YEAR-END TAX-SAVINGS \ STRATEGIES: SOLO 401(K)S Oc October 21, 21, 2019 2019 www.AdvantaIRA.com
YOUR MODERATOR Welcome Larissa Greene, CISP Director of Education Contact me at: Tel 1.800.425.0653 Lgreene@AdvantaIRA.com www.AdvantaIRA.com Advanta IRA and its employees, do not provide investment advice or endorse any products. All information and materials are for educational purposes only. All parties are encouraged to consult with their attorneys, accountants, and financial advisors before entering into any type of investment.
WHO WE ARE About Advanta IRA EXPERIENCED SECURE With a combined 20+ years in our industry, Advanta IRA is the nation’s premier self-directed IRA administrator. We We use multiple banks that are insured by the FDIC to also provide a more flexible fee schedule than most protect the undirected cash held within your IRA. custodians . TRUSTED PERSONAL With clients across the nation, Advanta IRA holds over Our account manager system guarantees clients $700 million in assets and partners with a network of concierge-style personal service. Advanta IRA also offers trusted CPAs and attorneys. cutting-edge educational tools for all types of investors.
OUR LEARNING CENTER About Advanta IRA Powerful knowledge about self-directed retirement plans and alternative investments is available at your fingertips: ADVANTA EVENTS ADVANTA ON-DEMAND THE ADVANTA BLOG ADVANTAIRA.COM/EVENTS ADVANTAIRA.COM/LEARNING-CENTER BLOG.ADVANTAIRA.COM Seminars, webinars, networking, Watch free investment training Get the latest industry news, and lunch and learn events to help videos and learn how to build a updates, and insights from our team of professionals you learn the ins and outs of self-directed plan that’s self-direction right for you
Disclaimer Advanta IRA, and its employees, do not provide legal, tax, or investment advice or endorse any products. All information and materials are for educational purposes only. All parties are encouraged to consult with their attorneys, accountants, and financial advisors before entering into any type of investment.
KEY POINTS TO TAKE AWAY Checkbook Control IRAs Sole proprietors and 401(k)s are the only type of 401(k)s can be self- independent business plan that allow you to co- directed and can easily owners qualify even if they mingle traditional funds and have a checking account are not incorporated Roth funds
What is an Employer Sponsored Plan? What Is a Self-Directed 401k, SEP, SIMPLE? A plan typically established by a company at little or no cost to employees for their benefit. These plans allow for larger contributions than traditional and Roth IRAs and contributions can be made both as the employer and as the employee. Did you know that 401k and IRA accounts were established in 1974 with the passing of ERISA (Employee Retirement Income Security Act)
KEY COMPONENTS OF A EMPLOYER PLAN Checkbook Control IRAs BUSINESS PARTICIPANTS / EMPLOYEES CONTRIBUTIONS Where the contributions are The Individuals that are covered by The overlying entity that the coming from and how / the plan and what considerations plan is established to benefit. must be given to whom is covered where they are deducted and not covered. from.
PLAN CONTRIBUTION LIMITS Types of Assets and Accounts FOR YEAR 2019 Traditional / Roth IRA $6,000 ($7,000 if over 50) SEP IRA Up to $56,000 (up to 25% of compensation) $13,000 (additional $3,000 if over 50) + SIMPLE IRA up to 3% of employer match) $19,000 (+ $6,000 if over 50) of salary deferral 401(k) + up to 25% employer match up to $56,000 ($62,000) ESA (education) $2,000 per year, per child HSA (health) $3,500 individual (+ $1,000 catch-up) / $7,000 family
PLANS AT-A-GLANCE Types of Assets and Accounts EMPLOYER-BASED ACCOUNTS: SEP IRA, SIMPLE IRA, 401(K) WHO THEY ARE FOR Sole proprietors, independent contractor, self-employed, partner, corporation, or S corporation BENEFITS SEP and SIMPLE IRAs offer tax-deferred growth like traditional IRAs, but have larger contributions limits; they also offer lower administrative costs than a 401(k) plan + You must include certain employees in SEP and SIMPLE + Individual(k) offers largest potential contribution for a business without employees (no discrimination testing necessary) + Roth individual(k) option available Check with your CPA or accountant to help determine which option would be the best fit for you and your business.
PLANS AT-A-GLANCE Employer Based Accounts BENEFITS FOR EMPLOYER BASED ACCOUNTS 3 CONTRIBUTIONS BASED ON COMPENSATION UNINCORPORATED BUSINESS OWNER Schedule C or F Adjusted Net Business Income PARTNERSHIPS (ALL PARTNERS MUST PARTICIPATE) K-1 Earned Income CORPORATIONS W-2 Note: See IRS Publication 560 for further guidance on the calculation of compensation and contributions Check with your CPA or accountant to help determine which option would be the best fit for you and your business.
PLANS AT-A-GLANCE Types of Assets and Accounts INDIVIDUAL (K) WHAT MAKES INDIVIDUAL (K) PLANS SO APPEALING? ALL THE BENEFITS OF TRADTIONAL BUSINESS RETIREMENT PLANS, PLUS: • Higher funding limits • Defer a larger amount of your earned income • Complete funding flexibility • Rollover opportunities • Access to tax-free loans • Flexible distribution options • Cost-effective administration • ROTH 401(k)! Check with your CPA or accountant to help determine which option would be the best fit for you and your business.
CONTRIBUTIONS EXPLAINED Types of Assets and Accounts Employee Employer (Roth?) $19,000+ (Pretax) 20-25% 401(k) *Other investments include: Oil and gas rights Tax certificates Structured settlements Commercial paper Convertible notes Commodities Livestock Timberland Rights or warrants Accounts receivable factoring Equipment leasing and more
PLAN CONTRIBUTION LIMITS Types of Assets and Accounts FOR YEAR 2019 Traditional / Roth IRA $6,000 ($7,000 if over 50) SEP IRA Up to $56,000 (up to 25% of compensation) $13,000 (additional $3,000 if over 50) + SIMPLE IRA up to 3% of employer match) $19,000 (+ $6,000 if over 50) of salary deferral 401(k) + up to 25% employer match up to $56,000 ($62,000) ESA (education) $2,000 per year, per child HSA (health) $3,500 individual (+ $1,000 catch-up) / $7,000 family
CONTRIBUTIONS CONTINUED Earnings are unlimited! Contributions are limited to the amount specified by annual limits, defined but the amount you take from your earned funds (from your pocket) and put in your IRA. Earnings (the amount the your IRA can grow from an investment) are unlimited! By choosing your investment, you determine the rate at which your account will grow. With some investments, you are even naming an interest rate that you are satisfied with (more on private lending later)
INVESTMENT OPTIONS Types of Assets and Accounts Other investments* Notes & Futures mortgages Real trading estate INVESTMENT OPTIONS Single- Foreign member currency LLC Private (FOREX) placements/ private *Other investments include: Oil and gas rights Tax certificates Structured stock settlements Commercial paper Convertible notes Commodities Livestock Timberland Rights or warrants Accounts receivable factoring Equipment leasing and more
CONSIDERATION OF LEVERAGE Non-Recourse Financing Different Plans can use All Employer plans can finance leverage with different Their purchases considerations Understand what UBIT and UDFIT are and how they are calculated. No personal guarantee can be All Financing must be non given and penalties for doing recourse. so can vary widely between plans
DYO v. Third Party Admin. How much control do you want? Cash and assets can be administered by Advanta or directly by trustee. − In either scenario assets are held in name of the plan (john smith as trustee of ABC 401k) Trustee signs all documents in both models. − DYO plans have trust account at local bank. All of the income from any investment is directed to the plan and is non-taxable!
CASE STUDY #1 Purchasing Real Estate Using A TPA www.AdvantaIRA.com
CASE STUDY #1 Real Estate in Your IRA LARRY ESTABLISHES A SOLO K WITH ADVANTA AS THE ADMINISTRATOR TO PURCHASE REAL ESTATE Larry established a solo 401(k) account with Advanta IRA. Larry will act as trustee for his 401(k) and Advanta IRA will do the recordkeeping. Advanta IRA will go over the options for funding this account with Larry. Since he is moving funds from an old employer plan, he will initiate the rollover. During the application process with Advanta IRA, Larry establishes a name for the 401(k): LS 401(k). Larry is ready to buy real estate with his 401(k).
CASE STUDY #1 Real Estate in Your IRA LARRY ESTABLISHES A SOLO K WITH ADVANTA AS THE ADMINISTRATOR TO PURCHASE REAL ESTATE Larry finds the property to purchase and writes the contract in the name of his 401(k). The contract will show Larry as the trustee, as well: Larry Smith as trustee of LS 401(k) FBO Larry Smith Larry will send the contract to Advanta IRA so we can confirm the contract is correctly vested for the 401(k). Advanta will also assist with the vesting for the closing documents. Larry will complete two forms with Advanta, giving us permission to fund the purchase the day of closing. Larry will sign all documents for the purchase and close of the property as trustee.
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