Jul 31

No Penalty Withdrawls

You invest in an IRA to live comfortably after retiring.  Typically, you would never want to touch it, but what if you must?  Well, the IRS makes it hard to dip into your IRA plan by assessing penalties on many withdrawals.  They do this so you don’t thoughtlessly withdraw money that you don’t absolutely have to.  However, there are exceptions even the IRS will allow.  Here are just a few:

Medical Insurance – If you are unemployed, you may take penalty-free distributions to pay for medical insurance.  You must meet the following criteria: you lost your job, have collected unemployment benefits for 12 consecutive weeks, you received the distribution during the current or next year that you received unemployment compensation and you received the distribution no later than 60 days after you were re-employed.

Disability – If a doctor determines that you are unable to engage in gainful employment (whether from mental or physical disability), you may take penalty-free distributions.

Home Purchases – If you are buying a first home, the IRS will allow you up to $10,000.00 penalty-free to use towards expenses.  That amount is a lifetime limit (if you’re married, your spouse is allowed another $10,000.00).

While these exceptions are penalty free, they may be subject to state and/or federal taxes.  These are just a few examples.  This article goes over a few more in greater detail.

Need to dip into you IRA?  Let the tax experts at the IRA Financial Group help you avoid needless mistakes.  Contact them today!

Jul 30

The Other IRA Tax Penalty

One penalty often overlooked is the “excess contribution” tax.  This is a 6% tax that’s levied on any contribution to an IRA that is in excess of the maximum allowable amount for that year.  For example: if you were to contribute $5,000.00 into your Roth IRA and a pay raise later in the year put you above the $125,000.00 income threshold (you cannot make contributions to a Roth if you are over that threshold) and you did not take corrective actions, you would owe 6% of that $5000.00 ($300.00) for that tax year.  Moreover, you would continue to have that penalty every year that you did not address that mistake.

Christine Benz goes into detail here on how to avoid and fix this problem if it should ever happen to you.  The best advice she gives is to contact a tax expert.  Be sure to contact the IRA Financial Group for all your retirement plan needs so the IRS isn’t taking money that you earned!

Jul 27

When Rollovers Attack

“In most cases, the strategy of rolling over a company retirement plan payout into an IRA is a good idea. That way, you can continue to defer taxes on the rolled-over balance — as well as future income earned on that balance — for as long as you leave the money in the IRA”, says Smart Money’s Bill Bischoff.

However, like most things, this is not 100% foolproof.  Always contact a tax expert like the ones at the IRA Financial Group for all things rollover.  A prime example that Bischoff cites is Young Kim, 7th Circuit Court of Appeals, 2012.

In this example, Mr. Kim mistakenly (whether intentional or not) thought that the “age-55-exception” (which allows you to bypass the 10% early withdrawal penalty in case of a permanent separation of service) that’s allowed in 401k plans also applied to IRA plans.

Mr. King was wrong and got hit with the 10% early withdrawal penalty PLUS another penalty for understating his tax bill which led to Kim taking a  $24,000.00 hit to the wallet.

Don’t let this happen to you, contact us today @ 1.800.472.0646!

Jul 27

Avoiding IRA Penalties

With the federal government in dire straights, they’re now looking at collecting money for errors made by taxpayers regarding their IRAs.  According to the Treasury Inspector General for Tax Administration, there was $280 million in uncollected tax penalties in 2007.

For 2012, the contribution limit is $5000 ($6000 if you are 50 years old or over), but you also cannot contribute over your earned income.  Doing so, results in a 6% penalty EACH YEAR that you have excess contributions and gains in your IRA.

Withdrawal penalties include: Withdrawing before you are 59 is a 10% penalty, withdrawing from a Roth IRA within 5 years of your first contribution is another 10% on gains and the biggest penalty is 50% if you fail to take the required minimum distributions starting at age 70 (there are no RMDs for a Roth IRA).

Be sure to check out the IRS’s website for all penalties and exceptions before withdrawing from your IRA and read this article for more information on IRA penalties.

Contact the IRA Financial Group to save you from losing thousands because of a simple mistake.

Jul 25

Don’t Neglect Your Roth IRA This Summer

Everyone plans for their annual summer vacation….but are you planning for your retirement?  Even though there are months to invest, why waste time (and money) and miss out on the benefits of your tax-free Roth IRA!

The good people over at Motley Fool show us some good stocks to invest in right now, including Chipotle Mexican Grill and mainstay, Coca Cola, that could bring in thousands of dollars down the line.  Mutual funds are another option they talk about here.

Put down the daiquiri, get off the chaise lounge and head over to the IRA Financial Group now and ask how a Roth IRA can help you relax more after you retire!

Jul 24

Make Your Teenager $1,000,000.00 With a Roth IRA!!

With a little incentive from you and a little hard work from your son or daughter, you can ensure he/she is set for his/her golden years.

Forbes contributor, David John Marotta, says “Contributing $615 each year for seven years and earning 11% will translate to investments worth a million dollars at the end of 56 years. If the process begins at age 14, the value of the Roth IRA will reach a million dollars at age 70”.

In Marotta’s example, if your child contributes $615 of earned income into a Roth IRA and you match that amount for seven years, his/her IRA will be worth $1,00,000.00 in 56 years!

Read the amazing article HERE and contact one of our tax experts at The IRA Financial Group to set your child or grandchild up for success!

Jul 23

What is a Roth IRA anyway?

Simply put, after tax dollars are used to fund a Roth IRA and all distributions from the Roth IRA are tax-free – even the investment returns – as long as the distributions meet certain requirements.  There are two options with a Roth IRA.  One is contributory, used by those who have an earned income.  The other is called a conversionary Roth, whereby retirees can convert from a  traditional IRA or 401(k).  “By doing so, the retiree will pay taxes at their bracket level and then the money will grow tax-free in the account as long as they have it,” explains Jean Dorrell, Certified Estate Planner and founder of Senior Financial Security in Ocala, Fla in an article on foxbusiness.

To learn more and to see if a Roth IRA is right for you, contact one of our tax experts at The IRA Financial Group @ 1.800.IRA.0646.

Jul 18

Self-Directed IRA Investors Now Turning to Master Limited Partnerships

A Self-Directed IRA, also called a Self-Directed IRA LLC with checkbook control, is an IRS approved structure that allows one to use their retirement funds to make real estate and other investments tax-free and without custodian consent.

There are a growing number of clients looking to use their retirement funds to make investments in master limited partnerships (“MLP”).  MLPs are typically limited partnerships that are publicly traded on a U.S. securities exchange.  Since cash-flows are only taxed once at the investor level, MLPs have become popular over the last few years because their yield can be much higher than other investments.

As seen in an article in the Houston Chronicle, IRA Financial Group tax attorney Adam Bergman was quoted saying, “Our clients have been able to use their IRA funds to generate high tax-free returns through MLP investments”.   A number of MLP investors are hoping to make MLP investments with self directed IRA funds in order to take advantage of the strong worldwide energy demand. “A number of MLPs are in the pipeline business, which may protect them somewhat from the energy industry’s volatility,” stated Mr. Bergman.

IRA Financial Group’s Self-Directed IRA involves the establishment of a limited liability company (“LLC”) that is owned by the IRA (care of the IRA custodian) and managed by the IRA holder or any third-party.

For more information about Self Directed IRAs, please contact The IRA Financial Group @ 1.800.472.0646

Jul 11

Use IRA to Buy Real Estate

Using a Self Directed IRA LLC to purchase real estate allows the IRA to earn tax-free income/gains and pay taxes at a future date (in the case of a Roth IRA the income/gains are always tax-free), rather than in the year the investment produces income.

With a self-directed IRA, you can invest tax-free and not have to pay taxes right away – or in the case of a Roth IRA – ever! All the income or gains from your real estate deals flow though to your IRA tax-free!