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Don’t Depend on Social Security – Take Control of Your Retirement Instead

Dont Depend on Social SecuritySequestrations, fiscal cliffs, job losses, lower birth rate . . . all of these contribute to the real concern that Social Security benefits will not be fully funded for the mass of baby boomers heading into retirement, or that Social Security as we know it will even exist in twenty or thirty years. According to Daily Finance the Trust Fund for Social Security benefits could run out as early as 2036.

One thing we do know: It is very important to become more self-reliant and prepare for your retirement needs by funding your own IRA now. Those golden years of retirement can be a wonderful time to enjoy the things you never get to do during your working years. However, this takes some discipline and planning ahead to avoid facing a scary financial future.

As stated in a previous blog post, many Americans are not adequately prepared for retirement. People are afraid that the Social Security check will get smaller, so some people may have to work well into their 70s.

There are plenty of reasons to control your future by building up retirement wealth in a retirement account—and for certain investors who are comfortable controlling their retirement accounts and their investment decisions, a self-directed IRA is a great way to go.

 • Long-term unemployment or underemployment since the Great Recession has hurt Americans’ ability to fund Social Security or build up their Social Security credits.

• The current average payout for someone on Social Security is equivalent to a minimum-wage job, which means if any additional income is lost it will be nearly impossible to survive.

• The lower birth rate (post-baby boom) means fewer young people paying into the system to help support the baby boomers, who will pose a record burden on the system due to their numbers.

 Due to the increasing concerns with the viability of Social Security benefits for supplemental retirement income, there’s no time like the present to prepare for your retirement and take control of your investments. Next Generation Trust Services offers several options to help Americans retire comfortably through self-direction, which allows for a broader array of traditional and nontraditional investments to build retirement wealth. To find out more about how to control your future with a self-directed retirement plan, or how to include non-publicly traded alternative assets in your retirement account, contact one of our professionals at Info@NextGenerationTrust.com.

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Contact Next Generation at (888) 857-8058

or Info@NextGenerationTrust.com, or read through our Starter Kits for more information.

Traditional IRA vs. Roth IRA

Traditional IRvs Roth IRAUh oh – we’re in the fourth quarter of the calendar year, it will soon be time to send your tax documents to your accountant . . . and you didn’t set up an IRA yet to start saving for retirement?

No worries – you have until April 15, 2014 to make a contribution that will apply to the 2013 tax year. But now—well, any time—is ripe for opening up an IRA, if you don’t have an employer-sponsored retirement plan through work. Whether or not to select a traditional IRA or Roth IRA is the question. There are benefits to each type of retirement plan depending on the investor’s goals and situation. There are also certain restrictions around income, age, and other factors. Either one of these may be self-directed. We always recommend that our client consult their financial planner or tax professional about which type of retirement plan is best for their unique situation.

Traditional IRA 101

The traditional IRA (individual retirement account) was created in 1975 by the federal government for those Americans who did not have pension plans through their employers, and because (even back then), Social Security was not providing enough income during retirement. Sound familiar?

The IRA education page of our website lays out the basic information about traditional IRAs; for example:

• The traditional IRA is an account that is used to save pre-tax dollars for use in retirement.

• The contributions made to this account are tax-deductible.

• The minimum age that account holders are allowed to start withdrawing money is 59½; withdrawals made prior to age 59½ are subject to an early withdrawal penalty in addition to taxes owed.

• Account holders must start withdrawing funds, which are taxed as ordinary income, after reaching the age of 70½.

• Money grows tax free while it is in the account. Taxes are only paid once money is withdrawn.

• You may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan.

• You may set up a traditional IRA and make contributions if you (or, if you file a joint tax return with your spouse) received taxable compensation during the year, and you are under the age of 70½.

 With a self-directed IRA, whether traditional or Roth, SEP or SIMPLE (for employers and the self-employed) individuals may invest in a broad range of assets, not only stocks, bonds and mutual funds but the many alternative investments allowed within a self-directed retirement plan. If you have any questions about these assets or the types of plans that are available, please contact us.

 Roth IRA 101

The Roth IRA was created in 1997 due to the Taxpayer Relief Act. A big difference (there are a few) is that the funds you contribute to this type of retirement account are already taxed, so the money generated by the investments in a Roth IRA is withdrawn tax-free.

A Roth IRA is similar to a savings account. Money is invested to generate a sizeable profit. The profit you make will then be reinvested into a Roth IRA until the maturity date hits. A Roth IRA allows a person to withdraw funds tax-free and you aren’t required to ever withdraw the funds. The reason the money is tax-free is because the money is invested after you pay your taxes.

Here is some basic knowledge that you need to know about a Roth IRA which was covered in a previous blog post.

 Basic Information About a Roth IRA:

• When money is taken out of the Roth IRA, however, funds up to the amount put into it are always federal-tax free, and often the entirety of the funds are free from federal taxes.

• Intended for the middle class to help save for retirement. The basic uses include: purchasing a primary residence, medical expenses, and help fund a child’s college education.

• No penalties if you withdraw after a 5-year waiting period.

• Money invested is already taxed so any return you earn won’t be taxed if you wait to withdraw until you are 59½.

• No required age to withdraw from the account, and your beneficiary can inherit the account.

There are also restrictions towards a Roth IRA. When this was setup it was intended to help the middle-class. Therefore a single person who makes a gross income of $110,000 or more, and a married couple who earns an income of $160,000 or more is not eligible to contribute to a Roth IRA.

There are advantages and disadvantages to both types of IRAs. Now that you are educated about what a Traditional IRA and Roth IRA are we hope that you decide which one would be more beneficial to you when planning for your retirement. If you have any questions please don’t hesitate to contact one of our representatives at (888) 857-8058 or email us at Info@NextGenerationTrust.com.

For further information about Traditional IRAs and Roth IRAs please read up on information at http://www.irs.gov/


Self-Directed IRA – What it is not?

What is a self directed IRA and wht is it not?

In our second part of our self-directed IRA primer, we will explain what is NOT a self-directed IRA-type investment.

A self-directed IRA is not directed by another party. Financial planners, banks, accountants, or tax or estate planning attorneys do not direct a client’s self-directed IRA. These financial and legal professionals may advise the account holder about how to manage his retirement finances or discuss the ramifications of certain investments; however, it is ultimately up to the investor to do the research and legwork associated with any of the alternative assets allowed through self-direction, make the decisions, and to instruct the account administrator about what is needed to execute the transaction.

Self-directed IRAs are not administered by the individual. All the paperwork, filing, reporting, and execution of the transactions are managed by neutral, third-party retirement plan administrators. A professional self-directed retirement plan administrator does not advise the client about his asset choices or give investment advice; the administrator will provide account administration, transaction support, and guidance and education about self-direction when needed. This includes informing the client if an investment will fall outside of IRS guidelines.

A self-directed retirement plan is not an investment free-for-all. It is important to note that there are certain guidelines regarding the transactions allowed—there are a few prohibited classes of investments.

Under the Employee Retirement Income Security Act (ERISA) and IRS codes, several types of investments are excluded from self-directed retirement accounts: life insurance contracts, S-Corp stock, gemstones and metals (except for certain US coins and bullion), and collectibles (art, rugs, jewelry, coins, stamps, etc.).

There are also rules about who may not benefit in any way from the self-directed IRA (disqualified individuals) which are addressed below.

The self-directed assets are not for your personal benefit or those of disqualified individuals. There is a list of “disqualified individuals” addressed in IRC § 4975 who may not directly, personally benefit or use the assets within a self-directed IRA. These parties would disallow a transaction and include the investor, spouse, ascendants, descendants and their spouses, business partners, fiduciaries, and anyone providing a service to the retirement account.

Examples of these exclusions are:
•    Borrowing funds from the account
•    Use the self-directed IRA as security against a loan
•    Receiving unreasonable compensation from managing property held by the IRA
•    Allowing fiduciaries to use the retirement plan’s assets or income for their own interest
•    Conducting transactions involving disqualified persons, including:
o    Selling, exchanging, or leasing property
o    Lending money or extending credit
o    Furnishing goods, services, or facilities
o    Transfer of plan income or assets

If in doubt about a transaction in your self-directed IRA it is best to consult your account administrator or your trusted advisors about IRS guidelines.

The self-directed assets don’t belong to the account holder, per se. The assets held in a self-directed IRA belong to the IRA; it is the retirement account that is earning tax-free or tax-deferred income from the assets, and the IRA pays for all the expenses related to its assets and transactions. When the asset is sold, the proceeds go back to the self-directed IRA, to be reinvested as the account holder instructs.

A self-directed IRA can open the door to a wealth of investment opportunities to build a more eclectic retirement portfolio. If you have any questions about self-directed retirement accounts, or are ready to start building retirement wealth through investment in alternative assets, give us a call or send us an email.

You can read the first part of our Self-directed IRA primer, “What IS a Self-directed IRA by CLICKING HERE”

Click Here to Download a PDF Version of Self-Directed IRA – What it is not?

What is a Self-directed IRA? – A Primer

What is a self directed IRAIn the next few articles we plan to dig deeper to paint you a more accurate picture of what is a self-directed IRA and what is it not?

In this first part of the series we’ll be explaining exactly what a self-directed IRA is so that it might inspire you to think about the possibilities that self-directed IRAs can bring to your investment portfolio:


Most people know about or already have an individual retirement account (IRA) but many have yet to hear about or understand what a self-directed IRA is . . . and what a self-directed IRA is not. Self-directed IRAs have been around since the launch of the individual retirement account in the mid-1970s and are gaining popularity among many people who have grown tired of the unpredictable stock-and-bond markets.

The term “self-direct” explains something about these retirement plans but just scratches the surface of what they are.

Self-Directed IRA — What it is

What is a self directed IRA?

In short, a self-directed IRA is one in which the individual account holder makes all his or her own investment decisions, in order to direct the types of investments made within the retirement plan. But to simply say it’s about controlling your investments is the tip of the self-direction iceberg.

Self-directed IRAs come in all types. They may be Traditional or Roth (for individuals), SEP (for the self-employed) or SIMPLE (for business owners and their employees). You may also self-direct the holdings in a health savings account (HSA), a Coverdell Education Savings Account, or a 401(k) if your employer allows self-directed IRAs as part of its plans.

Self-directed IRAs allow for a broader range of investments. The retirement accounts offered by banks and brokerage houses limit the types of assets you may invest in; the options are usually restricted to what the financial institution sells—stocks, bonds, mutual funds. Self-directed accounts allow for a much wider array of both traditional and nontraditional investments, such as real estate, precious metals, hedge funds, commodities, private placements, and much more.

Self-direction can help build a more lucrative retirement portfolio. As noted above, account holders make all their own investment decisions, usually based on assets they already know and understand, or might already be investing in outside of their existing IRA. This flexibility allows savvy investors to build a potentially more lucrative retirement portfolio based on particular interests or areas of expertise.

Self-direction requires knowledge. Making all your own investment decisions means also becoming educated about what is allowed and not allowed through self-directed retirement plans; there are many options and benefits to this retirement strategy but there are some restrictions. Self-direction is growing in popularity, which makes it so important that investors truly understand the many options and benefits—and the few restrictions—related to these eclectic retirement plans.

It also means truly understanding what those investments are all about, so it is wise to have some experience in them before making those transactions within your self-directed IRA. For example, if you are already trading commodities, investing in rental properties, or providing capital for startup companies, you can do so within your self-directed retirement plan and build retirement wealth with what you already know and understand.

In part two of our series on Self-directed IRAs we will describe what a self-directed IRA is NOT, before also bringing you some case studies and success story examples.  So please check back as we roll out our new self-directed IRA series.  If you have questions about self-directed IRAs in the meantime please give us a call at:  (888) 857-8058

Click Here to Download a PDF Version of What is a Self-Directed IRA? — A Primer

Planning a Comfortable Retirement for Generation X – Pipe Dream or Possibility?

Are Self-Directed Retirement Plans Right for Gen Xers?

self directed IRAs for Gen Xers

Younger baby boomers and the citizens of Generation X right behind have some serious planning to do for their retirement, and we aren’t talking about where to vacation. These people are still working and some of them will be working for several more decades. That’s a good thing in terms of saving for their retirement, as studies show they are woefully unprepared to finance their retirement years in the style they are now living.

Although all those of the baby boom generation were hurt by the Great Recession by losing a significant chunk of their retirement savings (about a quarter of assets), older baby boomers have had ample time to save for retirement (or so the theory goes), enjoyed many decades of favorable markets and growing assets, and many sold their homes at peak prices before the real estate market tumbled in 2008. Younger boomers have had less time to build up retirement savings and were hurt by the dot com meltdown and sagging stock market after 9/11 as well as the Great Recession of recent years.

But Gen Xers—those born between 1965 and 1975 to 1980 (depending on whose figures you use) has been hit very hard, having started their investment lives during economic downturns, near-record unemployment, and a busted housing bubble—just as they were establishing careers and starting their retirement plans. In many cases, they have also been establishing home ownership and starting families.

  • Gen X members lost approximately 45% of their retirement account values and also are carrying, as a group, more debt than their elders.
  • A Pew Research Center study revealed that people in their mid-30s are the least confident about their ability to finance their retirement.
  • Pew also found that households age 35-44 are now 44% poorer than their counterparts of the same age in 1984.
  • This age group also saw a 59% decline in median household net worth between 2005 and 2010, the largest drop of all age groups.


Attention Gen Xers: Take Control of Your Future through Self-Direction

Although there are many factors affecting household wealth that none of us can control—the world economy, our company’s benefits program, interest rates, etc.— there are factors we can control when it comes to saving for retirement. With a self-directed retirement plan, investors make all their own investment decisions and are not restricted to the stocks, bonds, and mutual funds of typical bank or brokerage accounts.

If you are someone who understands investing in alternative assets, a self-direction retirement plan could be right for you. There are myriad ways to build an eclectic retirement portfolio through self-direction: real estate, commodities, investing in startup companies, precious metals—the list goes on. You might even be investing in some of these nontraditional assets outside of your existing IRA, in which case you should take a look at how a self-directed IRA can boost your retirement savings by diversifying your portfolio—a lot.

If you are a member of Generation X you have time on your side to branch out and make a comfortable retirement a reality. Even baby boomers may consider opening a self-directed IRA—there are no age limits for these types of retirement accounts. You can roll over an existing 401(k) or open a SIMPLE or SEP IRA if you are self-employed. All the same types of retirement plans that you find through your broker are available as self-directed plans.

Click HERE to read more about the Pew Charitable Trusts findings on Gen Xers and their retirement savings.

Self-Directed IRAs


For investors who are comfortable controlling their own retirement accounts — and those savvy investors who are already dealing in real estate or investing in certain instruments outside of their existing IRAs — there is an option that allows for more diversified, tax-advantaged portfolios than in traditional IRAs or 401(k) plans: the self-directed IRA.

What is a Self-Directed IRA?

A self-directed IRA is a nontraditional retirement account that allows individuals to invest in what they already know and understand… with alternative investment options not allowed within typical retirement plans. A self-directed IRA includes: What is a Self Directed IRA?

  • Real estate – residential and commercial properties, land, renovation or new construction, passive rental income
  • Mortgages and other loans
  • Private hedge funds
  • Precious metals
  • Limited partnerships
  • Commercial paper and notes
  • And many more

A broader selection of allowable investments in a self-directed IRA means informed consumers can develop a more eclectic portfolio that they control; the self-directed IRA allows them to respond to economic downturns or take advantage of opportunistic (and tax-advantaged) investments in a more nimble way than going through a conventional IRA custodian.

If you have had experience before with these kinds of investments outside of your retirement plan, a self-directed IRA could be a smart way to grow your savings more aggressively.

Who Should Open a Self-Directed IRA?

What is a Self Directed IRA?
If you are someone who understands certain markets and investments and perhaps is already investing in those as part of your retirement plan, consider applying what you know to this new investment strategy with a self-directed IRA.

People who open a self-directed IRA may:

  • Be an angel investor in a company
  • Purchase real estate or own rental property as an investment
  • Invest in certain commodities
  • Make unsecured personal loans to friends or certain relatives and earn tax-free interest on the loan

You can do all this within a self-directed IRA and enjoy the tax advantages of these plans.

Are you self-employed? You may open a self-directed SEP (simplified employee pension plan) IRA . Individuals can roll over the funds from a traditional IRA or an old 401(k) plan. You can even choose to keep your existing IRA account for stock and bond transactions and open a self-directed account for your other investments. And you can start with an initial investment of just a few thousand dollars.

The bottom line is you must want to make the investment decisions for your account or have a trusted advisor who’s knowledgeable about the options available for these accounts who will work with you.

How Do I Open a Self-Directed IRA?

Although you control your investment strategy, self-directed IRAs are administered by neutral third-party professionals, such as Next Generation Trust Services, who serve as custodians of the assets in these accounts. The custodians offer knowledge and insights to help you make informed decisions when you purchase, maintain, or sell your investments, and will ensure those transactions are properly expedited.
What is a Self Directed IRA?
Custodians of self-directed IRAs understand the special processes, documentation, and regulations these accounts are subject to, and handle all the necessary paperwork so that you invest safely and securely. When you open your account, ask about phone support for when questions arise and educational seminars for you and/or your advisor so that you receive the knowledge you need to control your self-directed IRA wisely.


Roth IRA versus a traditional IRA

Roth IRA versus a traditional IRA New YorkNot sure which IRA is right for you and your family? Deciding the benefits of a Roth IRA versus a traditional IRA? Well, if you’re looking for answers that compare a Roth IRA versus a traditional IRA, you’ve come to the right place. Click here to learn “What is a traditional IRA?

When comparing a Roth IRA versus a traditional IRA it’s important to understand that when money is first invested in a Roth IRA, it is federally taxed based on the tax bracket one currently inhabits. When money is taken out of the Roth IRA, however, funds up to the amount put into it are always federal-tax free, and often the entirety of the funds are free from federal taxes. That’s one of the biggest differences between a Roth IRA versus a traditional IRA – the funds are taxed going in but not when they are withdrawn. That’s why it’s important to consult with a retirement planning expert who can advise you the best tax implications for you based on your individual circumstances when considering the benefits of a Roth IRA versus a traditional IRA.


Roth IRA versus a traditional IRA New Jersey
A Roth IRA is an account or annuity set up in the United States solely for the benefit of you or your beneficiaries. It is an individual retirement arrangement. However, when comparing a Roth IRA versus a traditional IRA, it’s important to understand that a Roth IRA differs from traditional IRAs in that contributions are not deductible. For information on contributions and the limitations please refer to Chapter 2 of the Publication 590, Individual Retirement Arrangements.

To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is set up. A deemed IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA. To be eligible to contribute to a Roth IRA versus a traditional IRA, you must meet IRS designated income limits, which are adjusted periodically. For more information on current Roth income limitations please visit the IRS website at www.irs.gov.

If you satisfy the IRS regulated requirements (which include a five year holding period), qualified distributions are tax free. Additionally, you may take tax free and penalty free distributions of basis (the amount you originally contributed) at any time. Contributions can be made to your Roth IRA after you reach age 70½, and you can leave amounts in your Roth IRA as long as you live, as the Roth IRA is not subject to the Required Minimum Distribution rule.


Traditional IRA or Roth IRA

What is a Roth IRA?

When money is first invested in a Roth IRA, it is federally taxed based on the tax bracket one currently inhabits. When money is taken out of the Roth IRA, however, funds up to the amount put into it are always federal-tax free, and often the entirety of the funds are free from federal taxes.

Source: www.irs.gov

A Roth IRA is an account or annuity set up in the United States solely for the benefit of you or your beneficiaries. It is an individual retirement arrangement. However, it differs from traditional IRAs in that contributions are not deductible. For information on contributions and the limitations please refer to Chapter 2 of the Publication 590, Individual Retirement Arrangements.

To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is set up. A deemed IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA.

Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA. But, if you satisfy the requirements, qualified distributions (discussed later) are tax free. Contributions can be made to your Roth IRA after you reach age 70½ and you can leave amounts in your Roth IRA as long as you live.

Source: www.irs.gov

What is a SEP IRA ?

Source: IRS.gov

A SEP is a simplified employee pension plan. A SEP plan provides employers with a simplified method to make contributions toward their employees’ retirement and, if self-employed, their own retirement. Contributions are made directly to an Individual Retirement Account or Annuity (IRA) set up for each employee (a SEP-IRA). See Publication 560 for detailed SEP information for employers and employees.

Note: The IRS has a system of correction programs for sponsors of retirement plans, including SEPs, which are intended to satisfy Internal Revenue Code requirements but have not met the requirements for a period of time. This system, the Employee Plans Compliance Resolution System (EPCRS), permits employers to correct plan failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis.

How is a SEP established?

A SEP is established by adopting a SEP agreement and having eligible employees establish SEP-IRAs. There are three basic steps in setting up a SEP, all of which must be satisfied.

  • A formal written agreement must be executed. This written agreement may be satisfied by adopting an Internal Revenue Service (IRS) model SEP using Form 5305-SEP, Simplified Employee Pension – Individual Retirement Accounts Contribution Agreement. A prototype SEP that was approved by the IRS may also be used. Approved prototype SEPs are offered by banks, insurance companies, and other qualified financial institutions. Finally, an individually designed SEP may be adopted.
  • Each eligible employee must be given certain information about the SEP. If the SEP was established using the Form 5305-SEP, the information must include a copy of the Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. If a prototype SEP or individually designed SEP was used, similar information must be provided.
  • A SEP-IRA must be set up for each eligible employee. SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. The SEP-IRA is owned and controlled by the employee and the employer sends the SEP contributions to the financial institution where the SEP-IRA is maintained.

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Next Generation Trust Services
75 Livingston Avenue, 3rd Floor
Roseland, NJ 07068

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Phone Number (973) 533-1880
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