Required Minimum Distributions – You Can’t Afford to Miss This Deadline!

December 7, 2012

Don’t let the little issue of RMDs or required minimum distributions get lost in the blur of the holiday season.  The IRS makes it painfully clear that they are envious of those of you that are over the age of 70.5 and have an IRA or other retirement plans.  Interestingly, the Roth IRA holders are spared the indignity of the government telling them how to manage their finances, but more about that later.

If you hold a non-Roth IRA and had your 70th birthday before July 1 of 2012, you must take a minimum distribution from your plan.  In other words, make what was tax deferred, now taxable.  How much must you take out?  It is based on an IRS provided table that calculates your estimated life expectancy.  How much is it?  Well, if you turned 70.5 this year, you will be forced to take a distribution of a little over 3.6% of your holding.  My mother, age 92, is required to take out 9.8%. For those of you yearning to know more, consult IRS publication 590 for the rules and tables.

All non-Roth IRAs are added together to calculate the RMD, and distributions can be made out of any of the held IRAs to meet the distribution requirements.

IRA holders that are in or near their RMD years should plan for sufficient liquidity in their plans to permit the easy withdrawal of funds as required.  This withdrawal can take place anytime during the calendar year – but if not done by December 31st, a penalty of 50% of the undistributed amount will accrue to the IRA holder.

Those that have contributed or converted to a Roth IRA are not forced to take any distribution during their lifetime, as all taxes have already been paid.

So, two end-of year reminders:  If you are nearing or over seventy years of age and have pre-tax IRAs, get prepared, and take the distributions as required.  If you wish to convert to a Roth this year, you must do so before December 31st.  Talk to your tax professional before the end of the year so you make all the best moves.

As always, all the best in your investments,

Glen

Riding the Foreclosure Wave with your Real Estate IRA

November 5, 2012

According to a recent article published by CNBC entitled “Buy Foreclosures With Your IRA”, many investors are beginning to take advantage of the downturn in the market by investing in foreclosures through their self-directed IRA. The article notes that Cincinnati resident Rich Pregel, an investor with experience in the real estate industry, decided to invest his money in a commercial foreclosure through his self-directed real estate IRA. Pregel is now generating almost $80,000 a year after expenses on an initial investment of $140,000 by renting out his commercial property. Pregel bought the property for a good price, put some money into it to get it up to rentable specs, and now says it’s like a no brainer. Since his IRA owns the property, all expenses that go into the property must come from his IRA account and the rental income received goes back directly into his self-directed Roth IRA tax-free.

Last month, Florida overtook Illinois as the state with the highest foreclosure rate in the country, according to RealtyTrac, a company that publishes the largest database of US foreclosure, auction, and bank-owned homes. Also according to RealtyTrac, one in every 318 housing units in Florida received a foreclosure filing last month, compared to one in every 730 homes nationally.

While this does not bode well for Florida homeowners’ credit scores, it does offer a potentially profitable investment opportunity for those looking to grow their retirement funds and diversify their portfolio. Many of these distressed and foreclosed properties in Florida can be purchased for a steal, and with the power of a self-directed IRA behind the investment, the gains go back into the retirement fund either tax-free or tax-deferred, depending on your IRA.

To take advantage of the foreclosure wave and invest in foreclosures with your IRA, it must be a self-directed IRA. To do this, you need the assistance of a qualified and experienced self-directed IRA custodian to facilitate your self-directed investments. Give our Florida self-directed IRA administrators a call today at 407-367-3472 to learn more about self-direction and Florida real estate IRAs!

How to Take Advantage of a Self-Directed IRA with Just $5,000

October 29, 2012

There is a common misconception out there regarding self-directed IRAs that you have to already have a lot of money in your IRA to get started with self-direction. Here’s an example of an investor who started out with just a 5,000 contribution to her self-directed Roth IRA.

This particular investor had some friends in the real estate business who specialized in buying and selling Real Estate Contracts. Her friends helped her find an individual who was looking to get some cash by selling his Real Estate Contract for a small piece of property in the Appalachian Mountains. The contract was originally sold to him for $23,000 and he had invested a significant amount of equity in the property and paid down the contract considerably. In fact, if he were to continue making payments, he would have the property paid off in roughly two and a half years.

Therefore, the investor decided upon what she would like to offer the seller for his Real Estate Contract, and after some negotiation, agreed upon a price that would earn her 10% on her money over the next 2.5 years. A check was sent to the seller through her self-directed IRA, completing the entire transaction in less than a week!

You may not think that 10% on $5,000 is very much money, but what if you have 10 investments like this or you start buying bigger contracts? The possibilities are endless with a self-directed IRA. Whether you are looking to issue notes or mortgages, invest in tax liens, or purchase real estate, the choice is yours with a Florida self-directed IRA from NuView. Call us at 407-367-3472 to get started!

Retirement Obsession Disorder

October 17, 2012

There are certain phenomena that can only be explained through experience.  Once such event is what happens when you achieve the age of fifty.

When I was thirty, my viewpoint of those meeting the mid-century milestone was a bit jaded.  It seemed that the “older” generation’s musical tastes included artists such as Johnny Mathis, Andy Williams and perhaps the more wild confessed to owning an Elvis record or two.  This graying set drove large, boat-like cars, the men wore their pants a bit higher and tended to schedule their dinner out earlier.  They never could effectively communicate with us younger types and seemed overly concerned with their investments.  Certainly I would never become like them.

Then I turned fifty.

Everything changed – perhaps not all at once, but certainly in rapid fashion.  Let’s see.  My musical tastes tend to be reunion tours of geriatric groups such as the Eagles, Bruce Springsteen, and even an occasional Broadway musical.  I now drive a Cadillac, though I would like to point out that it isn’t the size of my Father’s car.  While the waistline of my pants hasn’t risen too much, I must confess, I have become more obsessed than ever with funding my retirement.

The equation is quite simple.  If I want to retire at age 65, I now have 15 years to take what I have managed to save so far, contribute more to it, and invest it wisely enough to live out my years in blissful retirement.  This may be easy to understand, yet hard to execute, especially if the gains are subject to taxation.  It becomes even more difficult when traditional, relatively “safe” investments are providing sub-standard yields.

Retirement obsession disorder (ROD) has hit me hard.  One cure that I have found to this malady is self-direction of my retirement plan – and partnering with smart people that can help guide me to the best combination of risk/reward  to accomplish my objectives.  Through a self-directed IRA, I am able to reinvest my returns, without the tax toll gate that diminish the gains of those who choose to use after-tax money for those same investments.  Rental real estate, private lending, and new business start-ups are all part of my IRA investments, along with a few Wall Street funds.

As the principal of NuView IRA, a self-directed IRA administrator in Florida, I share the perspective of thousands of clients investing hundreds of millions of dollars with the objective of improving their retirement outcomes.  If you suffer from ROD, seize control of your retirement funds and start self-directing your IRA.  Stay involved, save slavishly and invest in things you know and understand.  If you are over fifty, best of luck avoiding those pesky AARP applications.  If you are younger, listen to your elders and start your retirement early, much earlier than I did.

All the best in your investments,

Glen

Roth IRA Conversion – You Are Now “On the Clock”

October 16, 2012

For those of us that are sports fans, both football and basketball drafts are once a year events that require a great deal of strategy and preparedness on the part of the drafting teams.  For example during the NBA draft, a team only has 5 minutes to decide what choice to make once they are “on the clock”.   Now something far more important is now on the clock – your IRA.

Less than ninety days separate almost 50 Million IRA households from a critical decision that may impact their retirement – and even their heirs.

It’s mostly about taxes.  If you have a SEP, Traditional, Simple IRA1, or a retirement that can be rolled into an IRA this year, regardless of your income, you can elect to convert those funds to a Roth IRA.  Here is the difficult decision – pay taxes voluntarily now, or later when you take a distribution.

This year brings an additional complexity to the decision – where will individual tax rates be in 2013 and how will your marginal tax rate be affected?   If Congress does nothing, the Bush era tax cuts will expire, and the top federal income tax rates will rise from 35% to 39.6%, an increase of 15%. For those fortunate IRA holders that are in the top bracket, a decision to convert their traditional IRA to a Roth IRA in 2012 may come at a 15% discount than if they wait a few months until 2013.

Perhaps your taxes in 2012 will be lower due to diminished earning or write-offs.  This may also provide the impetus to make at least a partial conversion this year at a lower personal rate.

Here are a few positive reasons to do a Roth IRA conversion:

  • Never face a Required Minimum Distribution after the age of 70.5 years old.  As a matter of fact, you need never to withdraw those funds.
  • The heirs to your Roth IRA will also not have to pay taxes on their distributions.
  • Of course, any distributions you take from your Roth IRA once achieving the age of 59.5 are free of any federal taxation.
  • If you hold an asset that you expect to appreciate significantly, convert while the tax basis is low, and enjoy the gains tax free.

Potential drawbacks of a Roth IRA Conversion

  • The tax rate in your retirement years will be significantly lower than the tax rate paid for your conversion.
  • The investment in your converted Roth account decreases in value.
  • The additional money used to pay the taxes on the Roth conversion is no longer available for investment and represents  a significant lost opportunity.

There are hundreds of Roth calculators on-line which will allow you make your own forecasts and come to a decision that best fits your situation.  By all means, work with your financial or tax professional to discuss whether you need to make a move to a Roth IRA this year.  Unlike making your IRA contribution, the deadline for Roth conversions in 2012 tax year ends at midnight on Dec 31st this year.

1 Simple Plans must be held at least two years prior to conversion


Glen Mather is President of NuView IRA, Inc., a leading self-directed IRA administrator in Florida. He can be contacted at 407-367-3472 or gmather@nuviewira.com.

Am I Too Young for a Retirement Plan?

October 15, 2012

You are never too young to start saving for retirement! When we work with clients who start a retirement plan later in life, more often than not, they regret waiting so long to get their plan in action. If you are a young adult in your mid 20’s to mid 30’s with any amount of earned income, it’s time to start thinking about your retirement.

A Roth IRA is a great option for young people looking to start saving for retirement. Think about it – a person who opens a Roth IRA at the age of 25 and maxes out the contributions every year until age 65 will save approximately $1.4 million (assuming the historical 8% rate of return prevails). Here are 3 reasons why you should open a Roth IRA today:

It’s Never too Early to Plan for the Future
TIME is more important than the SIZE of the account. A person of any age can open a Roth IRA as long as they can show that they have earned income (money made from the mind or sweat of the brow) in any given year. An interesting twist – even if you are an infant, as long as you’ve got a social security number and earned income, you can contribute to an IRA. If your child is one year old and gets chosen to model for pictures in a brochure, receiving 1099 income for their work, this earned income can be contributed to their IRA account.

You CAN Afford the Money
A Roth IRA can be started with any amount of earned income. Once you have the funds in the account, you can choose an amount that you are comfortable contributing on a yearly basis and continue to grow your retirement funds from here.

Easier Access to Funds before Retirement
Roth IRAs allow for more flexibility to make withdrawals before retirement. If you contribute to a Roth IRA, those contributions can always be withdrawn without taxes or penalties with no limitations. For Roth accounts that have been funding through conversion, there is a 10% penalty for withdrawals under the age of 59.5.

Saving consistently and investing wisely is a simple formula for success, but sometimes challenging to put into practice. By starting young, you can get in the habit of saving for your future, and soon it will become second nature to make smart investment decisions. At NuView IRA, we let our clients invest in many ways they never thought possible. Give our Florida IRA administration company a call today at (407)-367-3473 to learn more!

Former Hockey Coach Purchases Ice Rink through His IRA

October 11, 2012

A former men’s hockey coach at the University of Virginia recently decided to use his self-directed IRA to purchase real estate in the form of an ice-skating rink that was on the verge of closing. He got together with six other investors and contributed $300,000 from his own IRA in order to save the ice skating rink in Virginia where he had previously coached. In addition, the former coach also purchased several real estate properties in Florida and a mortgage on a medical building by self-directing his IRA.

With financial stress from the economy and unknowns in the stock market, it’s no surprise that people, like this former hockey coach, are looking for alternative ways to earn more money for retirement. Self-directed IRAs are a great option for this, as they allow IRA owners the ability to invest in what they know and understand. IRA owners can pursue a wide variety of investments including real estate, private placements, mortgages, tax liens, etc.

If you work in or know the real estate industry, you can self-direct your IRA into real estate. If you know the mortgage field, you can use your IRA as a lender. If you know a company looking to raise capital, you can invest in a note with that company. There are so many investment possibilities that most financial advisors are unaware!

If you’ve got experience or knowledge in a specific field, take the example of the former University of Virginia hockey coach and invest in what you know and understand. With a self-directed IRA from NuView, you can do just this, while taking advantage of the tax-advantaged growth of your retirement plan. Give our Florida IRA administrators a call at 407-367-3472 to learn more about the many ways you can invest in your retirement!

Thoughts at Thirty Thousand Feet

October 5, 2012

There is something therapeutic about flying.  No, not the shuffling through the TSA gauntlet, the detangling from the hordes of little ones returning home from Orlando with their skull caps adorned with plastic ears and clutching their furry souvenirs.

No, the respite comes once sufficient altitude is obtained, the drink order delivered, and the electronic device “all-clear” is sounded.  For the briefest of moments, sanity is restored and reasonable quiet is returned to the cabin.

Such is the case now, as I hurtle away to an industry conference in Phoenix, sponsored by the Retirement Industry Trust Association or RITA.  During the next few days, I will be learning about the latest governmental trends regarding self-directed (SD) IRAs and the likelihood of changes with the next Congress.  Rest assured that I will be sharing that information in future blogs over the next few weeks so that you will be able to anticipate any changes along with NuView IRA.

Regardless, all of us continue to move another day closer to our retirement – and I’m quite proud that on Friday, I took another step.  You might think that being a spokesperson for SD-IRAs and having  thousands of clients taking control of their IRAs, that my retirement would always be my first priority.  Not necessarily.

However, last week, I took the first step in investing my Health Savings Account (HSA) in a mortgage-backed loan.  Although some people have HSAs and can put up to $6,250 per year tax free into these accounts, most just keep them in non-interest bearing accounts.  They do not realize that they can invest these accounts just the same as an IRA, and with NuView, that includes private loans, mortgages, private companies and much more.

Join me in taking a look at your funds that are not working for your retirement future.  Don’t be up in the air about your investments.  Call our company of experienced IRA administrators in Florida at 407-367-3472 to discuss your choices and start building momentum toward the retirement you deserve.

As always, all the best with your investments.

Glen

I Own a Small Business or am Self-Employed – What are My Retirement Plan Options?

October 4, 2012

As an employee of a large corporation, you most likely have a retirement plan option provided to you that is sponsored by your employer. On the other hand, if you are a small business owner or self-employed, you make think your options for a retirement account consist of simply the traditional IRA and the Roth IRA. However, you may have more options than you think. Consider the following choices as you make your investment decisions.

SEP IRA: With a SEP IRA, the employer (instead of the employee) makes all contributions. If you are a small business owner with few or no other employees, this may be an ideal option for you because you can make annual tax-deductible contributions of 20% of your earned self-employed income or 25% if you’re an employee of your own business up to $50,000 per year.

SIMPLE IRA: If your small business has 100 employees or less, a SIMPLE IRA can be an attractive substitute to a 401(k) plan. Unlike with a SEP IRA, the employee is the primary contributor to a SIMPLE IRA. A SIMPLE IRA encourages employees to take an active role in their retirement savings because the employer is required to match the contribution made by the employee up to 3% of their compensation.

I401(k): An individual 401(k) plan is an appealing option for a small business with multiple owners who work for the business, or for the solo practitioner. Not only does this retirement plan allow the employee to fund the 401(k), but also it enables the employer to make a profit sharing contribution. Other advantages of an I401(k) plan include the ability to accelerate contributions, to contribute on a pre-tax or post-tax basis, and to take a loan up to $50,000 from the plan.

Saving for retirement doesn’t have to be a challenge for the small business owner. Take the time to explore and understand your options because the right one will depend on the strategies and growth goals of your business. Contact our Florida IRA administration company to learn more about the many ways you can invest in your retirement. Give us a call today at (407) 367-3472 to find out all the options available to you!

Myths Regarding Roth IRA Conversions

October 3, 2012

Unfortunately, all of the attention lately on Roth IRA conversions comes with a flood of misinformation. The following are a few common myths regarding Roth IRA conversions and the realities investors should know:

  • Myth 1: A Roth IRA conversion is irreversible – This is not true, you have the right to change your mind later (up to October 15th of the following year) and get your taxes back that you paid for the conversion.
  • Myth 2: After you convert, you can’t touch the money for five years – To withdraw earnings from a Roth IRA tax-free, it is true that the account must have been open for at least five years OR you have reached the age of 59-1/2. It is possible to withdraw your earnings before this time, but you will incur a 10% early-withdrawal penalty.
  • Myth 3: Only one conversion is allowed per year – A traditional IRA can be partially converted into a Roth IRA multiple times in a year, providing significantly more flexibility for investors.
  • Myth 4: Roth conversions cannot be made by people who are under age 59-1/2 or over age 70-1/2 – There is no age limit for conversions. Individuals older than 70-1/2 must satisfy their Required Minimum Distribution (RMD) before converting the remainder of their assets to a Roth IRA.

Since 2012 when Congress lifted the income restrictions on Roth IRA conversions, myths about the new rules have spread like wildfire. The reality is that Roth IRAs are becoming increasingly popular because earnings accumulate tax-deferred and then can be withdrawn tax- free if the appropriate requirements are met.

Converting a traditional IRA to a Roth IRA is an appealing option for individuals who believe their retirement income will be taxed at a higher rate than their current income. As always, seek the advice and counsel of a financial professional before making investment decisions. Give us a call today at 407-367-3472 or toll free at 877-259-3256!