Small-business consultant Barbara Weltman recently reminded her readers about SEP plans for business owners (SEP stands for simplified employee pension). The basis of her article was that these retirement plans are sometimes treated like an IRA (individual retirement arrangement), sometimes not when it comes to tax law.

Since we have clients who own their own businesses and open self-directed SEPs to save for retirement, we thought it was a good idea to share Ms. Weltman’s insights about these retirement plans. The timing is good as taxpayers head into the final laps before the 2015 tax filing and contribution deadlines.

A key takeaway is to understand that a SEP is not the same as a qualified retirement plan, which may have more leeway regarding some of the pointers listed below, depending on how the qualified plan is set up. Also, depending on the account holder’s particular situation or needs, some of these issues can be viewed as either favorable or not so favorable. We are sharing them here for informational purposes only; as always, it is best to consult your tax professional or trusted adviser regarding any of these as they may apply to you.

Some ways in which the IRS treats a simplified employee pension plan like an IRA are:

• Participants may NOT borrow from a SEP; this is a prohibited transaction that will cause the account to lose its tax advantages. Funds that are borrowed from a SEP are immediately taxable as income and there are penalties.
• You must start taking your required minimum distribution (RMD) starting at age 70-1/2, even if you own less than five percent of the business and are still working (this differs from qualified plans).
• Transfer of funds in the case of divorce is not a taxable event for the transferring spouse (as long as that transfer to a former spouse is “incident to divorce.”).
• The penalty exceptions for early distributions (taken before age 59-1/2) also apply to SEPs. You can read about these penalty exceptions on the IRS website.
• Assets held in a SEP are not protected to the same extent from creditors’ claims as those in a qualified retirement plan (which are covered by a provision in the Employee Retirement Income Security Act of 1974). This concerns assets that are not involved in bankruptcy. Your state laws may provide different protection so that’s worth checking out.
• That said, under the federal Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, an unlimited amount of assets in SEPs are shielded in case of bankruptcy; this is in contrast to IRAs, which shielded up to a $1 million limit of assets (adjusted for inflation).
• You may continue to make contributions to a SEP after reaching age 70-1/2 and enjoy the tax deduction for these contributions (remember you must start taking your RMD after reaching this age).
• Qualified charitable distributions (QCDs) cannot be used for SEPs; IRA owners age 70-1/2 are permitted to make tax-free transfers directly to public charities, up to $100,000 a year.

There are plenty of good reasons for owners of small businesses to open a self-directed SEP and even to offer these plans to your employees. At Next Generation Trust Services, we make it easy with our SEP Starter Kit. And of course, if you self-direct this retirement plan, you’ll be able to include many different types of assets beyond stocks, bonds and mutual funds to build your retirement wealth. But as we always say at Next Generation, do your research and fully understand your retirement plan and assets!

We hope this information has provided some insights into the potential pros and cons of a self-directed SEP. If you have any questions about SEP IRAs or any other type of retirement plan that can be self-directed, contact our helpful professionals at (888) 857-8058 or Info@NextGenerationTrust.com.

Do you want your retirement to be just beachy? Then Sarasota is the place for you with turquoise-colored waters, warm climate and plenty of outdoor activities. Nestled along Southwest Florida’s Gulf coast, Sarasota and her five main barrier islands (or keys)—Longboat, Lido, St. Armands, Bird and Siesta—are located between Tampa and Ft. Myers. Nicknamed Florida’s “Cultural Coast,” Sarasota offers culture and creative outlets with a casual vibe.

John Ringling Causeway connects downtown Sarasota to the keys, where wealthy, often famous, residents live nestled between Sarasota Bay and the Gulf beaches. Prime real estate can be found in northernmost Longboat Key, which has limited public beach access and boasts the Longboat Key Club & Resort where annual and seasonal memberships are available to nonresidents. Lido and Siesta offer large public beaches.

Sarasota is #2 on Livability’s list of best places to retire and near the top of AARP’s list (#4) of “best places to reinvent your life.” And, it comes in at #90 on CNN’s Top Best Places to Live. The high rankings can be chalked up to its mild sub-tropical climate. The area has gentle winters (average temperatures are 63°F), sun-drenched summers (average temperatures are 82°F), awesome sunsets and an abundance of activities.

Cost of Living

Retirees have a choice of living styles. For those who desire an apartment, plenty are available right downtown. Or, if you’d rather not be in the thick of it, there are many wonderful housing options in various neighborhoods in town. There are also homes on exclusive keys such as Longboat Key and Siesta Key, where towering apartment houses and huge mansions overlook the Gulf. Plus, Sarasota abounds with an enormous array of gated golf and active adult communities, which tend to be nearer the Interstate.

According to the National Association of Realtors, the median sales price of a home in the Sarasota/Bradenton/Venice area in 2015 was $236,400. Although the cost of living may be higher than in other parts of the United States, with balmy temperatures year-round there is no need to run the heat. Also, Florida has no state income tax making it attractive to retirees.

Fun and Cultural Stuff

Sarasota’s earliest pioneers arrived in the 1840s, drawn by the fishing and prospects of cattle and citrus farming. The sublime climate soon attracted wealthy wintertime residents like John and Mable Ringling of circus fame, who made the town their winter quarters. The Ringlings’ passion for collecting art is still evident in city landmarks, which include their bayside home, Cà d’Zan, and the John and Mable Ringling Museum of Art.With one of Florida’s best downtowns, Sarasota offers many appealing neighborhoods, an impressive array of cultural facilities and high-rise, luxury hotels. One of Sarasota’s top attractions—St. Armand’s Circle—sits at the end of the John Ringling Causeway. This lovely circle is surrounded by fine dining, shopping, and high-end housing.

Sarasota has 35 miles of sandy beach for swimming and boating; and plenty of artistic activities, like the Sarasota Ballet, Sarasota Opera, The Players and numerous other musical, dance, artistic, and theatrical venues. The Cincinnati Reds hold spring training here; the legendary golf champion Bobby Jones laid out the city golf course; and many buildings are listed on the National Register of Historic Places.

April brings the Sarasota Film Festival to the area, which offers hundreds of diverse films and draws some of the most acclaimed and burgeoning actors, directors, screenwriters, and musicians of our time.

Personal Well-Being

Sarasota has an enviable supply of doctors and medical resources. Sarasota Memorial Hospital, Healthsouth Rehab Hospital of Sarasota and Doctors Hospital of Sarasota are all located here and provide excellent health care.

Investing in Real Estate

Many knowledgeable investors already know that investing in real estate using self-directed IRAs can be a lucrative way to build retirement wealth. In fact, real estate is the most popular asset class in these plans. As a self-directed investor, you may choose to invest in vacation property in the Sarasota/Bradenton area to create rental income now and build up your retirement savings, and distribute your investment later so that you and your family may enjoy the home.

Regardless of where you make that real estate investment through your self-directed IRA, you will be on your way to making sure your retirement dreams are bright and sunny. Want to know more? Contact our helpful self-direction professionals with your questions at (888)857-8058 or Info@NextGenerationTrust.com; or go directly to our Starter Kits to open an account today.

In a recent article in Investment News, Mary Beth Franklin wrote about how the new Social Security rules around spousal benefits have the potential to hurt women’s financial futures. Since women tend to live longer they also tend to rely more heavily, for longer time periods, on Social Security benefits. (Let’s not forget the wage gap that still exists in our country, so many women earn less than their male counterparts), Therefore, for many women, maximizing their benefits is crucial to living in relative comfort in retirement. Ms. Franklin stated that:

• In 2013, Social Security represented nearly half of all income for unmarried women, including widows age 65 or older, according to the Social Security Administration.
• More than 80% of retired women currently collecting Social Security took benefits early (which also means they locked in a lifetime of lower payments), according to a Nationwide Retirement Institute survey.
• Of those who did so, nearly 25% of them said if they could do it over again, they would have held out for a bigger benefit.

However, one of the new restrictions on spousal benefits will affect married women and divorced spouses while another new rule will eliminate the ability of single people to request a lump sum payout of benefits.

Here’s what’s changed under the Bipartisan Budget Act of 2015:

Spousal benefits – Right now, married or qualified divorced spouses who are entitled to both their own retirement benefits and spousal benefits can elect to collect spousal benefits only when they wait until their full retirement age of 66 to claim Social Security. (A spousal benefit is worth half of their mate’s or ex-mate’s benefit amount at full retirement age.)

In the meantime, their own retirement benefit would accrue delayed retirement credits worth 8% per year up to age 70, when they can switch to their own larger benefit.
However, the ability to temporarily claim just spousal benefits is being phased out for any married people or divorced spouses who are younger than 62 by the end of 2015. Those who are 62 or older by the end of 2015 will still be able to claim only spousal benefits at age 66, assuming their spouse has filed for benefits.

(NOTE: widowed individuals who are entitled to retirement benefits from their own earnings record as well as surviving spouse benefits a benefit will retain the option to claim one type of benefit first and switch to the other later if that change would result in a larger benefit.)

File and suspend – This provision allows a worker who is full retirement age or older to claim Social Security and immediately suspend his or her benefits. This strategy can trigger auxiliary benefits for a spouse or minor dependent child while the worker’s own benefit continues to grow by 8% per year up to age 70.
Those 66 or older can still request to file and suspend their benefits by April 30, 2016; however, with the updated rules, new requests to file and suspend on or after May 1 will be subject to new rules that prohibit any benefits being paid to family members while a worker’s benefit is suspended.

Take control of your future—and rely less on Social Security—with a self-directed retirement plan

Don’t let changes in Social Security benefits rules ruin your retirement planning. With a self-directed retirement plan, you’re in control of your investments and make all your own investment decisions based on what you already know and understand. Savvy investors have been including a wide range of alternative assets in their portfolios to build up retirement savings that could be more lucrative (and certainly are independent of what happens to Social Security benefits).

Next Generation Trust Services has just about everything you need to get started—take a look under Client Forms on our website, where you’ll find our helpful Starter Kits and the documents you’ll need to start taking control of your future through self-direction. Our helpful staff is available to answer any questions you have about self-directed retirement plans and the many investment options these plans may include. Contact us for more information at Info@NextGenerationTrust.com or (888) 857-8058.

Are you planning on working longer in order to save more for retirement? Sure, it sounds like a plan—but will that really happen?

Many Americans have not saved nearly enough for their retirement and may try to stay in the workforce longer in order to shore up that retirement saving shortfall. Workers have been steadily increasing projections for the length of their working careers (and thereby extending their working lives beyond customary retirement age). According to the Employee Benefit Research Institute, in 1991, 11% of workers expected to retire after age 65; in 2015, that figure rose to 36%, with 10% of workers saying they don’t plan to ever retire.

Trying to extend your working life to save more for retirement might not be a surefire plan. A recent article in Investment News shares that viewpoint.

The author says that unforeseen circumstances could put the kabash on those plans to work longer in order to amass additional retirement funds. For instance, Wells Fargo & Co.’s recent annual retirement study revealed that half of retired respondents had retired earlier than planned—many for reasons beyond their control such as health (37%) or an employer decision (21%).

Similarly, according to the Employee Benefit Research Institute’s (EBRI) 2015 Retirement Confidence Survey, 60% of those who retired earlier than planned did so due to a health problem or disability; 31% did so because they could afford to.

So what to do when it’s hard to plan for a fixed retirement age? After all, whether you would like to retire on the early side—before age 65 or 66—or you plan to work past retirement age, life happens. Our priorities and market conditions change, our physical or mental skills may not be as sharp, lifecycle events and unexpected situations may interrupt those plans. And of course, for people who are nearing retirement age and realize their IRAs are not adequately funded, there are realistic concerns to deal with regarding finances.

In the Wells Fargo survey that was cited in the article, 54% of workers over 60 years old said they’d have to work until at least 70 to have enough retirement savings, while only 40% of those ages 55 to 59 felt that way.

Catch up on contributions in your self-directed retirement plan

Whether or not you have a regular or self-directed IRA, anyone ages 50 and up can make catch-up contributions to Traditional or Roth IRAs; check our website for helpful guidelines on this at https://www.nextgenerationtrust.com/irs-regulations-resources/

Another way to catch up—this and every year—is to include non-publicly traded assets in a self-directed retirement plan. By including nontraditional investments, you could build a potentially more lucrative retirement portfolio through assets you already know and understand. Are you already making real estate investments outside of your existing IRA? Why not make those self-directed investments instead, in a tax-advantaged retirement plan? Do you like to invest in commodities, hedge funds, or precious metals? These—and so many other types of alternative assets—can become part of a self-directed retirement plan.

Interested in learning more? If you’re ready to catch up on your retirement savings through self-direction, check out our free whitepaper … or contact our helpful professionals at Next Generation Trust Services with your questions at Info@NextGenerationTrust.com or (888) 857-8058.