Last week we outlined the difference between using a Self Directed IRA and a Self Directed IRA LLC to start a fix and flip business.
We saw the advantages and disadvantages of each strategy. But what if we wanted to actually do some the work on the property ourselves?
Can we do it? Can we get paid for it? How would we do this?
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With many people living and working longer, there are important tax saving opportunities to contribute, defer, or convert well past age 70 ½.
A nice reminder by William H. Byrnes, and Robert Bloink is in their article “The Post-70 1/2 Retirement Plan Contribution Rules” about options to continue contributions which reads in part:
The rules for post-70 ½ IRA contributions depend upon whether the account is a traditional IRA, Roth IRA or SEP IRA. Direct contributions to a traditional IRA are not permitted after the client reaches age 70 ½, although the client may roll funds from another type of retirement account into his or her traditional IRA.
Conversely, the client may contribute directly to a Roth IRA after he or she has reached age 70 ½ (up to the annual $6,500 limit, which includes a $1,000 catch up amount). Direct Roth IRA contributions, however, are subject to income limitations that apply to reduce the contribution limits for taxpayers who earn more than $184,000 (married taxpayers) or $117,000 (single taxpayers) in 2016.
This means that although you can continue to contribute to your Roth IRA if you are under the income limits, if you are over those limits you can’t do a backdoor Roth after age 70 ½. You can, however, convert some of your traditional IRA to a Roth IRA after taking our your required minimum distribution.
If you are still working, you can avoid required minimum distributions and continue contributions to your employer-sponsored 401(k) or SEP IRA. You also don’t need to start taking required minimum distributions so long as you do not own 5% or more of the company:
Clients who are still working after age 70 ½ may generally continue contributing to employer-sponsored 401(k) accounts and SEP IRAs. In fact, employers must continue to make employer contributions to the SEP IRA of an employee who is over age 70 ½ if it makes similar contributions to younger employees’ accounts.
If the client plans to work past age 70 ½, he or she can avoid RMDs by leaving the funds in the employer-sponsored 401(k). As long as the client continues to work for the same employer that sponsors that plan, and does not own 5% or more of the company, he or she can avoid taking distributions from a 401(k), thereby avoiding the associated income tax liability that those distributions generate.
There are great tax savings opportunities between age 70 ½ and age 90. Which options provide the best tax savings depends on your specific situation.
I am writing to give Tom Walker my highest recommendation. Tom possesses all the attributes necessary to put people like me at ease and let them know they are in good hands when you are trying to find a professional to give you accurate advise. It would be hard to envision someone doing a better job than Tom.
I apologize for not getting this letter to you sooner. I want to thank you and your organization for being very knowledgeable about non-prototype retirement plans which allowed me to use my employer 401K retirement funds as a downpayment to purchase a business. Tom Walker was very professional and patient in advising me on the legal and internal revenue service guidelines to avoid issues down the road.
I am a CPA and thought that this was something I could tackle myself but I was spending to much time researching the correct way to set up the legal structure to make it happen. Tom saved me a lot of time as well as money; I got several quotes from other company’s that were at least $2, 000 higher not to mention that they appeared to be not as knowledgeable as Tom Walker.
Thank goodness I stumbled on the selfdirectedira.org website; I found out about them by reading feedback comments from googling articles on investing your company’s 401K money in a business. Some of the articles talked about how you can either get ripped off or be given wrong advice so please be careful.
If you are thinking about using your 401K funds to invest in a business, you can’t go wrong with Self Directed IRA.
I hope the word get’s out about this company because I am very happy that I found them and have already recommended them to others.
Sincerely,
Tobias Felder, CPA – Norcross, GA
Good Morning America news story by Laura Mattia
If you have a will — and you should have one — you may have executed it after years of putting it off. You’ve paid your attorney a lot of money and given serious consideration to make the right choices and ensure that the will is air-tight. Finally your will is finished, and you can sleep soundly knowing that your heirs will receive the assets that you intend. Right?
Not necessarily. Most people aren’t aware that their wills don’t have the final say concerning assets held in retirement accounts — 401(k) plans and individual retirement accounts (IRAs). The beneficiary provisions of these accounts supersede those of wills. So clear is the law on this point that some financial people call retirement-account beneficiary designations “substitute wills.”
