By J.P. Dahdah, Founder & CEO of Vantage
As 2013 comes to an end, ’tis the season to identify any financial moves that may position you for a prosperous 2014. Savvy Self-Directed IRA investors understand that identifying profitable alternative investments isn’t enough to truly succeed at the retirement game. There are multiple things beyond investment returns that can negatively impact your financial situation throughout your golden years.
The more clarity you possess about what those things are, the better prepared you can be at overcoming them.
To help you determine whether you have all your bases covered or not, I have outlined three questions I ask myself in December to evaluate if there are any time sensitive things I must do now to gain a financial advantage in my retirement planning. Making this a year-end habit should help you stay on top of important financial areas that can create long-term wealth for you!
Can I afford to convert a portion of my pre-tax retirement accounts to a Roth IRA?
In my humble opinion, Roth IRAs are the most powerful retirement investment vehicles available. Even though there are income eligibility limits that can restrict high income earners from contributing to a Roth IRA, no one is restricted from converting a Traditional IRA or 401K to a Roth anymore. Since converting monies from a pre-tax IRA to a post-tax IRA is a taxable event, some tax planning is required to analyze if this is the right move. Investing in alternative assets versus stock market assets within IRAs lends itself in significant tax savings (30-40%) during the conversion process due to valuation discounts that can be applied to the fair market value of your Self-Directed IRA holdings. Interested in learning more about this amazing year-end tax saving strategy? Contact us and we will educate you on how it works!
Is my Self-Directed IRA structured in the most cost effective way possible to minimize fees and taxes?
Do you have multiple assets in your Self-Directed IRA? Are you currently leveraging your IRA with a mortgage? Are you an active investor that executes more than three deals a year? If so, it is critical that you evaluate if there is a more cost effective way for you to structure your Self-Directed IRA. Many of our clients are big advocates of the IRA LLC or the Checkbook Control LLC structure and rightfully so. This structure is created by having your Vantage Self-Directed IRA purchase 100% of the membership units of a newly formed LLC. This newly formed entity becomes an investment holding company for the IRA, which can subsequently be used to hold multiple assets and write checks for IRA expenses hence saving you money in fees.
Am I on track to maximize my retirement plan contribution limit for the year?
To stay on track of your retirement planning, it is essential that you maximize your contributions into your retirement account. Each type of IRA/401K has a contribution limit and a deadline by which time you must deposit your savings. Ensuring you have enough money to make a full contribution requires some budgeting and discipline. Before you go out and spend money on holiday gifts, it is important that you earmark dollars for your contribution. Without this planning, many Americans make the mistake of thinking they can wait until the last minute and catch up on their savings which rarely happens. I encourage you to determine how much money you are seeking to contribute to your retirement account (hopefully the maximum) and then stick to a systematic saving strategy to reach it!