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The Triple-Tax Advantage with a Health Savings Account

The Triple-Tax Advantage with a Health Savings Account

We’ve written before about health savings accounts (HSAs) and the triple-tax advantage account owners can enjoy with these accounts. HSAs were created as a savings plan for individuals with high-deductible health plans, in which the funds can be used for qualified healthcare expenses such as premiums, copays and deductibles, medical equipment, prescriptions and more. However, the benefits of HSAs go beyond just that, and this has made HSAs more attractive to individuals saving for retirement.

According to the September 2021 report from Devenir on HSAs:

And, yes, you may open a self-directed HSA and invest the funds you’re contributing through alternative assets!­­

Some HSA basics
In 2022, the contribution limits on HSAs are $3,650 for single-coverage plans and $7,300 for family-coverage plans. Account owners aged 55+ may contribute an additional $1,000 per calendar year (similar to catch-up contributions for retirement plans).

Account owners are required to stop contributing to their health savings account six months prior to applying for Medicare to avoid penalties. If your employer offers an HSA, the employer contributions must also stop once you apply for Medicare.

Once you are enrolled in Medicare, you may still invest or use/distribute the money in your HSA.

The triple-tax benefit
The triple-tax advantage is one of the most enticing features of a health savings account for the following reasons:

Added benefits of HSAs
Yes, you can use your HSA as an investment tool! Rather than allowing the account to accrue interest over time, it can also be self-directed, which provides the opportunity to actively invest in alternative assets. This strategy provides retirement portfolio diversification and added control over investment returns. Self-directed investors may open a self-directed HSA at Next Generation and invest account funds in assets such as real estate, private equity, cryptocurrency, promissory notes/loans, precious metals and much more.

Example of using an HSA as a long-term savings and investment tool
Let’s say you open the account in your early-30s and you contribute the maximum amount every year. You can set aside a cash cushion to cover qualified medical expenses and invest the rest, strategically, per your knowledge of nontraditional investments. Once you’ve completed an investment, you can reinvest the funds. Over the span of 30+ years, you may have amassed a healthy savings account, which has grown through those investments, and upon retirement age you can start using those funds as you see fit:

  1. Use HSA funds tax-free for medical expenses, Medicare premiums, or certain long-term care expenses or insurance.
  2. After age 65, use HSA funds for other (non-medical) expenses without penalty (you will still be taxed on those distributions).

Even better, there is no minimum required distribution nor do you have to start withdrawing funds by age 72 as you do with an IRA.

Next Generation makes it easy to open a health savings account, and our helpful professionals can answer your questions about the alternative assets that can be included in your HSA or any self-directed retirement plan. You may schedule a complimentary educational session, or contact our team at NewAccounts@NextGenerationTrust.com or 888-857-8058. You can also text us at 848-233-4076.

Don’t Want to Delay Retirement? Here’s Another Option…

Although the current retirement age is 66, many seniors continue to work, even though they are eligible for full Social Security benefits. In fact, research by Provision Living (a provider of services for older adults) revealed that in U.S. cities with populations of 200,000 or more, at least 20 percent of people ages 65 and up were still working. Results of a more recent poll by Provision Living (August 2019) showed that 55 percent of respondents worked part time and 45 percent worked full time. Survey participants were between the ages of 65 and 85.

Why do seniors continue to work?

A sizable amount—one third—enjoy working and don’t want to retire, or prefer working but with fewer hours. However, 62 percent of respondents cited finances as the reason why they were still in the workforce; they couldn’t afford to retire, they were supporting families, or were still paying off debt. For many, their retirement savings were not at the level needed for a comfortable retirement that was not largely dependent on Social Security benefits.

In fact, 70 percent of working seniors in the survey said that Social Security would be their primary source of income after retirement. The others said a pension, 401(k), personal savings, and stocks would be their main income source in later years. A small percentage (11 percent) said they planned to rely on children or family to support them.

Plan for a comfortable retirement through self-direction

If you enjoy being in the workplace, that’s great! But if you’re thinking ahead to either working less or not at all, have you thought about self-directing your retirement plan?

Opening a self-directed IRA opens the door to building a more diverse retirement portfolio allowing you to invest in alternative assets such as real estate, private equity, unsecured or secured loans, and precious metals. Self-direction can be a powerful way to build retirement savings—and gives you the option to delay retirement because you want to keep working, not because you must due to finances.

Savvy investors who are comfortable making their own investment decisions can invest in what they already know and understand, take advantage of certain market opportunities, and enjoy tax-advantaged retirement savings.

The Social Security Trust Fund has an uncertain future which will affect many of today’s workers. Corporate pensions are disappearing. The stock market is unpredictable. Those who wish to self-direct their retirement plans can better control their futures, today—and create a hedge against market volatility.

Want to learn more about self-directed retirement plans? Contact us to set up a complimentary educational session. Alternatively, you can contact our team with any questions about self-directed IRAs and the many types of nontraditional investments these plans allow. We’re available via phone at 1-888-857-8058, or email at NewAccounts@NextGenerationTrust.com.

 

Next Generation Services Adds to its Team with New Sales and Business Development Specialists

Jack Malpass Joins Company as Inside Sales Rep, Scott Ritchie is Business Development Rep for Firm that Specializes in Self-Directed Retirement Plans

ROSELAND, NJ, October 17, 2019 /24-7PressRelease/Next Generation Services, located in Roseland, N.J., is expanding once again with two new hires. Jack Malpass is Next Generation’s newest inside sales representative and Scott Ritchie is the firm’s new business development representative. Both will work on building and strengthening the firm’s relationships with prospective clients—individuals who are interested in controlling their retirement investments through self-directed IRAs and other retirement plans—along with their trusted advisors and other referral sources.

“Since growing a cohesive operations and transactions department, we have refocused our efforts on the expansion of our sales and marketing teams,” said Jaime Raskulinecz, founder and CEO of Next Generation. “Bringing on these two seasoned sales professionals will help us drive our passion for providing top-notch information and education to individual investors and financial professionals in even greater numbers and a farther reach.”

Malpass, of Hopatcong, has worked in inside sales for a variety of companies in the NY/NJ metro area; as such, he has managed IT help desks, and has extensive experience with lead generation and nurturing, handling customer inquiries, and representing companies at trade shows. At Next Generation, he is working with potential clients to understand their investing objectives, educate them on how self-direction may help them meet those goals, and ensure a smooth client acquisition process. He will be working closely with Next Generation’s marketing team.

As business development representative, Ritchie, of Bernardsville, will put his experience as a business development director for a software company, as well as his background in real estate investment and vendor relations to work at Next Generation. He will research target markets and develop leads, represent Next Generation at industry events and trade shows, and present how self-direction works to potential clients who may not yet have a full understanding of the retirement strategy. He will be collaborating with the marketing, account management and operations teams.

Self-directed retirement plans allow for a broad array of alternative assets to be included in them, with the same tax advantages as typical retirement plans offered by banks and brokerage houses. Among those assets are real estate, private equity, unsecured and secured loans, commodities and precious metals. As self-directed investors, account owners make all their own investment decisions and conduct their due diligence on the nontraditional investments they wish to include, in order to build a more diverse retirement portfolio.

Next Generation Services, founded in 2004, provides full account administration and transaction support. In 2017, its sister firm, Next Generation Trust Company was launched; the South Dakota licensed, chartered trust company acts as custodian for all Next Generation accounts. Anyone interested in learning more about self-direction as a retirement wealth-building strategy can sign up for a complimentary educational session; or contact Next Generation by phone at 1.888.857.8058 or email at NewAccounts@NextGenerationTrust.com. More information about self-directed retirement plans and Next Generation is available at www.NextGenerationTrust.com.

About Next Generation
Founded on the philosophy that every person should have control over their own retirement plans, Next Generation Trust Company educates consumers and professionals about self-directed retirement plans and nontraditional investments, a strategy at one time reserved only for the very wealthy. Next Generation Trust Company, a custodian of self-directed retirement plans, is a trust company chartered in South Dakota. Its sister firm, Next Generation Services provides comprehensive account administration and transaction support with Next Generation Trust Company acting as custodian for all accounts. The neutral third-party professionals at Next Generation expertly guide clients and their trusted advisors as part of their white glove, personalized service for a seamless transaction experience from start to finish. For more information on self-directing a retirement plan, visit www.NextGenerationTrust.com, call toll free 1.888.857.8058 or e-mail NewAccounts@NextGenerationTrust.com.

# # #

Contact Information

Caryn Starr-Gates
StarrGates Business Communications
Fair Lawn, NJ
US
Voice: 201-791-4694
E-Mail: Email Us Here

Get a RISE Out of Your Retirement Savings

You’ve been contributing to your IRA or employer-sponsored retirement plan—but are you retirement-ready or on track to be? Many Americans are not saving enough, or quickly enough, to sail smoothly into a comfortable retirement. Moreover, they are not properly calculating their anticipated expenses during their later years.

The Retirement Income Security Evaluation (RISE) is an online tool that evaluates where individuals are along their path to retirement in terms of their savings and their necessary income needed for the future. Based on data you provide, RISE gives you a score that measures how well you’ll be able to live on what you have saved today. The tool was developed by a provider of actuarial products and services and is provided by the Alliance for Lifetime Income, a non-profit organization. It’s flexible, so users can adjust data to see how they’d fare based on different financial information.

Consumers are asked to input their expected Social Security income, pension income if relevant, current savings, and their monthly living and medical expenses. The tool then calculates a score that tells users how well they can expect to live based on today’s numbers. Many people may be surprised by the gap their score reveals, since health care expenses are often left out of the equation—and can run into the thousands annually in a person’s later years. Plus, depending on the source, financial institutions recommend having up to 10 times your pre-retirement annual income in your retirement plans as a savings benchmark.

Knowing your score and where you stand can help you gauge whether you may need to ramp up your savings or—in the case of self-directed investors—further diversify your retirement portfolio with alternative assets.

Self-direction empowers individuals to achieve their retirement goals in more unique ways, by including nontraditional investments in their plans. These investments—such as real estate, private equity, unsecured or secured loans, precious metals, and more—have the potential to return greater ROI than the stock market and provide a hedge against market volatility. Savvy investors who are comfortable making their own investment decisions can invest in what they already know and understand, and take advantage of certain market opportunities.

If you’re thinking about how to boost your retirement score through self-direction, you can learn more about this strategy in one of Next Generation’s complimentary educational sessions. Or, you can contact our team with any questions about self-directed IRAs and the many types of nontraditional investments these plans allow. We’re available via phone at 1-888-857-8058 or email: NewAccounts@NextGenerationTrust.com.

DISCLAIMER

Next Generation Trust Company (“NGTC”) does not review the merits or legitimacy of any investment. NGTC does not endorse or recommend any companies, products, services or investments. NGTC does not provide any financial, legal or investment advice.

If the services of NGTC were recommended by any third party, such persons or entities are not in any way affiliated with NGTC. All information provided is for educational purposes only. All parties are encouraged to consult with their professional advisors prior to making any investments. 

Next Generation Services (NGS) is a third-party administrator of self-directed retirement plans, located in Roseland, New Jersey. NGS handles all the back office administration, record keeping, mandatory reporting, and transaction support. Accounts are named with Next Generation Trust Company as the custodian and holder of assets, for benefit of the individual account. 

NGS does not review the merits or legitimacy of any investment. NGS does not endorse or recommend any companies, products, services or investments. NGS does not provide any financial, legal or investment advice.

If the services of NGS were recommended by any third party, such persons or entities are not in any way affiliated with NGS. Next Generation Services is not a “fiduciary” as defined in the IRC, ERISA, and/or any applicable federal, state or local laws. All information provided is for educational purposes only. All parties are encouraged to consult with their professional advisors prior to making any investments.

 

Next Generation Services Celebrates 15th Anniversary in the Self-Directed Retirement Industry with Networking Event

Roseland, N.J. Firm Specializes in Self-Directed Retirement Plans; Event was Attended by Staff, Sponsors and Clients


ROSELAND, NJ, October 11, 2019 /24-7PressRelease/ — In celebration of its 15th year in business, Next Generation Services, a Roseland, N.J. firm specializing in account administration of self-directed retirement plans, held a networking event at McLoone’s Boathouse in West Orange. The event, on September 26, was attended by approximately 50 people including staff, sponsors, and current and prospective clients. Next Generation Investment Group (not affiliated with Next Generation Services), an alternative investment fund that specializes in the film distribution market, sponsored the open bar. Emerald sponsors included Prawdzik Properties, a real estate investment company; Iron Edge VC, which provides members with investment access to pre-IPO companies, and Jim Clark of Clark’s Laws PC, who specializes in ERISA law.

Next Generation Services, an independently owned and operated company, was founded in 2004 by Jaime Raskulinecz (far right, back row), a long-time real estate investor, licensed real estate broker and certified property manager; she and partner Linda Varas (center of photo) are the firm’s principals. Since its founding, Next Generation Services, which provides full account administration and transaction support, has grown to over $600 million in assets under management. In 2017, its sister firm, Next Generation Trust Company was launched; the South Dakota licensed, chartered trust company acts as custodian for all Next Generation accounts.

More information about self-directed retirement plans and Next Generation is available at www.NextGenerationTrust.com.

About Next Generation
Founded on the philosophy that every person should have control over their own retirement plans, Next Generation Trust Company educates consumers and professionals about self-directed retirement plans and nontraditional investments, a strategy at one time reserved only for the very wealthy. Next Generation Trust Company, a custodian of self-directed retirement plans, is a trust company chartered in South Dakota. Its sister firm, Next Generation Services provides comprehensive account administration and transaction support with Next Generation Trust Company acting as custodian for all accounts. The neutral third-party professionals at Next Generation Trust Company expertly guide clients and their trusted advisors as part of their white glove, personalized service for a seamless transaction experience from start to finish. For more information on self-directing a retirement plan, visit www.NextGenerationTrust.com, call toll free 1.888.857.8058 or e-mail NewAccounts@NextGenerationTrust.com.

Contact Information

Caryn Starr-Gates
StarrGates Business Communications
Fair Lawn, NJ
US
Voice: 201-791-4694
E-Mail: Email Us Here

Investing in Notes Through a Self-Directed IRA

Private notes, also called promissory notes, may be mortgage notes or deeds of trust, private loans, or corporate debt, and are among the many alternative assets allowed in a self-directed IRA. “Promissory” indicates that there is a written promise to repay the sum according to the terms of the loan.

These notes comprise a form of private lending from the self-directed IRA, with the same tax advantages that the retirement plan allows. Investing in notes is not only popular, it’s a great way to help someone who needs funding and earn passive, tax-advantaged retirement income at the same time. It is important, however, to note that the borrower cannot be a disqualified person, as defined by IRS Publication 590.

Notes may be secured with collateral—like mortgages that have real estate to back up the loan; in fact, real estate notes represent a fast-growing segment of self-directed investments. With a secured loan, if the borrower does not pay back the loan, the lender gets the collateral in lieu of payment.

Promissory notes may also be unsecured (without collateral), which carries some risk because there is no recourse if the loan goes unpaid (other than taking a borrower to court).

Real estate notes—an attractive nontraditional investment

Here are four reasons why real estate notes are popular among self-directed investors.

As with any self-directed investment, the loan is made from the retirement account (not personal funds) and loan payments flow through the retirement account, with terms worked out by both parties. Similar to a bank loan, terms on a promissory note may include amount owed, interest and monthly payment amounts, and the loan’s maturity date.

Types of real estate notes

Just as there are many ways to invest in real estate directly through a self-directed IRA, there are different types of real estate notes (loan types) and scenarios, including:

Do your research before investing in notes

Self-directed investors are those who are comfortable making their own investment decisions and conducting thorough research/due diligence before making any investment(s). From property liens, to real estate appraisals, to the borrower’s creditworthiness, there are many items to check off your list before entering into a transaction.

For investors who wish to include notes or private placements in their retirement plans, or if you’d like more information about self-directed IRAs, please register for a complimentary educational session with one of our representatives. Alternatively, you can email us at NewAccounts@NextGenerationTrust.com or call 1.888.857.8058.

Private Equity Investing Using a Self-Directed IRA

Do you know someone who is starting a company and is seeking investors? Is there an established privately held company you’d like to invest in to help it expand—and earn some equity in the process?

If you have a self-directed IRA, you could include private equity investing for startups and other private companies within your retirement plan. The investment gives you shares that represent ownership or an interest in the entity. Private equity investments are among the many alternative assets in which you can use to build a more diverse retirement portfolio through self-direction.

What is a private equity investment?

Whether via accredited online crowdfunding platforms or direct investment, private equity is a capital investment in an entity that is not publicly traded; rather, it’s an investment in a privately held company. Once only utilized by high-net-worth investors, both accredited and non-accredited investors may now take advantage of this investment opportunity. Including private equity investments in one’s retirement portfolio also provides a hedge against the volatile stock market.

Examples of private equity investments are:

When using a self-directed IRA, the plan invests directly into the business, partnership, or other entity, with terms worked out between the parties (in the case of a private placement, this is typically done via a subscription agreement). The entity gets needed capital and the self-directed investor diversifies his/her retirement portfolio by including this nontraditional investment within the retirement plan.

Ask your financial advisor if a private equity investment is right for you

As with any self-directed investment, account holders should conduct full due diligence about an investment opportunity before sending instructions to the self-directed IRA administrator. At Next Generation, we also strongly recommend that you check with your trusted advisor as to whether private equity and the potential tax liabilities associated with the investment fit with your financial goals. After all, every asset class has its risks – be sure you fully understand the upsides and potential downsides of any self-directed investment before making your decision.

For individuals who would like to invest in private equity, Next Generation offers complimentary educational sessions, so you can learn more about how these investments are structured with a self-directed IRA. Alternatively, you can contact our team with any questions about this or other self-directed investments by phone: 1-888-857-8058 or email: NewAccounts@NextGenerationTrust.com.

Raising the RMD, Repaying Student Loans and Other Potential Changes to Retirement Accounts

Helping Americans save more for retirement is very much on the mind of Congress.

In the spring, Senators Ben Cardin of Maryland and Rob Portman of Ohio reintroduced legislation (Retirement Security and Savings Act of 2019) that proposes raising the required minimum distribution (RMD) age for retirement accounts to 75, with increases to be phased in over several years from age 70½. Additionally, it would potentially increase savings in 401(k)s and IRAs, help with small employer coverage for part-time workers, and remove obstacles for including lifetime income options in retirement plans.

NOTE: Currently, account holders of Traditional IRAs and SEP IRAs must start taking required minimum distributions no later than 70-1/2 but this rule does not apply to Roth IRAs, Coverdell ESAs and some other plans.

A different bill, Retirement Parity for Student Loans Act, contains a provision that would enable workers to make student loan payments while their employers make matching contributions into their retirement account “as if the student loan payments were salary contributions.” These elements give Americans more time and more financial freedom to save for retirement.

The House of Representatives has also been looking at retirement legislation; in late May, the House passed the SECURE Act—Setting Every Community Up for Retirement Enhancement, which currently awaits passage in the Senate. The bill’s significant retirement policy changes are designed to improve access to financial products in order to encourage more Americans to save for retirement. It also contains incentives for employers to expand access to 401(k) plans, particularly to employees of small businesses and part-time employees.

 

Is a self-directed IRA on your mind?

 

Here are some reasons why it should be:

 

If you’re thinking about opening a self-directed IRA of any kind, please register for a complimentary educational session with one of our knowledgeable representatives. Alternatively, you can call our team directly at 888.857.8058 or email NewAccounts@NextGenerationTrust.com with any questions.

Updates on Government Oversight and Exemptions Regarding Prohibited Transactions in Self-Directed IRAs

Did you know that in addition to the Internal Revenue Service (IRS), the Department of Labor (DOL) also has responsibilities for overseeing prohibited transactions relating to IRAs? The DOL handles interpretive guidance and has exclusive authority to grant exemptions from the rules regarding prohibited transactions in IRAs and retirement plans. The IRS enforces tax laws and assesses additional taxes related to prohibited transactions.

This spring, the U.S. Government Accountability Office (GAO) published a comprehensive report advising that the DOL and IRS collaborate more closely regarding the exemptions from prohibited transaction rules. This advisory report was the result of the GAO’s examination of the grant exemption process and its examination into the extent to which the Department of Labor and Internal Revenue Service currently collaborate on oversight of these matters.

What constitutes a prohibited transaction?

As we’ve often educated our clients on the subject, certain types of transactions are prohibited, as outlined here. Any self-dealing (gaining personal benefit) or conducting a transaction with a disqualified individual puts the self-directed retirement plan at risk for loss of its tax-advantaged status, and the account holder may incur increased income tax liability, along with other penalties.

According to Internal Revenue Code Sections 408 & 4975, a disqualified person is generally defined as the IRA holder, any of his/her ascendants or descendants, and any entity controlled by such persons. If you have questions, or if you’re concerned about whether or not a transaction could be considered prohibited, our team of transaction specialists are ready to help.

The significance of the study

The authors of the GAO report felt that prohibited transactions are more likely to arise due to investor noncompliance with IRS guidelines and the complex rules governing tax-favored retirement accounts.

It is for this reason that we always remind our clients that they must conduct their own due diligence regarding any investments they wish to include in their self-directed IRAs. Fully understanding any risks can help protect the tax-advantaged status of their accounts.

What the GAO study comprised

According to the report, “GAO reviewed relevant federal laws and regulations; examined agency guidance, exemption process documentation, and application case files; assessed interagency coordination using internal control standards and prior work on interagency collaboration; and interviewed DOL and IRS officials.”

The GAO audit was performed from December 2016 to June 2019, during which the GAO team:

GAO found that most processed applications were seeking exemptions that involved the sale of IRA assets. Further, the agency found that DOL has not sufficiently documented internal policies and procedures to help ensure effective internal control of its process.

The DOL exemption process

DOL regulations outline the process for filing and processing applications for prohibited transaction exemptions: who may apply and the information required; when a conference with DOL can be requested as well as requests for reconsideration of a DOL decision; and how DOL and the applicant will notify interested parties if a tentative approval is warranted.

The application evaluation uses statutory criteria and follows codified administrative procedures. Generally, DOL may grant an exemption only if it finds the exemption to be administratively feasible; in the interest of the plan, its participants and beneficiaries; and protective of the rights of plan participants and beneficiaries.

Before granting an exemption, DOL generally must publish a notice of proposed exemption in the Federal Register inviting interested parties to comment on the proposed exemption.

GAO recommendations

The agency found that interactions between DOL and IRS are infrequent and limited in scope. GAO therefore recommends that they increase their interaction/interagency collaboration regarding these applications as follows:

These steps will increase transparency about how applications are handled, reduce the risk of inconsistency among DOL employees in carrying out their duties, and record and retain organizational knowledge. Both entities generally agreed with the recommendations.

As a custodian and administrator of self-directed IRAs, and in accordance with our mission to provide top-notch education and customer service, this report caught our attention. We felt it necessary to share these insights so that we can continue providing the white-glove quality service that the Next Generation name upholds. If you have any questions regarding the content within this post, please do not hesitate to contact our office. We can be reached via email at NewAccounts@NextGenerationTrust.com or via phone at (888) 857-8058.

Alternatively, if you’re interested in learning more about the benefits of self-directed IRAs, or to learn more about the do’s and don’ts, you can register for a complimentary educational session with one of our representatives.