Your Self-Directed IRA To-Do List to Wrap Up

Yes, time flies. Another year is coming to an end and soon we’ll all be ringing in the New Year.

Over the next few weeks, many of us plan to attend holiday parties, shop for presents for our loved ones, and begin our lists of resolutions to make next year happier and more prosperous than this one (hopefully) was. While Advanta IRA agrees this month is definitely a time for celebration, we also know it’s time for planning. Before you know it, April 15th will arrive (time flies, remember?) and there are things you must do right now to ensure your self-directed retirement plans are ready for the year to end and roll into income tax deadlines.

So, in the midst of your holiday cheer, set some time aside to take stock of what you need to do regarding your self-directed IRAs and other plans. Doesn’t sound like much fun, we know. However, doing so can help ease frantic last-minute preparations and at the same time can potentially ensure the health and prosperity of your accounts for years to come. To help give you a nudge in the right direction, we’ve created a to-do list for you to follow. Consider it a gift, if you will, from our house to yours…

1. Think about Roth IRA conversions.

If ever you have thought you might want to convert funds from an old 401(k) or other IRA to a Roth account, NOW is the time to do it. The deadline for these transactions is December 31, 2014, and there are certain eligibility requirements that must be met to do so. Roth IRAs have many benefits—which make them very popular among savvy investors—but these accounts may not meet the goals of everyone. Meet with your accountant or other trusted financial advisor as soon as possible in order to give yourself ample time to complete the conversion process.

2. Max out your yearly contribution limit.

If you have not made a contribution for 2014, or if you have not met the maximum contribution allowed, you still have time to do so. Below is a basic summary of limits for plans Advanta IRA serves. For more in-depth information, read our recent blog on the subject. Keep in mind, different plans have different deadlines, eligibility requirements, and contribution limits—so consult with a tax professional or financial advisor to make sure you are compliant with IRS regulations when determining your contribution amount and eligibility.

Traditional and Roth IRAs:

  • $5500 per year with a $1000 catch up if you are 50 years and older
  • 2014 contribution deadline for both accounts is 4/15/2015

Traditional IRA deductibility phase-outs:

  • Singles and heads of households covered by an employer plan with modified adjusted gross incomes (AGI) ranging from $60,000 and $70,000
  • Married filing jointly $96,000 – $118,000

Roth IRA contribution phase-outs:

  • The AGI phase-out for singles and heads of households making contributions is $114,000 – $129,000
  • Married filing jointly – $181,000 – $191,000

Savings Incentive Match Plans for Employees (SIMPLE plans):

  • $12,000 or $14,500 with catch-up contribution if over 50 years of age
  • Employers typically match up to 3% of an employee’s salary deferral contributions, dollar-to-dollar.
  • Contribution deadline for employees: 01/30/2015
  • Contribution deadline for employers: business tax filing deadline, including extensions

Simple Employee Pension (SEP plans):

  • Maximum Dollar Allocation: $52,000 / Max considered compensation: $260,000
  • The maximum contribution amount to a SEP plan is 25% of the employee’s compensation.
  • Contribution deadline for employees: business tax filing deadline, including extensions

Individual(k) or Solo 401(k) plans:

  • Employee contributions: $17,500 or $23,000 including catch-up contributions for those age 50 or older
  • Employer contribution: up to 25% of compensation, but total contributions (employee and employer contributions) are not to exceed $52,000 per person ($57,500 if over the age of 50)
  • Employee contribution deadline: 12/31/2014
  • Employer contribution deadline: business tax filing deadline, including extensions
  • Note: the combined salary deferral and profit sharing contributions for these plans cannot exceed $52,000 (or higher with catch-up contribution)

3. Measure the returns on your investments over the past year.

Review the success (or fails) of the alternative investments in your self-directed IRA and determine which ones to keep and which ones to replace. As you know, assets permissible in your self-directed accounts are nearly endless. Consider branching out in areas you haven’t yet explored. Below are a few options that may pique your interest and also help achieve diversity in your portfolio:

  • Real estate (single and multi-family homes; improved and unimproved land; commercial property; tax liens and certificates; rehab-and-flips)
  • Precious metals
  • LLCs, LLPs, and trusts
  • Private equity and stock
  • Crowdfunding opportunities
  • Foreign exchange and futures trading
  • Oil and gas options

4. Determine applicable tax liability your account may have incurred.

While the majority of self-directed plans earn income for retirement on a tax-deferred or tax-free basis, certain transactions regarding your account come with the ball and chain of taxation. For example, your IRA may be responsible for UBIT or UDIT depending on what types of assets your IRA owns. Unrelated business income tax (UBIT) applies to operating income received from companies owned by IRAs. Unrelated debt-financed income (UDFI) tax applies to the portion of a property that has been debt-financed within an IRA. Qualified plans, like the individual 401(k) plan, do not pay UBIT or UDFI. It is critical that you consult with your tax professional to ensure your account complies with IRS rules.

5. Attend a seminar or webinar held weekly by Advanta IRA.

We believe that knowledge is power, control is key, and diversity is essential to the success of self-directed plans. As one of the nation’s leading self-directed IRA administrators, serving clients who hold over $700 million in assets, we do not sell investments or give investment advice. We don’t make any commission, either. However, we frequently hold free events tailored for investors to achieve complete control of their own investment funds and decisions. Attend one of our powerful events and walk away with the confidence you need to choose investments you know and understand—to build your own successful retirement future.

If you have questions about this article or would like to learn more about self-directed IRAs and alternative investments, please contact us.

About Jack Callahan

Jack proudly earned his bachelor’s degree in finance and multinational business from Florida State University and his law degree from the University of Florida College of Law. He established Advanta IRA in 2003 and has steadily nurtured and grown the company and the team every year since. Prior to founding Advanta IRA, Jack delivered specialized counsel to real estate investors, small business owners, and real estate professionals on tax, legal and financial matters. As an industry expert, Jack is a frequent speaker on self-directed retirement plans. He is an accredited continuing education instructor for the Florida and Georgia Bar Associations, Florida and Georgia Real Estate Commissions, and The American Institute of Certified Public Accountants.