Due Diligence Best Practices on Precious Metals Held in a Self-Directed IRA

Due Diligence Best Practices on Precious Metals Held in a Self-Directed IRA

It seems fraud is everywhere these days; we’ve all gotten questionable email messages or have read news stories about employees embezzling or misusing corporate funds). Con artists are in no short supply and can be found in every industry, including financial services and wealth management. According to the Association of Certified Fraud Examiners (ACFE):

“In its broadest sense, the term fraud encompasses actions that are meant to deceive for financial or personal gain. It’s any intentional or deliberate act to deprive another of property or money by guile, deception or other unfair means.”

The ACFE sponsors International Fraud Awareness Week, which occurs this year during the week of November 14-20. The week is a global effort to minimize fraud’s impact on consumers by promoting anti-fraud awareness and education.

It isn’t only seniors being scammed by bad actors on the phone or internet; self-directed investors are also prey to fraudulent schemes that can wipe out their retirement savings. Precious metals—gold, silver, platinum, and palladium—are commodities that comprise a popular alternative asset class in self-directed IRAs, but these are among the investments that can expose uninformed investors to fraud. The Commodity Futures Trading Commission (CFTC) has a lot of valuable information about precious metals investments that all self-directed investors should heed.

Precious metals investment fraud

Anyone can invest in precious metals; most individuals with self-directed IRAs have their retirement plan purchase bullion bars or coins produced by government mints or private companies. Unlike other alternative assets, precious metals are tangible assets that must be held off-site in special third-party depositories (if you own metals in your IRA, you cannot store them in your home, for example).

Owners of self-directed retirement plans make all their own investment decisions and are responsible for conducting their full due diligence on any nontraditional investments they wish to include in their IRA. However, even the savviest of investors can fall for a fraudulent investment scheme.

As an administrator and custodian of self-directed IRAs, Next Generation shares the CFTC’s fraud warnings for investors who are including precious metals in their self-directed retirement plans:

Be on the alert for fraud!

You can contact the CFTC at 866.366.2382 or the National Futures Association to check a broker’s registration status, business background, and disciplinary history. If you suspect fraudulent activity or believe you have been defrauded, call the CFTC or file a tip or complaint.

Need more information? Contact us today.

Next Generation Trust Company Forms Educational Alliance with Purse Strings

Two Women-Owned Financial Services Companies Come Together to Offer Valuable Resources and Promote Women’s Financial Health

ROSELAND, N.J. (PRWEB) NOVEMBER 11, 2021

Jaime Raskulinecz, CEO of Next Generation Trust Company, announced that her firm has formed an educational alliance with Purse Strings LLC, a female-centric platform that provides financial resources for women. As a Purse Strings Approved™ Professional, Next Generation shares insights into self-directed retirement plans with the Purse Strings audience, comprised of women who are seeking resources and education to become financially independent. Both Next Generation and Purse Strings are woman-founded, woman-owned businesses committed to educating consumers about their financial options.

Next Generation is a custodian and administrator for self-directed retirement plans, designed for investors who wish to include alternative assets within a tax-advantaged retirement vehicle. Some of these investments might include real estate, private equity, private lending, partnerships, hedge funds, cryptocurrency and more. Purse Strings offers straightforward financial advice and an available-for-hire network of vetted insurance and financial services professionals who specialize in serving women.

“As a woman-owned business with a passion for empowering women in finance, we are excited to engage with the Purse Strings community. Our mission to help women control their financial futures aligns nicely with Purse Strings’ commitment to connect women in all stages of life with the right resources and financial professionals to help them succeed,” said Brittany Melville, Next Generation’s Director of Marketing and Sales.

Barbara Provost, founder of Purse Strings, added “We are a one-stop shop for female-centric financial knowledge, know-how, and professional resources. We’re available to any woman who wishes to design a fearless financial future that’s full of choices.”

Next Generation also offers educational webinars and articles on its blog about various aspects of self-direction as a retirement wealth-building strategy. Individuals may also schedule a complimentary educational session with Next Generation to find out more about self-directed IRAs and the many nontraditional investments these plans allow.

More information about self-directed retirement plans is available at https://www.NextGenerationTrust.com. To learn more about Purse Strings, visit https://pursestrings.co/.

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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. A custodian of self-directed retirement plans, it is a trust company chartered in South Dakota, with its sister firm, Next Generation Services, providing comprehensive account administration and transaction support 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. Contact: 888.857.8058 or NewAccounts@NextGenerationTrust.com.
For more information, visit https://www.NextGenerationTrust.com.

About Purse Strings
Founded in 2015 by Barbara Provost, Purse Strings provides resources and services to help prepare women to become more financially independent and master their relationship with money. The website offers free financial education resources, guidance, and support including events and a database of Purse Strings certified professionals that have been vetted, trained, and are committed to addressing the specific financial needs of women. The organization also provides training, insight, promotion, marketing, and an established certification for insurance and financial professionals, plus access to the Purse Strings member community as an established and trusted resource. More information is at https://pursestrings.co.

Financial Independence: It is Possible with a Self-Directed IRA

You’re in a rewarding career, you enjoy what you do, and you have a professional development path laid out… GREAT! But while working towards a promotion, more responsibility and a pay raise is only part of the picture for people in the early years of their careers. Working toward financial independence should be part of your life plan as well.

Jamila Souffrant, founder of the Journey to Launch podcast, Budget Bootcamp and the Money Launch Club, is not yet 40 years old, but she and her husband have unlocked saving and investing strategies that helped them save a significant amount of money in just two years.

We’ve written before about FIRE—Financial Independence, Retire Early. Souffrant counsels that her model is not so much about retiring early, but more about enjoying the flexibility that financial independence offers. She says that focusing on that first part of FIRE—the financial independence—led her and her husband to explore new ways to get smarter with their money. Having the option to not work for other people and the ability to explore entrepreneurial avenues of interest are among the benefits of that financial freedom. Her “Journey to Launch” program includes five steps on that path:

Souffrant also recommends getting a start on investing as early as possible. And with a self-directed IRA, you can become the captain of your own financial ship in more creative ways beyond simply investing in the stock market.

Put a self-directed IRA on your path to financial independence

Anyone can get started with a relatively small amount to fund a self-directed retirement plan—and you may already have the insights and know-how about investing in alternative assets, which is the foundation for building a more diverse (and potentially more powerful) retirement portfolio.

Perhaps your current job has provided you insights and experience in real estate, private equity, hedge funds, precious metals, cryptocurrency, or any of the myriad nontraditional investments allowed through self-direction. Or perhaps you are already investing in these assets outside your existing retirement plan, so you already know and understand how those investments work. If so, self-direction can be a way to fast-track your way to financial independence.

Be the captain of your financial ship

Self-direction enables individuals to take control of their financial futures by choosing their own investments of interest. Through alternative investing in a retirement account, these individuals also maintain a hedge against stock market volatility by investing in real estate, precious metals, private equity, notes/loans, cryptocurrency, and many more alternative assets. And a self-directed IRA is a tax-advantaged vehicle, so earnings grow either tax-deferred or tax-free (if using a Roth IRA). If you are a business owner, you may even be able to self-direct a workplace retirement plan, such as a 401(k)or other qualified plan.

While you may wish to work for decades more, why not consider ways to reach your financial goals on the earlier side of retirement age? If you have questions about self-direction as a wealth building strategy, the team at Next Generation is here to help.

Need more information? Contact us today.

Need a New Self-Directed IRA Custodian? Here’s Everything You Need to Know

From time to time, financial institutions close or terminate certain programs. In some instances, that may mean that an IRA custodian—the entity that is holding your retirement assets—is shutting down its business.

When that happens, the account owner must find a new custodian for purposes of transferring the IRA funds to a new “home,” or possibly face taking an early distribution.

While at a glance, taking an early distribution seems to be the easy choice, but depending on your age and the health of your account, you could be facing potentially steep consequences. If you are not at least 59½ years old, you are typically not eligible to take a distribution from your IRA without being penalized and having to pay taxes on the amount distributed. We strongly encourage you to consult a trusted tax advisor before electing to take an early distribution.

The other option is to find a new IRA custodian. If you were happy with your prior custodian and have to transfer your account to a new custodian, this may seem daunting. It is important to choose a custodian that prioritizes its clients, first and foremost, but there are several things to consider.

Shopping for a self-directed IRA custodian

Just as you take care to find the right accountant or financial planner, you want to make sure you are comfortable with your new IRA custodian. Investors with a self-directed IRA (or any type of self-directed account that allows alternative investments) require a firm with experience in these types of retirement plans and the many alternative assets they can hold. While the tax advantages associated with self-directed IRAs are the same as their “regular” counterparts, the investment options are far broader, enabling investors to build more diverse retirement portfolios.

When considering a new custodian, you should look for one that:

A company that provides both custodial and administrative services offers the ideal scenario, since that firm will manage all your account paperwork, generate all required statements, and handle required tax reporting with the IRS under one corporate umbrella. You’ll find this arrangement at Next Generation with our two sister companies- Next Generation Trust Company as custodian and Next Generation Services as administrator – working in tandem on behalf of our clients.

Transferring cash from like account to like account

Account owners will not incur IRS tax penalties when transferring cash from one IRA to another—from like account to like account. That means from Traditional IRA to Traditional IRA, Roth IRA to Roth IRA, and so on. The new custodian will ask for certain documentation to ensure the funds are coming from the same account type and that the funding amount is available to execute that transfer.

Note: Although a custodian that is closing its business will not (or should not) charge you any account closing or transfer fees, you may incur these if you are making the move for personal reasons. Be sure to thoroughly review the fee schedule so you are aware of this upfront.

In-kind asset transfers

If you are transferring public securities from a regular IRA at a brokerage to a self-directed IRA, some receiving custodians may require that those assets be liquidated before conducting the transfer. However, alternative assets can be transferred in-kind to from one self-directed IRA to another. These assets may include real estate, private equity, precious metals, cryptocurrency, or any of the other asset types that can be held in self-directed IRAs.

When transferring assets in kind, note that the new/receiving custodian will typically require additional documentation (including an updated asset value) depending on the asset type. The assets are then re-registered, with the assets vested in the name of the new self-directed IRA.

The new custodian will contact the resigning custodian, provide funding instructions to initiate the transfer, and follow up on required documentation (which includes a letter of resignation from the existing custodian). It’s also important that the account owner follow up with the current custodian to provide authorization and prevent any processing delays.

You’ll find more details about the steps required to execute an asset transfer between self-directed IRA custodians in this blog post. Of course, if you have questions about how to transfer cash and/or assets from your current IRA custodian to Next Generation, don’t hesitate to contact us at NewAccounts@NextGenerationTrust.com or 888.857.8058. As always, you can also schedule a complimentary educational session with one of our representatives if you’d like to discuss your unique situation.

How Can Women Leaving Corporate America Still Save for Retirement?

We’ve all been hearing about the Great Resignation (or the Big Quit), which was thought to be a result of the COVID-19 pandemic. Throughout 2020 and 2021, many Americans have confronted how they felt about their jobs, many deciding it was time to quit what was no longer satisfying and seek more fulfilling career paths—including self-employment/business ownership.

According to the Bureau of Labor & Statistics, there were nearly four million voluntary separations (quits) in July 2021.

For women specifically, this decision may have been motivated by family or childcare issues and homeschooling when classes were remote. Purse Strings has called this the “she-cession,” and shared that 1.8 million women left the workforce entirely. In September 2021, women who left the workforce outnumbered men by more than five to one (863,000 women compared to 168,000 men).

Further, Market Watch reported that a March 2021 U.S. Census Bureau population survey found that 80% of Americans who left the workforce since the start of the pandemic were women. Plus, a McKinsey study on women in the workplace reported that:

Goodbye Corporate America, Hello New Retirement Plan

Leaving behind the “golden handcuffs” of Corporate America can be a daunting decision for many women but when done, it opens the door to an exciting future with many options for taking more control.

Have you left, or considered leaving, a corporate position at a well-paying job with benefits such as a qualified retirement plan? If so, you may be well positioned to take time off and consider a shift that will bring meaningful personal and professional rewards.

If you decide to dabble in entrepreneurship, you will have many things to think about. That also means considering what to do with your workplace retirement plan—and as a self-employed person, thinking about a new retirement savings strategy. Here are a couple of tips we have if you’ve left the workforce or decided to go solo:

1 – Don’t abandon your retirement money! The funds left in your old employer-based 401(k), or other workplace retirement plan, are yours. Contact your former employer to find out about rolling over those funds into a new retirement plan. Depending on your age and financial situation, a rollover IRA can ensure the money in your old employer plan ends up in a new account for continued growth.

2 – Consider opening a self-directed retirement plan. If you’re now self-employed and launching a new business, you’re already a person who is comfortable being in the driver’s seat—making your own decisions about your future. A self-directed retirement plan could be a powerful option for your retirement savings strategy—especially if you know and understand certain alternative assets, which these plans can hold.

What is a self-directed retirement plan?
As the name implies, a self-directed plan is one in which the account owner makes all her own investment decisions. You can open the same types of plans that you could at any other financial institution, such as a Traditional/Roth IRA, SEP, SIMPLE, Solo 401(k), and even HSAs and ESAs.

As a self-directed investor, you are also responsible for conducting full due diligence on any investment, so being comfortable doing that research is important—or having the experience with investing in a certain asset class outside of your existing retirement plan already.

All income and expenses related to the assets flow through the retirement plan (such as management fees for an investment property, or the rental income derived from that asset; the loan amount to a borrower, and the repayment with interest).

What types of assets may I include?
A self-directed IRA or other retirement plan may include a broad array of alternative assets that cannot be held in a typical retirement account, which typically limit you to invest in publicly traded assets such as stocks, bonds, and mutual funds. Self-directed retirement accounts allow you to broaden your options and include things like real estate, precious metals, private equity/partnerships, notes and loans, cryptocurrency, and many more. The only alternative assets you cannot include in a self-directed account are life insurance and collectibles.

Why open a self-directed IRA?
Just as with a new business enterprise, your self-directed IRA and your retirement savings will benefit from your knowledge. Self-directed investors take advantage of what they already know to build a more diverse retirement portfolio and a hedge against stock market volatility. Self-direction also allows for increased control over investment returns, as these assets tend to be non-correlated with the stock market.

Where do I open a self-directed plan?
The account is opened with a self-directed retirement plan custodian/administrator, a firm that specializes in these types of plans. The administrator manages all the paperwork and mandatory filing, executes the transactions on behalf of the account (based on account owner’s instructions), and the custodian holds the assets. In many cases, the custodian/administrator are the same entity. The administrator also reviews transaction documents to ensure there is no risk for a prohibited transaction, which can endanger the account’s tax-advantaged status.

To all the women who’ve bid farewell to Corporate America, we support you! To those who are launching new businesses, we congratulate you. And to those who are shifting their retirement plans to a self-directed version, be sure to work with a custodian/administrator who offers ample client education, stellar customer service, and is available to answer your questions about this exciting strategy.

DON’T MESS WITH OUR IRAS! Let Your Representatives Know the New Rules on IRAs Would Hurt Ordinary Investors

There are major concerns with the proposals recently added to the Build Back Better Act regarding IRAs.

If this is the first you are hearing about this legislation, the U.S. Congress is considering a spending bill that covers many issues. Last week, text of the legislation was made public and concerning language in the tax section proposes changes to IRAs aimed at preventing mega-wealthy investors like Peter Thiel from using Roth IRAs to accumulate massive wealth tax-free. (A recent Forbes piece did a great job of explaining the potential impacts of this bill.)

These proposed changes include:

While the intention of these policies may be to target the ultra-wealthy, the reality is that, if passed, these proposals would hurt ordinary, hard-working investors the most.

We cannot allow this bill to pass as it currently stands. In the days since this language appeared, we have met with policymakers across the aisle to discuss the potentially catastrophic and unintended consequences of this bill, consulted with government affairs consultants, and built a coalition with others in the self-directed IRA space.

But we can’t do this on our own. Your representatives in the House and Senate need to hear from you about why these proposed changes will be harmful to you personally.

To help make your voice heard, we’ve made it easy to look up your representatives, as well as drafted a message you can use to contact them.

Let Your Representatives Know the New Rules on IRAs Would Hurt Ordinary Investors

You can find contact information for your House Representative and Senators here. 

If you would like to contact your representative—which is strongly encouraged—a sample message is below:

“I’m a constituent of Representative/Senator [Last name]. My name is ____ and my ZIP code is _____.

I’m calling today to express my concerns with some of the language recently added to the Build Back Better Act. The legislation includes two sections (Sections 138312 and 138314 of the House reconciliation bill) that will restrict my ability—and millions of middle-class Americans like me—from self-directing our IRAs into investments we believe in, like startups. 

I understand the goal is to prevent the mega-wealthy from using their IRAs to avoid paying taxes, but this language would impact all of us. I’m in the middle-class and have worked hard to invest money for my retirement. If this goes into law, not only might I be required to divest from these assets, but I may also be forced to take early distributions and be taxed heavily for doing so.

I cannot afford to lose these savings or be taxed on them just because the richest people in the U.S. have taken advantage of this. I’m asking my members of Congress to remove these sections from the Build Back Better Act that restrict or penalize IRA investments. 

PLEASE DON’T MESS WITH OUR IRAs.”

Please join us in demanding that these proposed new rules be removed from the final bill.

And believe us when we say that every single voice not only counts in this fight, but any single voice could be the one that makes the difference. So please don’t discount your potential impact here.

Next Generation – as always – will continue to advocate for individual investor choice.

September is National College Savings Month. Have You Considered Self-Directing an Education Savings Account?

With classes underway in colleges and universities across the country, families are reminded of the importance of saving for college, to make higher education available for their students. September is National College Savings Month, which puts researching college savings plans at the top of many families’ to-do lists.

According to Salle Mae’s report on how American families pay for college:

Completing the Free Application for Federal Student Aid (FAFSA) qualifies millions of students for scholarships, grants, work study programs and federal student loans every year. However, given the high cost of higher education and the many expenses related to attending college, an education savings account (ESA) is an excellent way to save for post-secondary education. Even better, an ESA can be self-directed, enabling the account owner to boost those savings by investing the funds into alternative assets.

ESA 101: what it is, who can open one, who benefits

Similar to a Roth IRA, contributions to an education savings account grow tax free and distributions are also tax free for qualified education expenses—if they do not exceed the beneficiary’s qualified education expenses. In other words, the funds must only be applied to qualified expenses (noted below).

When applying for financial aid for school, the assets held within a self-directed ESA are treated as those of the account owner (not the student).

Here are some ESA fast facts:

Investment flexibility

Unlike other college savings instruments, an education savings account allows for greater flexibility in terms of how the assets are invested. And that’s good news for individuals who prefer to self-direct their plans. Rather than being limited to investment options such as stocks, bonds, mutual funds or CDs, investors who are knowledgeable about certain nontraditional investments can include alternative assets like real estate, private equity, lending, cryptocurrency, precious metals and more.

The team at Next Generation can provide education about these and other self-directed ways to save, such as using self-directed IRAs for retirement and building generational wealth. You may schedule a complimentary educational session with us to learn more, or contact Next Generation directly via phone at 888.857.8058 or email at NewAccounts@NextGenerationTrust.com.

Protecting Seniors Against Investor Fraud

August 14 was National Financial Awareness Day and August 21 was National Senior Citizen Day, which was proclaimed in 1988 by President Ronald Reagan to recognize the achievements and services of our country’s more mature citizens throughout their lives. According to the U.S. census, more than 54 million seniors were living in the U.S. in 2019; that number is projected to grow to 95 million by 2060.

Seniors lose more than $3 billion annually to fraud; this heartbreaking statistic includes the retirement savings of millions of people a year. These are all good reasons to raise awareness of potential fraud among older adults especially, and among all investors in general.

The top financial fraud scams that target seniors are listed here, including those that use fake tech support, Medicare, and scared grandchildren ruses via phone, email, or text.

Beware investor fraud at any age

You know the saying, “It’s too good to be true?” That’s one way to recognize a potentially fraudulent investment opportunity. You can also visit Investor.gov (a website of the SEC), which has a wealth of information about how to avoid retirement fraud.

Individuals who invest in alternative assets through a self-directed IRA should be accustomed to doing their research and conducting full due diligence about their investments, and typically have experience with alternative investments. While they may already know these tips, some chief ways to avoid possible investor fraud are:

Fraud risk and self-directed IRAs

Baby boomers and Gen Xers who are approaching retirement age, or seniors who’ve continued working into their retirement years, cannot afford to become victims of senior fraud. Because of the broad array of alternative assets allowed through self-direction, and because self-directed investors make all their own investment decisions, it is increasingly important for senior investors to educate themselves on the risks.

As with any financial account you open, research the plan custodian that will hold the assets. How transparent is their transaction process? Are the forms for opening and funding a plan easy to follow? Is the team available by phone or email to answer your questions about self-directed investments?

The SEC and Next Generation Trust Company offer these tips for avoiding retirement fraud in self-directed IRAs:

If you fear that you or a loved one has been the victim of investor or senior fraud, contact the SEC Complaint Center.

To learn more about self-direction as a retirement wealth-building strategy, you can always get the information you need from Next Generation, where our team is here to answer your questions.

Need more information? Contact us today.

Using a Self-Directed IRA to Invest in a Broadway Show

Ah, the Great White Way – dazzling marquees, bright lights, the glamor of Broadway. With plans for theatrical productions to open again in New York City this fall, there will be new opportunities to become an investor in a Broadway play.

You need not use discretionary income to make this investment; if you have a self-directed IRA, you can include this and other entertainment assets within your retirement plan, and build a more diverse retirement portfolio while feeding your passion for plays.

Broadway musicals—with their elaborate sets, high rent, union employees and large casts—cost a lot of money to get off the ground. Playbill states that the average cost of a Broadway show was between $10 and $18 million in pre-COVID seasons. Think: development costs, running costs, and closing costs to finance. However, there is money to be made; according to an article on RIA Intel, the 2018-2019 Broadway season  grossed $1.8 billion and attendance reached 14.8 million, both all-time highs. The 2019-2020 season was cut short by the COVID-19 pandemic, completing 41 weeks, and even that curtailed box office grossed $1.4 billion.

Straight plays (non-musicals) are generally less expensive to produce. Off (and off-off) Broadway shows, which play in small theaters with smaller budgets in every way, are also much less expensive to mount and run. Either way, a long-running show plus solid ticket sales can equal strong ROI for investors over time.

How to invest in a Broadway show

Most shows are set up as an LLC or partnership, and the investors and producers are shareholders. You can invest in a private equity fund that invests in certain types of shows, or an investing group that finances multiple productions, which can mitigate risk for its investors/members.

You can also make a direct investment into the production, which usually means having a personal connection to the lead producer or one of the co-producers, as this is not typically an “open to the public” investment opportunity. Producers may only want accredited investors to come in, but the criteria and minimum investment vary from production to production.

Pulling back the curtain

With most Broadway shows, the investors are paid back before any funds are distributed to the producers—this is called recouping the investment, which occurs when weekly gross revenues generate income that exceeds weekly running costs. Once the initial capitalization is met, the show is recouped. There may be certain circumstances where the show keeps some funds in reserves for cash flow purposes.

Successful shows often yield licensing rights for touring companies, cast recordings, merchandise, and other possible ancillary revenue or investment opportunities. Think of all the shows that continue their Broadway runs while also having national and international tours, and you get the picture.

Like any investment, there is risk in theatrical productions and many shows do not recoup their original investment, but when the shows are hits, everyone wins. Therefore, as with any alternative asset within a self-directed retirement plan, the account holder should conduct full due diligence on the investment. It would be wise to research who is behind the show (producers, director, stars), as their past performance can be a strong indicator of future success; understand the source material or know the script enough to feel comfortable with it (and the investment); be a raving fan of the show; and be mindful of your risk tolerance.

At Next Generation, we’re here to help clients understand the many options and benefits of self-direction as a retirement and wealth building strategy— such as including theatrical productions as an alternative asset in their self-directed IRAs.

Need more information? Contact us today.