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Taking Care of Business

Taking Care of Business

Taking care of business means different things for different people. For more than 12 million Americans (10.1% of the U.S. population), according to the 2015 U.S. Bureau of Labor Statistics, taking care of business means being self-employed. Yes, setting one’s own hours and schedule can be terrific. And, for many people being self-employed can be its own reward; however, for those who eventually want to retire, it can also be challenging.

Flexibility and adaptability toward work are distinct characteristics that spill over into the self-employed’s attitude toward retirement planning. Almost 70% of respondents to a report by Transamerica Center for Retirement Studies (TCRS) and the Aegon Center for Longevity and Retirement (ACLR) envision a fluid transition into retirement. These individuals predict that they will either gradually slow down before they fully retire or continue to work occasionally through retirement, or just not retire at all. And, their reason for continuing to work in retirement is because they enjoy what they do and want to keep engaged.

While this mindset is great, it is also more important than ever for those who are self-employed to be prepared for self-retirement. And part of that preparation is saving, investing and planning for retirement. It’s critical for these individuals to ensure that the monies are there when, and if, they are ready to retire.

However, for many people who are self-employed this is not a reality. In fact, the majority of small business owners surveyed by BMO Wealth Management have less than $100,000 saved for retirement. Since many of these respondents don’t have a succession plan for when they are ready to retire, a few noted that they are hoping to turn the business itself into a retirement plan. A small number of respondents (8%) have over $500,000 saved for retirement, and an even smaller number (4%) have over $1 million.

Self-employed means self-retired

The self-employed have a much greater personal responsibility for funding their retirement compared to employed workers since they don’t have access to employer-sponsored retirement benefits. And, people who are self-employed tend to want to have control—over their work and their life. So it makes sense that they would want to decide for themselves how to prepare for retirement.

It’s relatively easy to be retirement ready. And, being a self-starter can help in establishing the tax-advantaged retirement plan that works best, whether it’s a traditional IRA, a Roth IRA, or a SEP.

Self-directed retirement plan

Savvy investors can also self-direct their retirement savings and include alternative investment options not allowed within typical retirement plans. For instance, self-directed IRAs can invest in real estate, mortgage, private hedge fund, precious metals, and many more non-publicly traded assets. For individuals who already know and understand nontraditional investments and like to control their investment decisions, self-direction can be a great way to build retirement wealth.

No matter what business you are in, Next Generation Trust Services professionals are available to answer questions about self-directed retirement plans and our transaction specialists ensure you are investing within IRS guidelines. Since we do not give investment advice, we strongly recommend you consult your trusted financial advisors about your investments and any tax implications they have for your unique situation. Contact us at (888) 857-8058 or, or read through our Starter Kits for more information or to open a new self-directed retirement account.


SEPs vs. IRAs: How They are Similar, How They are Different

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

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Small-Business Owners: Are You Planning Smartly for Business Continuity When you Retire?

sneaker-shopBusiness Ownership

Owning your own business is filled with rewards—and its share of stress and worries. For those who are running profitable businesses, there are as many things to consider in order to ensure a smooth hand-off of the business when it’s time to retire.

However, a study by MassMutual reveals that almost 40 percent of business owners don’t have a retirement income strategy, assuming that proceeds from selling their business will feather their retirement nests. This might not be the case, so small-business owners are wise to do some planning in advance.

Before you sit back and relax in your retirement years, here are some steps to take while you’re in business owner mode to protect you and your heirs.

Have your business appraised

Valuation is an important first step in determining what you might get for your company when you sell it. Hire an expert appraiser to ascertain what your business is worth; this information will also be important for you and your financial adviser(s) for estate and succession planning. Some online tools, such as the one from BizEquity, can give you an approximation as a planning starting point.

Plan for your business’ future after you leave

Unfortunately, retirement isn’t the only thing that can cause a change in business ownership; disability or death may also intervene. Planning for these scenarios is vital to the long-term health of the company you’ve worked so hard to build up. Who will step into leadership roles? How will that look? Two ways to do this are with buy-sell agreements and succession plans.

Buy-sell agreement

The MassMutual study showed that only 44 percent of business owners have buy-sell agreements that lay out contingency plans for retirement, disability, divorce, death, or personal bankruptcy (the issues that would cause business disruption for a small business). This legally binding contract is among company owners or between the owners and the company, and ensures business continuity if ownership changes. Buy-sell agreements can also be used for estate tax planning so be sure to consult your financial advisers about this important tool.

Having adequate insurance is also important to protect heirs during a buyout. The MassMutual Survey also found that only 52 percent of existing buy-sell agreements are funded with life insurance and only 5 percent are funded for a disability buyout.

Succession plan

This is all about transitioning ownership of the company (to your heirs or other internal stakeholders) during your lifetime or in the event of your death. It’s as much a human resource issue as it is a long-term financial strategy. Upon your death, your succession plan will make it easier for your family when your ownership intentions are clearly spelled out.

Build a robust retirement nest egg through self-direction

If you’re not only savvy about your area of enterprise but savvy about alternative asset investing as well, a self-directed SEP IRA can be a great way for you (and your employees) to build up retirement capital. All types of retirement plans may be self-directed (Traditional and Roth IRAs and even HSAs may be self-directed); you may also choose to offer a self-directed SIMPLE IRA to your employees, depending on your business goals.

These self-directed accounts allow individuals to include a broad array of nontraditional investments, such as real estate, precious metals, hedge funds, commodities and so much more—assets they already know and understand, and might be investing in outside of an existing IRA.

As part of your long-term business planning, you recommend you consult your tax or other financial adviser about setting up these retirement plans and determining if they’re right for you. At Next Generation Trust Services, we’re available to answer questions about the types of investments that may be included and help you get set up with ease. We have plenty of online tools available on our website, including a SEP IRA starter kit.

Get Our Free Whitepaper: the Secrets About Self-Directed Retirement Plans Your Broker Doesn’t Want You to Know!

Contact the helpful professionals at Next Generation Trust Services at (888) 857-8058 or today!

Love Your Work Lifestyle? Make Sure You Show Your Retirement Plan Some Love as Well.

Americans are taking the term “work/life balance” to heart and turning it on its head by freelancing or becoming their own boss. According to a new, landmark survey conducted by the independent research firm Edelman Berland and commissioned by Freelancers Union and Elance-oDesk, more than 53 million Americans (or 34 percent of the workforce) are doing freelance work.

This flexible work lifestyle has many tangible benefits such as: more control over where you work, when you work and the type of work that you do. However, being part of a contingent workforce means that the responsibility of building retirement savings is a contingency plan for which everyone needs to plan and take on a very active role.

Whether you are starting out in your career, self-employed or doing freelance work to bridge yourself to retirement, here are some solid ways to plan for your retirement.

Building retirement savings needs to be part of any work/life balance plan; no matter how flexible life is now, the future is unknown.

Alternative investment options—
A Valentine for self-directed retirement plans

For financially savvy investors who understand alternative investment options, a self-directed IRA can be a good way to build retirement wealth more aggressively. A self-directed retirement plan allows individuals to invest in nontraditional assets not allowed within typical retirement plans; these alternative assets include real estate, mortgages, unsecured loans, private hedge funds, precious metals, limited partnerships, commercial paper and notes and more to bolster their retirement efforts. Individuals who already know and understand these types of investment vehicles, and who want to make their own investment decisions, find a lot to love about self-direction.

At Next Generation, our professionals are available to answer questions about self-directed retirement plans and our transaction specialists ensure you are investing within IRS guidelines. Since we do not give investment advice, we strongly recommend you consult your trusted financial advisors about your investments and any tax implications they have for your unique situation.

For more information about self-directed SEP IRAs, SIMPLE IRAs or other types of self-directed retirement plans, contact Next Generation at (888) 857-8058 or, or click here to read through our Starter Kits.

A Self-Directed SEP IRA—A Great Way for Business Owners and Their Employees to Save for Retirement

SEP – Simplified Employee Pension

SEP stands for simplified employee pension; a SEP IRA is a truly simplified way for employers to make contributions towards their employees’ retirement. Self-employed individuals may open a SEP IRA to contribute to their retirement savings as well. If an employer decides to establish these retirement plans for workers, a SEP IRA (which is a Traditional IRA) must be set up for each employee and all employees must receive the same benefits (contribution percentage) under the plan. IRS Publication 560 has details about this or go to

Some simple but strictly held conditions of eligibility apply for SEP IRAs. Participating employees must be at least 21 years old, must have worked for the employer for a least three of the previous five years, and must have received at least $550 in compensation for the tax year (this will go up to $600 in 2015). Once those criteria are met, a formal written SEP agreement is executed and eligible employees are given relevant information about the plan. The employees control their accounts and the employer sends the contributions to the financial institution where the account is maintained. You can read more about setting up a SEP IRA here.

SEP IRA contributions

SEP IRA contributions are treated as part of a profit-sharing plan and employers may contribute up to 25 percent of the employee’s wages to his/her account (up to $52,000 in 2014 and $53,000 in 2015); the contribution amounts are flexible so they can change as seasonal cash flow or sales cycles fluctuate. Contribution limits for the self-employed are different and are based on net profit, so it’s a good idea to consult your accountant about this.

Contributions are deductible and will lower a taxpayer’s income tax liability in that contribution year. The funds are taxed at ordinary income tax rates when qualified withdrawals are taken after age 59 1/2 (as for Traditional IRAs).

Investing for Retirement in a SEP IRA

Funds in a SEP IRA may be invested in the same way as they are in the case of a Traditional or Roth IRA. In the case of a self-directed SEP IRA, those tax-advantaged funds could be growing more via the alternative assets allowed in self-directed retirement plans.

As with all self-directed retirement accounts, there are many more investment options available to owners of a SEP IRA. Many individuals already know and understand various alternative assets such as real estate, commodities, precious metals, and private placements—why not include them in a self-directed SEP IRA and build a more diverse retirement portfolio? Whether it’s the business owner/self-employed individual seeking to make alternative investments or savvy employees who might already be investing in these assets outside of their existing IRAs, there are more opportunities to build up retirement savings through self-direction.

To learn more or to get started with a SEP IRA for you and/or your employees, contact our self-directed IRA specialists at Next Generation Trust Services: (888) 857-8058 or


Read more about SEP IRAs here.

2014 Pension Plan Limitations Announced by IRS


In short, elective deferrals to 401(k) plans remain the same as in 2013 ($17,500 plus $5500 “catch-up” contributions for people age 50 and over). Traditional and Roth IRA contribution caps are $5500 (plus $1000 for the 50-plus group). However, for these IRAs, the modified adjusted gross income limits for contribution deductibility have changed.

For business owners or self-employed individuals with SEP IRAs, the deduction for contributions goes up to $52,000 (an increase of $1,000 over last year).

These limits—such as contribution limits, salary deferral limits, and taxable wage bases—are important considerations as you discuss your retirement goals with your advisor or are determining how to include nontraditional assets in your self-directed retirement plan. All the income and expenses relating to the assets flow in and out of the self-directed retirement plan, which owns the assets within it. If you have any questions regarding self-directed plans of any kind, check our website ( or contact us at or (888) 587-8058.


What is a SEP IRA? Are you Ready for One?

SEP stands for Simplified Employee Pension plan; this type of retirement plan allows self-employed individuals and small-business owners to make contributions toward their retirement and that of their employees (if applicable) with some excellent tax advantages. A separate account must be set up for each employee. These plans are typically offered in companies with 25 employees or less.

SEPs are considered “simplified” plans because they are not as complex in terms of reporting requirements as qualified plans (such as 401ks). Contributions are tax deductible, and the accounts earn tax-free income until that money is withdrawn. As with all types of retirement plans, a SEP IRA may be self-directed.

How to Determine if a SEP IRA is Right for You


A.    SEP IRAs have high contribution limits. A SEP IRA is a great option for self-employed business owners who want to contribute the highest amounts possible toward their retirement and qualify for the highest annual tax deductions. In 2013, the annual maximum contribution was $51,000 (beyond that, we get into 401k territory). This is far higher than the contribution limit allowed in a Traditional or Roth IRA.

B.    Any kind of employer (business entity) can establish a SEP—corporation, partnership, LLC, sole practitioner; for profit or nonprofit. There just needs to be one employee (in the case of a sole proprietorship, the employer and employee are the same person) and the minimum requirements are easy to meet: participants must be at least 21 years old, have worked for the business during three of the past five years, and have earned a minimum of $500 in compensation. Spouses and children of the business owner who are employed by the company and meet the requirements may also participate and open their own SEP IRAs.

C.    They allow small companies to offer a strong benefit. SEPs are popular with owners of small companies because they are easy to administer and allow them to offer some kind of matching program (if they choose to) on a small scale. Employers may contribute up to 25 percent of the employee’s total annual compensation, up to the allowed amount.

Depending on your personal or company financial picture, your financial or tax advisor can help you determine if a SEP IRA makes sense for you, and discuss the tax advantages to employers and employees of these plans.

Self-Directed SEP IRAs

If you are already investing in certain alternative assets outside of an existing IRA, you might want to open a self-directed SEP IRA.

With a self-directed SEP IRA the employee (or business owner, for his/her own account) directs the types of investments to be made. Like all self-directed retirement plans, a self-directed SEP IRA must be held and managed by a third-party administrator, who will execute the transactions for the account holder and administer all the paperwork, record-keeping, and filing correctly.

Self-directed SEP IRAs allow for a broad range of traditional and nontraditional investments to help savvy investors build more eclectic retirement portfolios—and in many cases, build retirement wealth more aggressively than with stocks, bonds, and mutual funds. Whether the participant is the business owner or employee, the SEP IRA provides an excellent vehicle for building retirement wealth through investments in alternative assets. These include real estate, commodities, hedge funds, precious metals, private placements, unsecured loans, and so much more.


To set up your self-directed SEP IRA, you must have a formally written SEP agreement on file (yes, even for yourself). This form is a Simplified Employee Pension-Individual Retirement Accounts Contribution Agreement, known by the IRS as Form 5305-SEP.

When setting up the SEP, the employer must give each eligible employee certain information about the plan (the IRS or financial institution will have those instructions). Finally, a distinct and separate account must be set up for each eligible employee. For solo entrepreneurs or practitioners who have no employees or are only setting up a SEP for themselves, there is just one SEP IRA to set up.


The professionals at Next Generation Trust Services can help you get started or answer any questions you have about these types of retirement plans. You can find all the forms you need to open a self-directed plan or to roll funds over from an existing account at:

Or give us a call at (888) 857-5058 to discuss your self-directed SEP IRA or other self-directed retirement plan needs.

How To Set Up A Self Directed IRA

Looking to estabish a Self Directed IRA, Self Directed Retirement Plan, or Real Estate IRA? Next Generation Trust Services, a self directed IRA administrator based out of Northern New Jersey, presents the basic steps to filling out the application paperwork to get your self-directed retirement account open! Control Your Future, Today!

What is a SEP IRA ?



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.