[00:00:01] Speaker A: You're listening to PTC point of view brought to you by preferred trust company, the preferred custodian for all alternative investments. We're here to provide retirement savers like you with the tools you need to succeed. Need a confidence boost when it comes to investing outside of the stock market? Do you want the power to build a tax sheltered nest egg that will last through your golden years? You've come to the right place. Turn up your speakers and turn off cruise control because we're taking you on the alternate route to investing with your IRA.
[00:00:41] Speaker B: Hi, I'm Carrie Cook, CEO of preferred Trust Company. And today I'm going to talk to you about how to fund your IRA. So there are three ways that we can fund our IRA. The first is through a rollover of an old 401K plan.
The second is to transfer funds from another qualified plan or IRA into your self directed IRA. And the third is to make contributions to your IRA, which you should be doing all the time anyways. So let's break these down a little further.
The first is the rollover of a 401 plan. The title here says it all, don't leave your hard earned money behind. I hear this a lot where individuals say, yeah, I used to have a 401K plan with my old employer from six years ago. Six years ago. Get that thing moved over. The reason why you would want to move that over are these reasons you can no longer contribute to that 401K plan. So why are you leaving it lingering out there? The second, administrative fees are typically higher to maintain that type of account after you've left your employer. So why pay the fees?
And your investment options are still limited to what the investment options were for that original plan, which is typically stocks, bonds and mutual funds. So why not roll that old 401K that virtually is doing nothing for you into a self directed IRA and get it earning potentially double digit returns.
The second is transferring funds. So in order to maximize your strategic plan for your portfolio, why not transfer either a portion or maybe all of an IRa that's virtually doing nothing for you? It could be sitting out there earning one 10th of 1% and really doing nothing. Why not maximize that and make that part of your alternative portfolio pulling? Maybe you're pulling some of it out of stocks, bonds and mutual funds, giving yourself that diversification. So here's how you would do that. If you have a traditional IRa right now, and a traditional ira is obviously just that, a traditional Ira or a sep ira or a simple Ira. If you have any of those three, you can transfer those funds into a traditional IRA. If you have a Roth IRa, you can transfer your Roth IRa funds into a Roth IRA.
If you have a Sep IRA, you can transfer traditional funds, Sep funds, and simple funds with an asterisk because you must have it for two years before you can transfer it into a sep IRA.
In a simple Ira, you can transfer your traditional Ira, your sep Ira, and your simple Ira. Now here's a big misconception. If I transfer my Ira to an IRa, I'm going to incur tax consequences.
That is absolutely not true. You will not incur any tax consequences unless for some unforeseen reason you decide to take it as a distribution to you. If you do that, one, you must prove to the incoming custodian that you took it as a distribution, and two, it must be rolled into another qualified plan within 60 days. So if you stay inside of those rules and regulations, you will not be taxed on that transfer. And here's the third option, making contributions.
Now we finally have some changes in 2023, which is super exciting. We haven't seen increases in two years. So we're finally going to receive some increases in 2023. So let's talk about 2023 because we are at the end of 2022 now. You can still make contributions in 2022 all the way through April 15 of next year.
So 2023. Let's focus on that for just a minute. $6,500 a year is what you can contribute to your traditional Iraq, to your Roth IRA.
If you're 50 years or older, you have a catch up clause of an additional thousand dollars, making your contribution limit $7,500 a year. Now, you might be asking yourself, Kerry, can I have a traditional and a Roth IRA, and can I contribute to both? The answer is yes. The reason why the answer is yes is because one falls under the tax deferred definition and the other falls under the tax free definition. So one is pre tax, one is post tax. So you can make contributions to both. And in fact, I would go as far as saying you should. You should. This is your retirement account. Put as much money away as you possibly can for your future. Now, let's talk about a sep Ira.
The SeP IRA is intended to be for a small or sole business owner. That business owner can contribute 25% of their compensation or $66,000, whichever is greater. I think it actually says whichever is lesser. But let's be honest, what a huge increase over a traditional or a Roth contribution. So if you are a sole or very small business owner and want to elect to have a SeP IRA, know that these contribution limits are out there and available to you and could reduce the income of your business, therefore decrease the potential taxes that you're paying. So please look into this. Ask your cpas and your tax professionals about this. And then we have the simple IRA. The Simple IRA is intended truly for small business owners that maybe can't afford to establish a 401k plan, but want to provide their employees with an option of investing in their retirement future.
A simple plan. Each individual who's part of that simple plan can contribute up to $15,500 a year.
If you are over the age of 50, there's a $3,500 catch up clause here making it $19,000 that you can contribute to those plans. Now, don't forget, you can still make that contribution in 2022, all the way through April 15. So maybe it's time to make a contribution for both years as this new year rolls around and double your contribution that you're making to yourself, to your future and to your retirement plan.
Also, don't forget that you can set up reoccurring contributions.
Reoccurring contributions will be pulled from your, your bank account and applied to your IRA of choice, whether that's your traditional or your Roth, each and every month. If you want to set that up, there's no additional cost to do that at preferred trust. So why not give yourself a gift every single month in preparation of your retirement?
Thank you so much for joining us today. If you have any questions specific to how you fund your IRA, please reach out to us and we'll help you through the process. Thank you.
[00:09:17] Speaker A: Thanks for joining us for another episode of PTC Point of View, where retirement savers meet alternative investments. Know someone who's struggling with a retirement strategy? Tell them about our show. Can't wait for the next episode? To learn more or visit our
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