Posts Tagged ‘self directed ira’

What you Didn’t Know was Possible with your IRA

Tuesday, November 7th, 2017

It’s not difficult to imagine that the majority of U.S citizens have heard of an IRA. It’s equally imaginable that most have not heard of a self-directed IRA. A self-directed retirement account gives you the ability to invest in non-traditional investments. In all reality, though a self-directed IRA is the same thing as a regular account. Because they are the same thing and the only real difference is what your custodian allows I wanted to explain a few things that you need to know about an IRA that you may not have known.

You can invest in so much more

Most retirement accounts are invested in stocks and bonds, but they don’t have to be. What most don’t know is that a self-directed IRA is really just a custodian that allows you to take full advantage of your retirement account and invest how you want with you. Most custodians only allow for certain types of investments, like stocks and bonds. Why is that? More than likely it is because they make more money by pushing other investments. Or it could simply be because it is not in their wheelhouse. The truth is though with an IRA you can invest in just about anything. You can invest in real estate, gold or even private placements.

You can pay for college

You can without penalty withdrawal funds from your IRA to cover the cost of tuition. There are a few issues to be aware of when doing this though and that is why it is important to talk to a tax attorney or CPA when dealing with this.

Whether this information is new to you or not you can gain from this knowledge. What you can gain from this is that you can do more with your individual retirement account than you probably are doing. If that means using your funds for things like education or if it means investing in things other than stocks and bonds. You can find a way to maximize your IRA for what works for you.

A Beginner’s Guide to Investing in Gold

Monday, January 18th, 2016

beginning gold - square

Only 18 days into 2016, and we can already say that it’s been a rocky year. The world is going through rough times in many ways; the second episode of the Chinese stock market crash last week has spooked stock investors across the globe. Bond yield spreads are rising, adding to investors’ fears of bigger defaults in the bond markets. And at the same time, leaving cash idle in the bank isn’t earning savers anything. With interest rates under one percent and inflation close to two percent, investors who are stashing cash stand to lose all of its worth in real terms.

In times like these, gold bullion might be looking like the next best alternative for your investment portfolio.

Bullion investing is basically gaining financial exposure to precious metals—primarily, gold, silver, platinum, and palladium. Of these, gold offers the most liquidity.

1. Physical Gold

The simplest and most direct form of gold investing is in buying gold jewelry, gold bars, with an IRA, or gold coins—jewelry from a jewelry store, bars from a bank or a dealer, through your self-directed IRA administrator, or coins from a dealer.

Coins are the most commonly held form of physical gold, after, of course, jewelry. The best options are the American Eagle, American Buffalo, and Canadian Gold Maple Leaf coins.

When looking for a coin dealer, always seek one who offers the best bargain value. Albeit small, dealers charge premiums on coins above the spot gold price, meaning that you’ll be buying these coins at a price higher than the current market price of gold. In order for you to make money on your investment, the spot price of gold must increase enough to cover the premium you paid. This is why you should look for a dealer who is selling coins for the lowest premium.

2. Gold ETFs

If you don’t want to buy physical gold, you may gain indirect exposure to gold through exchange-traded funds (ETFs).

ETFs indirectly track the price of a basket of assets. Gold ETFs, in particular, come in three forms: 1) those backed by physical gold, meaning they track gold’s spot price; 2) those backed by gold miners’ stocks, such that they track the stock prices of a handful of prominent gold mining companies; and 3) those backed by gold futures, meaning they track the prices of derivative contracts that speculate the future price of gold.

3. Gold Stocks

The third possible way to add gold to your investment portfolio is to buy gold stocks. By “gold stocks,” I mean companies that are involved in the mining, exploration, development, and production of gold.

The risk involved here is that like any other listed company, gold stocks are exposed to stock market fluctuations. The same rules of investment will apply here that apply to any stock on the stock market, in that you’ll have to weigh the financials and fundamentals before jumping into any of these stocks.

4. Gold Derivatives

Finally, gold options and gold futures contracts are an indirect way to invest in gold—but a very risky one. Experts say that gold derivatives should be the last investment resort for any novice investor.

Unlike the spot gold market, where the prices are listed as they are, the futures market trades contracts on future price speculations. Because of the risks involved and the level of sophistication required, investors should strike this option off their radar if they’re not a seasoned trader.

To wrap it all up, gold derivatives, gold stocks, and gold ETFs that are not physically backed by gold are some of the riskier investments. On the other end of the risk spectrum, there’s physical gold and gold-backed ETFs, which are relatively simpler, safer investments.

IRA Q&A: is it Possible to Contribute to an IRA Without a Job?

Thursday, January 14th, 2016

without a job - square

Here’s a question that popped into my head just the other day: Can you put money in an IRA or a Roth IRA if you don’t have wage income?

And the answer I found is that Individual Retirement Accounts (IRAs) were introduced in the mid-70s to help employees save for retirement and reduce their taxable income. So it stands to reason that to make a contribution—and get the tax benefit—you’d have to have income from a job. And, in fact, contributions to both traditional and Roth IRAs can only be made from what the IRS determines to be “earned income.” However, wages aren’t the only form of earned income. So let’s start by looking at the definition.

What’s considered earned income

You don’t have to work for someone else to have taxable earned income. You can also work for yourself. Compensation from either type of employment would be considered earned income. But the complete definition is a bit broader. According to the IRS, taxable earned income includes:

  • Wages, salaries and tips
  • Union strike benefits
  • Long-term disability benefits received prior to minimum retirement age
  • Net earnings from self-employment

In terms of an IRA contribution, the amount of your earned income is also important. The maximum contribution you can make for 2011 is $5,000 ($6,000 if you’re over 50). But if your taxable income is less than the maximum contribution, you can only contribute up to the actual dollar amount of your earned income for the year. In other words, you can’t contribute more to your IRA than you earn.

What about unearned income?

Because there are other ways to make money, it’s probably equally important to understand what’s not considered to be earned income. Things such as interest and dividends from investments, pensions, Social Security benefits, unemployment benefits, and child support—even though they may factor significantly in your monthly bottom line—aren’t considered earned income for tax and IRA contribution purposes.

The Spousal IRA exception

Fortunately for married couples, there is one way to make a contribution to an IRA if you don’t have wages—a Spousal IRA. This is a tax-advantaged retirement account designed specifically to allow a working spouse to make contributions on behalf of a nonworking spouse. Under current laws, if you’re married filing jointly, you can contribute the maximum into an IRA for each spouse—even if one of you has no earned income—as long as the working spouse has income equal to both contributions.

So let’s say both you and your spouse are over 50 and want to contribute the maximum of $6,000 to each of your IRAs. Whichever one of you is working would have to have earned income of $12,000 or more to cover both contributions.

Another good thing about the Spousal IRA is that, should the non-working spouse go back to work, he or she can contribute to the same IRA. That’s because, once opened, a Spousal IRA is an Individual Retirement Account like any other.

Making retirement top priority no matter what

Even if you don’t qualify for the tax advantages of an IRA or other type of retirement account, if you have income from other sources besides wages, I advise you to save for retirement—and save consistently. Open an investment account or other type of savings account, earmark it for retirement and direct a percentage of your income to that account each month. Ideally, you could set up an automatic transfer from your online checking account into your savings account to make it easier on yourself. Then, should your earnings situation change and you find you’re able to contribute to an IRA or participate in an employer-sponsored plan, you’ll be ahead of the game.

Five Changes Coming to the Retirement World in 2016

Monday, January 11th, 2016

2016 changes

It’s still early in 2016, but big changes are coming in the retirement world, as it’s always changing. As you plan for retirement, it’s important to stay on top of specific changes that can affect your self-directed IRA retirement accounts, regular retirement accounts, Social Security and investment vehicles. These changes could impact your saving strategy:

The new myRA is now available

The myRA is a Roth individual retirement account (IRA) that has no fees, and the government guarantees that it will never lose its value. We talked about myRA’s back in September, and weighed the pros and cons. This is pegged as an ideal option for those who are just getting started on their retirement savings because it’s easy to set up contributions.

The saver’s credit threshold increases

People who make slightly more money might have a better chance qualifying for the saver’s credit in 2016. The limit for adjusted gross income (AGI) increased $250 to $30,750 for single filers, and for married couples filing jointly, the AGI limit rose $500 to $61,500.

Obama’s 2016 budget focuses on retirement

President Obama’s budget proposals include eliminating the special tax break for net unrealized appreciation on retirement accounts, limiting Roth conversions to pretax dollars, putting a cap on retirement savings and more.

While some or all of Obama’s proposals might not happen, these changes could impact what you can do with your retirement accounts.

No more ‘restricted applications’

The “restricted-application” option is being eliminated. Before this new law, couples would file a “restricted application” after reaching full retirement age to receive only spousal Social Security benefits while their own benefit earned delayed credits until age 70. But now, only those who were 62 years old at the end of 2015 qualify.

Rebooting ‘file and suspend’ strategy

Spouses have been using the “file and suspend” strategy to increase their Social Security benefits. Changes are coming by May. As CNBC reports, in order for your spouse to receive a benefit based on your earnings record, you need to actually be receiving benefits as well. Some extensions are possible for those 62 and over.