January 13—The Trust Advisor
January 18—Vegas Inc.
January 23—Inc. magazine
January 26—The Cerrone Show podcast
Last Friday, we set the stage for the new year—literally. Provident Trust Group kicked off a celebration to discuss our departmental goals for 2015 and held a special musical experience for employees. A large breakfast assortment was provided before team leaders presented their goals to the company. Each team member wore one of Provident’s new t-shirts with pride. Marketing gifted our CEO Theresa, president Jason and CSO Nate with a proclamation from Las Vegas City Hall and Mayor Carolyn Goodman declaring January 16, 2015 as Alternative Investments Day.
After a delicious lunch made by Chef Rodney, everyone headed to Rock and Roll Fantasy Camp™! Employees were divided into four groups, each with a rock star mentor and designated song they had to work with. Everyone was very creative in changing the lyrics to relate to Provident’s services and offerings. A “Battle of the Bands” ensued, complete with inflatable guitars, triangles and tambourines, followed by live karaoke with all of the rock stars. Now that we’ve been rock stars, we can do anything!
“On our way to 15×15… Better, faster, stronger!”
Source: Rebecca Sheppard, Benzinga
Retirement planning is an essential part of rounding out your financial portfolio and investing in your future. While there are various methods of savings vehicles, one of the most common retirement plans is an Individual Retirement Account (IRA). IRAs are not the same as 401(k)s or other employer-offered plan.
Below are answers to nine of the most commonly asked questions regarding IRAs.
IRAs function as a savings vehicle designed specifically for retirement. Unlike other savings accounts, IRAs follow their own rules regarding contribution amounts, withdrawal amounts and taxes. The regulations on IRAs are in place to protect your assets for the future, ensuring that once retirement hits, the account holder has a cushion.
Roth and Traditional IRAs are both vehicles for retirement savings, but they do function differently. Choosing between the two is a very important decision, and while conversions can be made to switch from one to the other, the initial choice should not be taken lightly. Because of how the accounts work and their specific benefits, the choice is ultimately an individual preference based upon personal/situational specifics.
The main differences between the two account types are: income limitations, tax incentives and withdrawal regulations.
Yes. For Traditional IRAs, withdrawals before 59.5 years old may come with taxes and penalties. At 70.5, withdrawals (for a minimum amount) are mandatory.
For Roth IRAs, withdrawals are tax- and penalty-free and can be made at any point.
There are contribution limits based on age and income levels.
For Roth IRAs, the 2014 contribution maximum is $5,500 for individuals under 50. Additionally, the amount contributed cannot exceed the total annual taxable income.
For Traditional IRAs, the 2014 contribution limit is also $5,500.
An additional $1,000 can be contributed for individuals 50+.
Anyone with taxable income can qualify.
For Roth IRAs, contributions can be made any year that taxable income is earned. The stop-and-go contribution benefit makes Roth IRAs especially appealing for minors and low-income earners.
If your child has taxable income, opening an IRA may be a financially savvy option.
Related Link: Roth IRAs For Kids? Take A Closer Look
One way or another, IRAs are taxed. The specifics boil down to the type of IRA you invest in.
Roth IRA contributions are taxed on the front end. Because contributions are not tax-deductible, the amount contributed is factored into your annual income.
Traditional IRA contributions are tax-deferrable. Tax deductions for contributions to Traditional accounts can be made, and therefore, the contributed amount is not factored into annual income for taxation purposes.
As with contribution taxes, Roth and Traditional IRAs follow different regulations.
Since Traditional IRAs are taxed on withdrawal, yes – the IRA growth is taxed for Traditional accounts.
Since Roth IRAs are taxed as income prior to contribution and not taxed on withdrawal, no – the IRA growth is not typically taxed for Roth accounts.
IRAs can be inherited to a beneficiary if the original account holder dies and the account is willed, in the estate/trust documentation or beneficiaries are listed in the IRA account documents. A Wells Fargo piece stated, “This approach defers the tax bite, lengthens the time that earnings grow tax-deferred and/or tax-free, and can increase the value of the inheritance (if certain conditions are met).”
In the daily course of business, a question that comes up rather often is “Why do I need a custodian?” The first thought I have is the sound of my mother’s voice saying, “because I said so.” Only in this case, it is Congress via the IRS instead of my mother issuing the edict.
Usually people want a bit more than that in their answers. So, here are the things you should know about custodians and why you need them. They can be quite different from each other even though they operate by the same set of government regulations.
Every single qualified account is required by law to have a custodian to administer it. Below is a comprehensive list of account types requiring a custodian in addition to the traditional Individual Retirement Arrangement (IRA), with which most people are familiar.
The why is simple. Congress passed IRA legislation so that people would have an incentive to save for their retirement. They did this by giving various tax advantages. Those tax advantages come with a set of rules that need to be obeyed. You can read more about some of those rules in IRS publication 590.
The government created the role of the custodian to assist them in the administration of those rules. Custodians are fiduciaries but do not give investment or legal advice. They do make distributions and assist in the purchase of assets for the IRA holders. They also provide recordkeeping and reporting to the IRS for all those accounts as required by law. The custodian is often a licensed financial institution. Individuals may not act as an IRA custodian.
Now you know a bit about custodians but do they all provide the same service to their IRA clients? Just because there is one set of rules for custodians does not mean they all do things the same way. When all is said and done, being a custodian is a business. All businesses make choices on how they would like to service their clients.
They do so in basically two ways that are termed self-directed and non-self-directed. Most people would be hard-pressed to name a self-directed IRA custodian. The custodians that they are familiar with are not known for being custodians but instead as broker dealers. These are big name companies people turn to in order to purchase publicly traded investments like mutual funds and ETFs. The fact that they also will be your IRA custodian when you purchase these assets in your IRA is not even an afterthought most of the time.
Many investors are learning that real estate and other alternative assets can be owned in their retirement portfolio. This gives greater diversification to the assets held in your IRA. If you turn to one of those big names and ask how real estate can be held in the account you have with them, the likely answer is “You cannot.”
Why not? Real estate is an acceptable investment according to the regulations. The simple answer is there is no way for that big name broker dealer to make money on the transaction. That is why the self-directed retirement custodian exists. This type of custodian services the segment of clients that want the full spectrum of investments available for their retirement accounts. Unlike the big name broker dealers, they cannot make money selling their clients’ investments. Thus, they charge a fee to provide that government-mandated custodial service. All custodians play by one set of rules but now you know why they do not all hold the same type of assets.
If you would like to learn more about holding alternative assets like real estate, gold, and silver in your IRA, click HERE to receive a free information packet.