The Basics of Limited Partnerships

In a partnership, which is a type of unincorporated business organization, multiple individuals, called general partners, manage the business and are equally liable to the debts of the business. Investors can invest their Self-Directed IRA in these businesses. These investors are then called a limited partners. They simply invest in the business but are not involved in management.
Limited partnerships are an investment option for Individual Retirement Account holders with Mountain West IRA. The partnership does not pay income taxes, but the individual partners have to report their share of business profits or losses. This means the investment is subject to Unrelated Business Income Tax. However, this is only if the IRA earns more than $1,000 in unrelated business income.
Although the investment might require the IRA to pay taxes, it requires little involvement by the owner since they are not involved in management. This is one of the benefits of this type of private placement investment. One important advantage when investing as a limited partner is the liability limitation. If the business goes bankrupt or is sued, the investor is only responsible for their own investment and not the debts of the business. General partners have a much greater liability.
Some rules regarding partnership investment with a self-directed IRA include:
• The partnership agreement must permit an individual retirement account or a qualified plan to be a partner
• The partnership must comply with the appropriate state law, have a determinate life, and be assignable
• The partnership subscription agreement must be signed by the investor as having been read and approved, and will be executed by Mountain West IRA on their behalf
Research and learn about Unrelated Business Income Tax and the company itself before making any investing decisions related to limited partnerships. Visit the Mountain West IRA website to learn more about private placements such as limited partnerships.

The Balancing Act

Many younger workers have the task of balancing debt reduction with retirement savings. Often the debt they have accrued is related to student loans and credit cards. Many of these workers believe they need to pay off their debt before they begin actively saving for retirement.

However, to be able to save a sufficient amount for their golden years, young workers are going to need to save while also paying off debt. Here are some ideas on how to do that:

  1. Focus on High Interest Debt

Getting out of high interest debt should be a priority. Credit cards are usually the main culprit with interest rates as high as 18 or even 25 percent. Once rid of high interest credit card debt, try to stay out of it. When these debts are out of the way, there will be more funds available to allocate to retirement savings.

  1. Be Smart with Loans

Often, loans are just a necessary evil in life. This is especially true when making large purchases, such as buying a new car. Try to find the best deal possible, with smaller payments. Sometimes this means buying a used car or a less expensive option. The larger the down payment, the smaller the monthly payments. With smaller payments, more money can be put toward retirement.

  1. Set Realistic Goals

Instead of having an illusion of spending very little in retirement, plan for spending more. The average annual spending for those age 65 and older is $40,938. Workers need to realize they will probably spend more and account for that in their savings.

This is especially true of spending money on healthcare. Many retirees do not account for medical needs when saving. One way to be cognizant of upcoming healthcare costs is to start a health savings account. These accounts help retirees cover the medical costs rather than dipping into their retirement savings.

Often, younger workers are only encouraged to take advantage of a 401(k) match plan through their company. While this is a great tool, opening a separate account in addition to a work-sponsored one can bump up their savings potential. Visit Mountain West IRA’s website to learn about their retirement plans and investment options.

Savings Tips for Millennials

Millennials are struggling to save and pay off student debt at the same time, putting them behind in the retirement savings area. The ones that are managing to save, aren’t saving what experts consider enough. There are some things they can do about it though.

Cut Costs

One of the biggest expenses on Millennials’ plates is housing. Before signing the lease to the really nice apartment with a pool, dishwasher and other extras, take a moment to reconsider. Most people can probably get along just fine without a few of the extra amenities and put the rent savings aside for retirement.

Create a Budget

This goes for everyone, but Millennials should get into the habit of creating a budget early on. Tracking spending can help determine how much money is spent on necessary purchases and how much is spent on extras. After creating a budget, it is easier to put more into a retirement savings account.

Adjusting Savings

Millennials should make it a goal to increase how much they save for three months. This can prove it is possible to save more, with a few lifestyle adjustments. It might mean having to cook at home more than eating out with friends, but it will be worth it later on.

These all seem like fairly easy tips, but putting them into practice is the difficult part. Millennials are in the spot where they’ve begun a career and are probably making more money than before. However, instead of saving the extra, Millennials, like many others of all ages, tend to increase their spending.

The tips listed about can help deter this habit and get Millennials on the right track for retirement savings. For those who haven’t yet set up a retirement savings account, contact Mountain West IRA. They have an option that is right for everyone.

Saving for Retirement and Paying for College

It can be a tough decision for most people when choosing the most beneficial way to spend or save money. Many people think choosing to invest in their retirement is a better option than paying for their children’s college tuition and here’s why:

  • Teens applying to college, can apply for student aid. Students are often eligible for scholarships, grants, and loans to help them cover the cost of tuition. Many students work part time during college to help pay for the fees as well. They do have some options when paying for college other than having their parents finance it.
  • While students have alternative ways of covering the cost of college, their parents don’t have many alternatives when it comes to financing retirement. What they save over the years is usually what they will have to live off during their retirement years. Some retirees are lucky enough to find part-time work if they don’t quite have enough money saved up, but some can’t because of age or illness.

You can save for both retirement and still help pay for college by starting early and making retirement the first priority. Before the kids come along and while they are still young, save as much as possible in a retirement account before putting anything in a college savings account. Time and compounding will be on your side.

Mountain West IRA offers many different self-directed IRA options when it comes to retirement accounts. They will have one that can help you save for retirement before saving for the college years.

Roth IRA V.S. Traditional IRA

When making the choice to invest in an IRA, the decision can seem a bit daunting. You may be wondering what type of IRA would work best for your needs. Additionally, the terminology and volume of information may have become overwhelming.

Mountain West IRA offers multiple retirement savings options to our customers. It’s important to understand that SEP IRA and Simple IRAs as well as individual 401(k) plans all revolve around meeting business needs. If, however, you are attempting to meet your own retirement needs, regardless of your employer, the Roth IRA or Traditional IRA are two options available to you. Did you know that all of these different types of IRAs can be done in a self-directed IRA account?

To begin, let’s take a look at the similarities:

Maximum Contributions: The maximum contribution limit for both IRAs is $5,500 for 2014. The only exception is for those who are age 50 or older. These individuals may contribute an extra $1000 to their IRA as a catch up contribution.

Contribution Deadlines: Contributions to an IRA must be completed by April 15 to count for the prior year.

Here’s a comparison of the Roth IRA and the Traditional IRA:

 

Roth IRA

Traditional IRA

Tax Benefits:

Tax and penalty free growth, and qualified (conditions apply) withdrawals after 5 years

 

No tax breaks for contributions

Tax deferred growth

 

Tax deductions may apply in contribution years

 

Eligibility:

Any age

Earned Income

Income restrictions apply

Under 70.5

Earned Income

No income restrictions

Withdrawals:

Contributions are withdrawn tax-free

 

Earnings are withdrawn tax-free after 5 years and only when meeting certain conditions

Withdrawals of pre-taxed contributions and all earnings are taxed when withdrawn

Penalties:

Non-qualified withdrawals are penalized with income tax and a 10% tax

 

Exceptions apply

Withdrawals prior to 59.5 years of age are subject to a 10% early withdrawal tax

 

Exceptions apply

Minimum Distributions:

None

starting at the age of 70.5

Other Benefits:

After the 5 year holding period, up to $10,000 can be withdrawn (tax and penalty free) to cover first-time homebuyer expenses

Contributions lower your adjusted gross income providing tax benefits

 

Up to $10,000 may be withdrawn (penalty fee but still taxed) to cover first-time homebuyer expenses

 

Although these guidelines provide some great information you’ll want to consult your tax professional for the plan that best suits your individual needs. Regardless of which IRA you select, Mountain West IRA would be happy to help you open your self-directed IRA account. With your self-directed IRA you’ll be able to take advantage of a host of different IRA investment options to assist you in your quest for a happy and comfortable retirement. Please contact Mountain West IRA today to discuss the possibilities.