Archive for June, 2010

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Thinking of the Future

Monday, June 28th, 2010

Through out life most people generally think about what is coming next.  Humans generally like to plan for the future.  Most people like to set goals and be prepared for what is coming up next.

Saving money for retirement comes naturally for some people.  They worry about becoming injured or getting too old and not having financial stability.  Even if nothing happens to them, at least that have a nice chunk of money to live comfortably on.

IRAs or Individual Retirement Accounts are an excellent way to save money for retirement.  Self Directed IRAs is a particular IRA with several benefits.  In this particular IRA individuals have more flexibility with their portfolio.

Some options with this IRA are stocks, bonds, and even real estate.  Even though there is more freedom with this IRA, there are still limitations.  One is that you cannot invest in life insurance as an IRA.

It is very important to understand the limitations within the Self Directed IRAs.  Any gain or money made from an investment must stay in the IRA.  If it is taken out for personal gain, then the entire investment is no longer an IRA.  This means that the IRS will consider the whole amount to be taxable.

There is also another penalty for early withdrawal.  The penalty amount is 10% of the entire investment.  Only people who are older than 59 years old are allowed to withdrawal money from their IRAs without it being an early withdrawal.

It is also important to understand the IRS codes regarding investments.  Once the money has been saved, it should be dealt with responsibly.  The money that is taken out is taxable.

If an individual doesn’t know the IRS codes, then they could be fined for negligence in paying taxes.  Money could be taken out of the Self Directed IRAs by a state agency for an insolvent savings institution without the individuals consent.  The amount would still be taxable.

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Using real estate to diversify and optimize your retirement.

Wednesday, June 23rd, 2010

Many of us have most or all of our retirements in a 401k at work.  However, if you can access your 401k funds your can roll some of them over into a Self Directed IRA. This can give you more flexibility and allows you to take advantage of economic downturns instead of being taken advantage of.

If you spot a particularly great deal on real estate, and you have the funds in your retirement to purchase it, a Self Directed IRA LLC will allow you to purchase and maintain the property using the funds from your account. (Self Directed IRA LLC are more expensive in California and Illinois but there are other options for those states.)

The costs for setting up the account will be about $2000 and include a state filing fee.

That includes, set up of the account, the LLC and guidance on how to proceed.  That also includes consulting after the plan is up and running.

If you purchase the property as a rental all rent is paid directly to the LLC and continues to grow your investment.  Taxes, maintenance costs, etc. are paid by the LLC.  So your personal income isn’t involved.

Of course, you want to remain diversified and do this with only part of your retirement.  With the incredible opportunities for purchasing real estate at low prices, now is a good time.   Rental income plus the appreciation on your property could have a huge impact on your retirement.

To increase the potential for appreciation look for the worst house in the best neighborhood you can find. To increase potential for rent look for the best house in the worst neighborhood.  But above all else, find the best deal.

Be careful to find a good company to work with.  With any investment, find people you trust.  Be sure of what your doing and don’t rush into anything.

When it’s time to retire, your Self Directed IRA LLC can stay in place.  The LLC can disperse funds to you as you need them.  If you prefer, you can dissolve the account and take ownership of the LLC yourself.

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Choosing the Right Self Directed IRA for You

Tuesday, June 22nd, 2010

Self Directed IRAs are becoming very popular in today’s society especially with all the negative predictions on our Social Security. People want to find ways to invest their money so that it will stay safe. Traditional IRAs and Roth IRAs are both excellent choices for investments as both have huge tax reliefs.

Both of these IRAs can be set up as a Self Directed IRA and allow you to invest the money you put into them. That way the money can be growing for a long period of time. However, there is a limit to the amount you can contribute to these accounts. You are only allowed a maximum of $5,000 yearly for those under the age of 50 and $6,000 yearly for anyone older. This still allows for a large amount of money to be saved up.

One large advantage to investing in a Roth IRA is that your money becomes tax free once it is in the account. This also includes any investments made. This makes for a great way to earn tax free income.

Roth IRAs are extremely flexible compared to traditional IRAs. You are allowed to take your money out whenever you want as long as it’s the original money you put into it and not money earned through investment. You are also never required to withdraw your money, which allows it to grow in the account for as long as you want.

The problem with Roth IRAs is that not everyone can open one. You must be with the income bracket making less than $95,000 as a single or $150,000 as a married couple. This makes it so the upper income class must resort to a traditional IRA.

However, a traditional IRA is still a great way to make investments. It does have a tax break for any money deposited. You are also allowed to invest the money in a number of different ways.

The downside to a traditional IRA is the strict nature for withdraws. You must pay a fee or 10% on any money taken out before the age of 59 ½. You also are required to start these withdraws by the age of 70 ½. Once you do take this money out, you are required to pay taxes on it as if it were normal income.

Either route you take for investing is a good one. Obviously there are more benefits to the Roth IRA, but if you are above the income limit this can’t be helped. Self Directed IRAs make a great way to prepare for your retirement.

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Using Your Checkbook with a Self-Directed IRA

Monday, June 21st, 2010

Have you been thinking lately that using a checkbook is most certainly becoming a thing of the past?  If you want to have authority over your financial planning future, you might think again.  Using your checkbook with a Self-Directed IRA is now the way to put yourself in the driver’s seat.

There is a growing trend among in the know Individual Retirement Account (IRA) owners who are taking the steering wheel of their financial future. They are using their retirement funds in their own personal accounts with checkbook control to make alternative investments of their choice. This includes use of traditional, Roth IRA, SEP-IRA and 401k plan owners.

They are using that Self-Directed IRA to purchase non-traditional IRA investments such as real estate investments (including international real estate), mortgages and trust deeds, tax liens, private partnerships, private placements, limited liability companies (LLC’s), business opportunities, and much more.

The most common IRA account custodians are banks and brokerage companies.  They tend to limit your choices to certificates of deposit, stocks, mutual funds, annuities, and similar financial instruments as it is in their own self interest to do so. They make their money from the sale of these types of investments and they usually only offer their own commissionable products to their account holders.

Using a Self-Directed IRA with checkbook control in your financial planning will put you in control of your retirement funds and will enable you to determine how, when and where your retirement plan and pension plan funds are invested.  A new world of investments beyond your bank or brokerage company is opened up to you.

When you find an investment that you are interested in purchasing…you simply write a check from your bank account to purchase the investment product. There is no need to secure approvals from your account custodian. There are no time delays in awaiting approval from your custodian. There are no review and transaction fees to pay.

By using a Self Directed IRA to make the investment, you, acting as the manager, have checkbook control of your retirement funds…you alone make the decisions of when and where your retirement funds will be invested.

If you have been discouraged with the amount on returns or are you concerned about the safety of your Individual Retirement Account (IRA) then you need to take direct control of your IRA, 401k or other retirement funds using checkbook control.

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Investing your Self Directed IRAs in Property Tax Sales

Friday, June 18th, 2010

At some time or another we will all retire. A great way to prepare for retirement is to make good investments with your retirement accounts. Using your Self Directed IRAs for investments may not yield money you can use immediately, but you will not have to pay taxes on the profit you make. With taxes as high as they are this can really help optimize your profits.

There are many options to investigate when it comes to investments. A very popular one is this economy is the housing market. With all the foreclosures and short sales, it can be a promising investment. A less known yet very rewarding route to take is property tax sales.

Property tax sales are investments that provide a way to get property at an extremely low cost. This allows you to turn them around and sell them for large profit. This profit goes right back into your Self Directed IRAs providing more money to invest.

A property becomes a tax sale when the original owner is delinquent on their property tax. If they do not pay off this debt, their property can be taken from them. In most parts of the country the tax delinquent properties are sold at auction to qualified citizens.

The bid for the property usually starts with the tax amount owed. The winner of the bid is essentially paying off the debt on the property. This way the county resolves the tax issue and also makes some money while the bid winner gets ownership of the property for a great price. Sometimes properties can go for as little as a few hundred dollars.

Before attending one of these auctions, it’s important to do your research. You may need to register or pay a refundable deposit in order to participate. You will also need to locate the list of properties that will be up for auction. Doing your research on these properties will help you determine which properties will be the best for you.

Be aware that without proper research, you may encounter problems with the properties you purchase. You might find people living there that need to be dealt with. There may also be additional liens that will need to be paid off. Most of these issues can be discovered beforehand if you put in the time.

Remember the key is to invest, so you want your cost to be as low as possible. If you’re using money from your Self Directed IRA, your retirement is at stake. Use it wisely so you can have the greatest return possible.

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Understanding SDIs

Friday, June 11th, 2010

Many people know how great having a individual retirement account will be for their retirement. But a lot of people don’t know how an IRA works. Every account will have their own rules and regulations and be used in different ways from one another.

Self directed IRAs, or SDIs, have a lot of uses. They are cost effective, save time on paperwork and fees, and are beneficial to those investing in it. The IRA account owner can have complete control of the SDIs funds.

After an account holder activates an SDI, they use a Limited Liability Company, also known as LLC, to help them make investments. With the help of the LLC, custodians are not needed. Investments are made solo, with out the help of outside help.

Custodians require time, effort, and money to perform their jobs. SDIs, because they do not require a custodian, have a lot less paperwork and fees than other IRAs. Transactions tend to go by quicker because everything is a lot easier.

The LLC does not require a custodian. They are able to do investments separate from the custodian. Because they do not use a custodian, self directed IRAs are a popular choice for many account holders. The SDIRA account holder makes decisions on their own about the type of investments they would like to make, and they don’t have to pay large transactional fees that other IRA holders have to pay.

To use a SDI the account holder already has to have an IRA account. If the owner has a traditional IRA, the money that is in the account is moved to the new SDI account. The self directed IRA owner then invests his money in to the new established LLC. The LLC then, under the direction of the SDI account holder, purchases any asset of their choice in to their new IRA account.

Professionals can really help you understand how to work SDIs. They have certain requirements and rules that need to be followed. This is to make certain that everything is done in a fair and proper manner.

Professionals are able to understand those rules. They can help you save time and money by helping you know what things to watch out for. Self directed IRAs are a wonderful way to save for the future and have a lot of advantages that you should look in to if you haven’t already.

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How Self Directed IRAs work with Investment Purchases

Friday, June 11th, 2010

Self directed IRAs provide great investment opportunities. You can use your SDI account to make investments that are then used specifically for your retirement funds. SDIs are a popular choice for many people.

The reason they are such a popular choice is because it allows you the chance to have complete control over your investments. You can use traditional investments, such as stock options and bonds. It also allows you to have alternative investments, such as real estate, etc.

Self directed IRAs allow you to invest in alternative investments that you would like to use towards your retirement plan. Real estate, personal loans, private businesses, tax liens, and much more are able to be invested in with SDIs.

These alternative investments are specially used through SDIs. Other IRAs are not able to make these types of investments.

Another reason that SDIs are popular is because they are easy to use. You simply make your investment and you do not have to worry about transaction fees. A custodian is not used, so you don’t have to worry about high fees because of him, or holding or asset-based fees either.

Account owners of SDIs can be a form of their own custodian. They can save literally hundreds, to thousands, of dollars in savings because they do not have to pay for those transaction and asset-based fees. Self directed IRAs also can diversify their retirement account money too through 401(k)s, IRAs, etc.

SDI owners can use the same self directed IRA LLC to purchase both nontraditional and traditional investments. That means they can invest in real estate as well as stocks or bonds. If they follow the specific guidelines in regards to real estates purchases, they can even buy their retirement home now at today’s prices, rent it out, and then move in to it later once they qualify for their IRA distribution.

Other perks are that owners can buy foreclosed properties and tax liens right then because they do not have to deal with custodial delays. They can also buy and sell their properties they have as self directed IRA investments. This can be domestic, residential, rental, commercial and foreign properties that will have profits tax-deferred and put in your retirement account.

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Who Should Take Advantage of Self Directed IRAs?

Thursday, June 10th, 2010

There are many advantages of self directed IRAs. First, they can help you manage your retirement plans in a more flexible manner than other IRAs. They also allow you control when you have to customize or conform to Limited Liability Companies (LLC).

They also allow you more investment opportunities. You can use the funds in your IRA to invest in non-traditional investments. You can invest in real estate, businesses, loans, tax liens, and more.

They also give you the opportunity to diversify your investment portfolio. The more diverse, the better chance you have with investments. All of these investments are done inside the same IRA account structure.

Self directed IRAs also have limited custodial fees. Sometimes custodians are not even needed. This means that LLC programs can eliminate transactional, asset-based holding fees.

It offers checkbook control. Normally time-sensitive investments have a lot of restrictions with them. With self directed IRAs those restrictions are lessened, as is the custodial paperwork process.

LLC programs work well with self directed IRAs. People who wish for this type of service should be looking for more secure options with their investments. These investments are for people who want to have an investment opportunity outside of the regular stock market option.

People who want this program should also want to have a diversified portfolio, or at least have the option and ability to have a diversified portfolio. They are for people who wish to have control over their investments and retirement funds. Also, if you are dealing with time-sensitive purchases, like foreclosures or tax liens, Self directed IRAs are the way to go.

IRAs are smart investment choices. This type of IRA is good for investors who already have $50,000 in their retirement account. It is also a good option for investors who want to make other small investments that incur high transactional fees with custodians.

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Limits Placed on IRAs

Tuesday, June 8th, 2010

Self directed IRAs do have contribution limits. Each year holds different requirements and limits. One requirement for one year will not be the same limit or requirement as another year.

In 2010 the contribution limit is $5,000 for people that are younger than 50 years old. If you are age 50 and above you can put in a $1,000 more, making the total contribution maximum $6,000. Just a few years back the limit was much lower.

Traditional IRAs have two different types of accounts. There are deductible accounts that deduct part of your contributions. They also have nondeductible accounts.

There are requirements for qualifying for a deductible IRA. Deductible IRAs allow you to deduct part, or all, of your total contributions from your taxable income. A lot of people like this option for their retirement plans.

A deductible IRA is available to people that do not have a retirement option from their work. They also have to take the payments only from the adjusted gross income. No other investments are able to be put in to an IRA.

This year there is a limit on how much you can make. In 2010 the rules now state that people trying to get a deductible IRA cannot have an AGI of more than $65,000 in single households. The limit for married people, filing jointly, is $109,000.

Some people who are not covered for retirement plans through their work may have other options. If your spouse works, and is covered by a retirement plan, there are circumstances when you can add money to your spouse’s deductible IRA. There are other IRAs available, such as self directed IRAs and Roth IRAs.

Both Self directed IRAs and Roth IRAs have their own limits and rules. Roth IRAs, for example, only allow people to contribute to it if they are making below $120,000 for single households, and $177,000 if married and filing jointly.

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What are valid investments with IRAs?

Monday, June 7th, 2010

IRAs are only meant to be funded with actual money. This means cash, or at least an equivalent of cash. You are not allowed to transfer any other type of asset over, such as a home or car. Money is needed.

You are allowed to mix and match your IRAs. You can have a Roth IRA and a Self Directed IRA. Rollovers or transfers between IRA accounts can include any asset.

There are maximum limits to how much you can put in your IRA accounts. For example, this year the limit that you can put in is $5,000 if you are under 50. Those who are older may contribute $6,000.

This limit is for Roth IRAs and Traditional IRAs. You cannot put more than $5,000 in either, or $6,000 if you are over 50. So if you have $4,000 in your Roth IRA, you are only allowed to put an additional $1,000 in either your Roth or Traditional IRA.

Traditional IRAs do have a deductibility phaseout limit. This is for those that are covered by a work retirement system. Roth IRAs also have an income level phaseout system as well.

Once funding has been put inside the IRA, the account owner can have the custodian use the cash to purchase types of securities. Some assets are not going to be able to be purchased, such as collectibles or life insurance. Other assets are allowed but come with certain stipulations.

Custodians handle the IRA. The IRS has given the custodians precedence to have their own policies, in addition to the rules the IRS imposes. Custodians are, however, not supposed to provide advice to IRA account holders.

Self directed IRAs are a little different than the other IRAs. Self directed IRA custodians can allow non-traditional assets and real estate in as investments for their retirement. They stand alone in allowing non security investments, and tend to be a little more complicated – so it is important to set these up with professionals who know the ins and outs of self directed IRAs.

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