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
Early Distributions From Retirement Plans
An early distribution from an Individual Retirement Arrangement (IRA) or a qualified retirement plan need not be a "taxing" experience. Fortunately, there are exceptions to early distributions. Any payment that you receive from your IRA or qualified retirement plan before you reach age 59? is normally called an "early" or "premature" distribution. As such, these funds are subject to an additional 10 percent tax. But there are a number of exceptions to the age 59? rule that you should investigate if you make such a withdrawal.
Some of these exceptions apply only to IRAs, some only to qualified retirement plans, and some to both. IRS Publications 575, Pensions and Annuities, and 590, Individual Retirement Arrangements (IRAs), have details.In addition to the 10 percent tax on early distributions, you will add to your regular taxable income any distributions attributable to "elective deferrals" that you contributed from your pay, your employer's contribution and any income earned...
Early Distributions From Retirement Plans
Ira > Early Distributions From Retirement Plans
Take Control of Your Retirement Investing
Copyright 2006 Damon Clifford
Ah, remember the good old days?
You would get up, go to work for 30 years, and then retire.
The company funded your pension and you had enough in savings to cover you for the rest of your life.
That was fine, because you would typically die 5 or 7 years after retirement.
But that isn't the case any more.
Many people are living 20 or 30 years after their retirement, companies are no longer offering pensions, and many people are spending more money than they make.
Because of this, it is up to you to take control of your retirement and IRA funds.
The stock market has historically gone up.
But when it's going down, or even sideways are you expected just to "take it"?
Many would have you believe that yes; you just have to "go with the flow".
Or they will tell you that it's the "entire" market, everyone is getting hammered.
Just stick with it...
Ira > Take Control of Your Retirement Investing
Retirement Savings Basics For a Secure Financial Future
The difference between an IRA and an ordinary investment account is that there are special tax advantages, but restrictions on the account apply. Individuals can only contribute up to $3000 per year to their IRA, or $3500 for people over fifty who want to jump start their retirement savings program. These limits are set to rise over the next few years, to $5000 in 2008, or $6000 for people over fifty. The contributions must be made from money which has been earned in the year the contribution is made. No tax is payable on the earnings from the investment as is grows, but the funds cannot be withdrawn until a certain age has been reached, usually fifty nine and six months, or penalties apply.A Roth IRA is a special type of account.
Contributions are not tax deductible, but investors can make tax free withdrawals after the age of fifty nine and six months, so long as the account has been established for more than five years. The basic difference between this type of account and...
Retirement Savings Basics For a Secure Financial Future
Ira > Retirement Savings Basics For a Secure Financial Future