Because again, all the money coming in and going out goes through your IRA. Simple as that.