I WANT A IRA WHAT TO LOOK FOR ?

Question

I looked into opening my ira account at my personal credit union and was faced with the fact that i didnt know what i was looking for lol ... So i was wondering what a good IRA plan or account would have ?

Mark Nolan · Answer

@Kyle GendronIf you are looking to simply invest in mutual funds and stocks, Fidelity Investments may be a good option. On the other hand, if you are looking to invest in alternative investments then a solo 401k or an IRA LLC may be a good fit.Following are the similarities and differences between the solo 401k and the self-directed IRA.The Self-Directed IRA and Solo 401k Similarities Both were created by congress for individuals to save for retirement;Both may be invested in alternative investments such as real estate, precious metals tax liens, promissory notes, private company shares, and stocks and mutual funds, to name a few;Both allow for Roth contributions;Both are subject to prohibited transaction rules;Both are subject to federal taxes at time of distribution;Both allow for checkbook control for placing alternative investments;Both may be invested in annuities;Both are protected from creditors;Both allow for nondeductible contributions;Both are prohibited from investing in assets listed under I.R.C. 408(m); andNeither may be invested in your own business. The Self-Directed IRA and Solo 401k DifferencesIn order to open a solo 401k, self-employment, whether on a part-time or full-time basis, is required;To open a self-directed IRA, self-employment income is not required;In order to gain IRA checkbook control over the self-directed IRA funds, a limited liability company (IRA LLC) must be utilized;The solo 401k allows for checkbook control from the onset;The solo 401k allows for personal loan known as a solo 401k loan;It is prohibited to borrow from your IRA;The Solo 401k may be invested in life insurance;The self-directed IRA may not be invested in life insurance;The solo 401k allow for high contribution amounts (for 2016, the solo 401k contribution limit is $53,000, whereas the self-directed IRA contribution limit is $5,500);The solo 401k business owner can serve as trustee of the solo 401k;The self-directed IRA participant/owner may not serve as trustee or custodian of her IRA; instead, a trust company or bank institution is required;When distributions commence from the solo 401k a mandatory 20% of federal taxes must be withheld from each distribution and submitted electronically to the IRS by the 15th of the month following the date of each distribution;Rollovers and/or transfers from IRAs or qualified plans (e.g., former employer 401k) to a solo 401k are not reported on Form 5498, but rather on Form 5500-EZ, but only if the air market value of the solo 401k exceeds $250K as of the end of the plan year (generally 12/31);When funds are rolled over or transferred from an IRA or 401k to a self-directed IRA, the amount deposited into the self-directed IRA is reported on Form 5498 by the receiving self-directed IRA custodian by May of the year following the rollover/transfer.Rollovers (provided the 60 day rollover window is satisfied) from an IRA to a Solo 401k or self-directed IRA are reported on lines 15a and 15b of Form 1040;Pre-tax IRA contributions on reported on line 32 of Form 1040;Pre-tax solo 401k contributions are reported on line 28 of Form 1040;Roth solo 401k funds are subject to RMDs;A Roth 401k may be transferred to a Roth IRA (Note that from a planning perspective, it may be advantageous to transfer Roth Solo 401k funds to a Roth IRA before turning age 70 ½ in order to escape the Roth RMD requirement applicable to Roth 401k contributions including Roth Solo 401k contributions and earnings.);Roth IRA funds are not subject to requirement minimum distributions (RMDs);The fair market value (FMV) of assets held in a self-directed IRA is reported on form 5498;The fair market value of assets held in a solo 401k are reported on Form 5500-EZ;At termination, the solo 401k is required to file a final Form 5500-EZ and 1099-R; andAt termination, the self-directed IRA is only required to file a form 1099-R.

Justin Windham · Answer

@Kyle GendronI agree the Solo 401k is likely to be the more attractive option for you. We have worked with many real estate agents and brokers who find it a good fit for their situations.Compared to an IRA, Solo 401k contributions limits are roughly 10x higher and there is no custodial requirement for the 401k. You can take participant loans from the plan, you don't need the additional expense and administration of an LLC to have checkbook control, and there is a built in-Roth component. A spouse can also participate in the same plan, there are additional tax benefits compared to an IRA, and there is generally greater privacy. Finally, the plans are often quicker to setup and cost less money over time especially compared to most IRA LLCs.

Brian Eastman · Answer

@Kyle GendronAs a realtor, you are probably self-employed without any employees. If that is the case, you probably want to evaluate a Solo 401k plan. Such plans can be self-directed and invested in real estate, private trust deeds, etc. in addition to conventional stocks, just like an IRA can. However, a Solo 401k is much more powerful as a retirement plan, with the ability to contribute up to $53K per year of your real estate commissions - thereby reducing your tax burden and also seeding the fund with more investment capital.There is a lot of good information here on BP on the topic. Be sure to chat with your CPA as well.

Kyle Gendron · Answer

Okay thanx ill do that ... video on your page is hilarious by the way

Rob Gillespie · Answer

Hi Kyle,because you are in real estate. I would assume you would want to invest in what you know. I would look up self directed custodians. You can own rentals in the account. I wont mention names because I do not want to get this answer deleted. I can tell you that my buddy came to me last year from a stock market backed IRA that he had for years and in about 6 months I showed him how to tripple the value. Real estate is so easy to get huge returns with in your account. search some self directed stuff here on BP!Good luck man!!!