The Four Stages of an IRA
Copyright 2006 Damon Clifford
With all these different names and terms being thrown around in the financial community, it can get very confusing on what something is, and what it is not.
How many times has it happened to you?
Let me go through and explain the four stages of an IRA.
Stage 1 ? Regular IRA
Everyone knows what the traditional IRA is.
It is what most of us have our money in.
We call up Fidelity, Charles Schwab, or Merrill Lynch and give them our money.
With this IRA, they make the investment choices for you.
They charge you for this, as they are managing your money.
It could be either fee based or commission based depending on the custodian you chose.
Stage 2 ? "self directed" IRA
Stage 2 takes it a little step further.
You still have your money with Fidelity, Charles Schwab, or Merrill Lynch but they allow you to make the decisions.
They have given you a "self directed" IRA.
However, you can only invest in their products which can include stocks, bonds, and mutual funds.
What happens is that they will offer you Microsoft, GM, or Starbucks stock and instead of them choosing which is right for you, they allow you to choose the stock.
With this control (over which stock you choose), they call it a "self directed" IRA.
A simple test to see if you really have a self directed IRA is to ask your custodian if you can invest in real estate and other non-traditional assets.
If they say "no, you cannot buy a house with your IRA", then it is not a "true" self directed IRA.
Okay, here's where we take the big jump from traditional investments to non-traditional investments.
Remember, the traditional investments are typically stocks, bonds, and mutual funds, which all of the larger custodians will offer to you.
The non-traditional investments include real estate, energy, tax liens, and many more.
Stage 3 ? Self Directed IRA
With the self directed IRA you are now allowed to invest your IRA funds in non-traditional assets.
The custodian for the non-traditional IRA will hold your funds for you.
They make their money by charging different types of fees.
These fees can include asset fees, transaction fees, and maintenance fees.
Each custodian is a little different, so you may want to check a couple of them out and see if any of them are a good fit for your particular types of investments.
When you find an investment you want to make, you have to get approval from the custodian first.
This can take time, and depending on the types of investments you are making, you may lose out on "quick turn" investments.
I have seen many investors lose out on an investment because they could not fund it in time.
On the flip side, I have seen many investors who were already at the fourth stage of an IRA and were able to fund the investment and reap the generous returns.
Stage 4 ? Self
Directed IRA LLC
The self directed IRA LLC is by far the most flexible IRA tool, and because of this, one must always be aware to stay within IRS regulations.
You have complete control over your funds.
You are the only one that will be held responsible for the success of managing your IRA account.
This is why the Self Directed IRA LLC is not for the "novice" investor.
With the self directed IRA LLC, there are four main benefits that none of the other levels of an IRA can offer.
First, the self directed IRA LLC provides the lowest custodian cost on their clients.
Second, there is no need for you, the investor, to ask permission for an investment.
Who is going to know more about that "hot" property just around the corner from your house, you or a custodian in Chicago?
Third, there is the extra layer of LLC protection.
It would make it just that much harder for someone to try to seize your assets in litigation.
Finally, and most importantly, you have checkbook control of your account.
You are able to make on the spot decisions about your investments.
You can use this as leverage against the investments you are considering.
Now you should have a better understanding of the different levels of an IRA.
Do you have the type that best suites your needs?
As more and more investors learn about non-traditional assets and how it can improve their portfolio returns, I hope to see many more of them at the fourth level of an IRA
Retirement Plans for Solo Entrepreneurs
Saving for retirement is even more important for solo-entrepreneurs because you don't have a company sponsored pension plan or matching 401K contributions to rely on.
There are many retirement plans available to self employed individuals and small businesses.
Which one is right for you?
Here is just a sample of the retirement plans available to solo-preneurs and small businesses:
Roth IRA ? although this is not just for solo-preneurs, this is the first place you should look to save if you are just starting to save for retirement (or resuming to save after starting a business).
Roth IRAs are low-cost, very flexible, and allow you to grow money tax-free as long as you follow the distribution rules.
Contributions can be made up to $4,000, and can be withdrawn at any time without tax or penalty (earnings withdrawn may be subject to penalty and tax if withdrawn before age 59 ? and certain other conditions are not met).
Ira > Retirement Plans for Solo Entrepreneurs
'How To' for Checkbook Control Self Directed IRA
Las Vegas, NV (ContentDesk) August 8, 2006 -- American Equity Corporation (http://www.americanequity.org) announced that its subsidiary SelfDirectedIRA.org has implemented a new free consumer website and it is now live online. SelfDirectedIRA.org provides consumers with a source for news, instruction, strategies and tips for implementing a
truly self directed IRA with checkbook control.Due to fact that we are a society concerned with providing adequately for retirement,
there has developed a need for a single source for the consumer to obtain the information necessary to fund their retirement programs in the most effective manner. While there are many sources that provide limited information to the consumer there is no single unbiased source.SelfDirectedIRA.org will fulfill the need for a single source. It will enable consumers to find everything they need related to self directed ira issues at a single site. SelfDirectedIRA.org provides free information for establishing...
Ira > 'How To' for Checkbook Control Self Directed IRA
IRA Services Announces Major Year-End Fee Discount
Investors are increasingly seeking these specialty assets for their higher returns over the traditional bank and brokerage assets.
IRA Services retirement accounts allow investors to invest in a wide variety of assets including the growing number of these direct investment and specialty assets. Many traditional retirement account providers do not permit these types of assets or if they allow them it is with much higher fees.
IRA Services has been handling accounts with these direct purchase and alternative assets for many years and has developed systems and personal that have been able to keep the costs low and pass that advantage on to the investor.Since fees can have a significant impact on an asset's return, the lower the fees, the better the return for the investor.
Many providers charge fees based on the account value, while fees in an IRA Services account are based on assets held, which is a major savings over those accounts which base fees on value....
Ira > IRA Services Announces Major Year-End Fee Discount
Roth IRA Accounts
In order to understand Roth IRA Accounts, you first need to understand the concept of a Roth IRA. IRA is an acronym for individual retirement arrangements, wherein an earning person can contribute his money to a Roth IRA account. The advantage of this arrangement is that, though the contributions themselves are subject to tax deductions, withdrawals are not taxed. The advantage of this is that your income is allowed to grow tax-free.
This means while a contribution is made with after-tax money, there is no tax involved with the withdrawal, subject to certain conditions.
So in a way, the Roth IRA is a good way to convert income earned from dividends, interest, and capital gains etc. into tax-free money.
An individual cannot contribute more than $4,000 to the Roth IRA Account, though he may have a large number of such accounts. But the contribution limit to these accounts should not exceed $4,000.
A Roth IRA Account can be built from either contributions...
Ira > Roth IRA Accounts
Non-Deductible IRA Contributions are Under Utilized by High Income Earners
(ContentDesk) February 1, 2006 -- As they rapidly approach retirement age, many savers find that they need to save more than the maximum annual 401k contribution.
Many of these individuals would like to contribute more money to tax deferred investment accounts, but have been told they are ineligible to contribute to an IRA for one of the following reasons:1. They are an active participant in an employer sponsored retirement plan (pension plan, 401k, SEP, or SIMPLE) 2. Although not covered by an employer plan, a spouse is, and joint income exceeds $160,000.The good news for savers with a little more money to sock away is that almost any individual is entitled to contribute up to $4000 per year to a traditional IRA.
Regardless of income.
Regardless of whether or not they are covered by an employer plan.
Of course, with the IRS there is always a catch.
You cant take a deduction for your contributions if you are over the specified income limits.
Ira > Non-Deductible IRA Contributions are Under Utilized by High Income Earners