Show Your Retirement Portfolio Some Love this Year

Whether you’ll be staring adoringly into your partner’s eyes on Valentine’s Day or celebrating with a Galentine’s/Malentine’s Day get-together with friends, February is the month of love and friendship—and your retirement plan also deserves some special attention.

The first way to give your retirement plan a loving boost is to open a self-directed IRA. Why a self-directed plan? Two words: alternative assets. And those non-publicly traded, alternative assets provide you with many ways to diversify your retirement portfolio with an array of investments you may already be “engaged” with outside of a retirement plan. In most IRAs held with a brokerage, those alternative investment options are not always available to you. Hence, the self-directed IRA.

Sure, you may love playing the stock market and enjoy the thrill ride of that roller coaster by way of its volatility. However, as a self-directed investor there’s no reason to limit your investing to stocks, bonds and mutual funds. In fact, most advisors may actually encourage diversification and alternative investing to allow you added control over your investment returns while providing a hedge against that volatility. Investment options include real estate, private equity, notes and loans, social causes, cryptocurrency, precious metals and more.

What do you already love?

Think about the investments you already know and understand—the ones you already love investing in, like real estate, precious metals, or private equity. As explained before, the list of possible investments through self-direction is long and enables individuals to take advantage of market opportunities and apply what they know to their tax-advantaged retirement account. For example:

• If you’re already doing fix & flip real estate investing, you can do so through your self-directed IRA.
• A friend is starting up a company and needs angel investors; your self-directed retirement plan can make that early-stage investment.
• You enjoy investing in energy-related assets like oil and gas; you can do so through your self-directed retirement plan.

Many types of retirement plans can be self-directed—a Traditional or Roth IRA, SIMPLE or SEP IRA, or solo 401(k), even health savings accounts (HSAs) and education savings accounts (ESAs). Depending on your goals and situation, you have plenty of options in terms of the type of plan to open. That flexibility may come in handy when you do retire and want a combination of tax-free and tax-deferred income, for example, or if you are self-employed or own a small business with employees.

Here’s more to love: opening a new self-directed IRA is easy and you can fund the new account the same way as you would any other plan—with a transfer from a like account, a rollover, or a personal contribution. At Next Generation, we simplify the process with our electronic starter kits that walk you through every step from opening the account through sending your instructions to our transaction specialists. As a third-party administrator and custodian of self-directed IRAs and other plans, we will review and execute investment transactions, custody asset(s) for our clients, provide recordkeeping and complete all necessary tax reporting.

If you are comfortable making your own investment decisions and conducting your full due diligence on the investments you wish to include, we invite you to learn more about this retirement strategy by scheduling a complimentary education session with one of our knowledgeable representatives. You may also contact our team directly via phone at 888-857-8058 or via email at NewAccounts@NextGenerationTrust.com.

What’s Your Retirement Planning Strategy?

If you’re a younger worker, it’s easy to think you have your whole life ahead of you to plan for retirement. And if you are nearing retirement, you may think you’ve got it covered through your employer’s retirement plan or other means. But with so much uncertainty swirling around us right now and with the cost of living rising, a proactive approach to your retirement planning strategy is always wise.

Plan ahead to be less dependent on Social Security or someone else’s bank account. Many older adults may feel that Social Security benefits will keep them financially secure or their adult children will help them out. But with real concerns about the Social Security Trust Fund’s sustainability and Generations X and Y facing their own savings issues, there are no givens. Besides, Social Security was meant to be a supplement to retirement income, not a main source of income.

Plan ahead for how (or if) the sale of your home will fund your lifestyle. Those who own a home may feel confident about living off the proceeds of the home’s sale, especially if the house is paid off already—but a lingering mortgage cuts into proceeds, capital gains may be a factor to consider, and if you’re thinking of moving into a retirement community, the rents can be quite high.

Plan ahead for possible early retirement. The pandemic has wreaked havoc on employers nationwide. Businesses are closing or tightening their financial belts in response to market conditions; extended furloughs may become permanent, and this may motivate some people to consider an early retirement.

Plan ahead for a smaller pension plan. Part of the corporate belt tightening has been the steady disappearance of traditional pension plans. Plus, many pension plans are in distress and may have to reduce distribution levels due to various factors such as poor ROI on investments, lower participant rates, and economic factors brought on by COVID-19.

Plan ahead for “I’m that old already?!” When getting our careers in gear, many of us think we have “forever” to get started on saving for retirement. Then suddenly, 20 years have passed and that time horizon for putting money away is much shorter.

Plan ahead for retirement through self-direction

Self-directed retirement plans offer an alternative strategy to traditional investing, by including non-traditional assets that brokerage accounts do not allow. For seasoned investors who are comfortable making their own investment decisions and are confident about conducting their own full due diligence on those investments, a self-directed IRA can be a great way to build retirement income with a powerful hedge against stock market volatility. Self-directed IRAs also allow for retirement portfolio diversification and greater control over your investment returns.

If you have an employer-sponsored plan, it is likely limited to stocks, bonds and mutual funds that are susceptible to the ups and downs of the market. You may also have an IRA (or brokerage account) that offers a “self-directed” option; however, it is not truly self-directed. The true definition of a self-directed IRA is a tax-advantaged retirement account that allows you to invest in non-publicly traded assets. These non-publicly traded assets, also known as alternative assets, can include real estate, private equity, social/impact investments, cryptocurrency, notes/loans, and more.

As a custodian and administrator for these self-directed retirement plans, the team at Next Generation is here to help. You can schedule a complimentary educational session to learn more about self-direction; or you may contact the Next Generation team directly via phone at 888.857.8058 or email at NewAccounts@NextGenerationTrust.com.

It’s a New Year – Do You Have a New Outlook on Your Retirement?

The new year often brings promises and resolutions to create new habits, get back to something we enjoy, or try something new. Why not apply the “new year, new you” mindset to your retirement planning as well?

Do any of these scenarios sound like you?

• You’ve been inattentive in the past when it came to contributing to your retirement plan on a regular basis. Now you might be falling behind on your retirement savings goals.
• As a younger millennial, you’ve been thinking you don’t need to open an IRA yet, but you have some cash sitting in a 401(k) from a previous employer.
• You are semi-retired and are looking around for a side gig to stay busy, but you don’t need the money for living expenses.
• You enjoy investing in alternative assets outside of your existing retirement plan and are curious about how you could make those nontraditional investments through a tax-advantaged retirement account.

Get a new plan for your retirement in the new year with a self-directed IRA

Self-directed investors are those who are comfortable making their own investment decisions (that’s where the “self-directed” part comes into play), and who are knowledgeable about (and often experienced in) investing in various alternative assets. For example, you:

1. Already invest in real estate (residential, commercial, industrial, raw land, etc.)
2. Understand how to make a secured or unsecured loan with interest and terms
3. Are involved in private equity funding
4. Trade in agricultural or energy commodities
5. Buy and sell cryptocurrency
6. Are passionate about investing in social causes

The list goes on and is as diverse as the investors who self-directed their retirement plans.

Open a new self-directed IRA at Next Generation

Whether you’re just starting out with your self-directed IRA or have one that needs some catchup contributions, Next Generation is here to help. As a self-directed retirement plan custodian and administrator, we work with investors who wish to include alternative assets in their self-directed IRAs. Our clients understand that this strategy enables them to diversify their retirement portfolios with investments they already know and understand, while also providing a hedge against stock market volatility and the same tax advantages as regular retirement plans.

The turn of the calendar page is a great time to consider opening a new self-directed retirement account and start putting your investing expertise to work through a tax-advantaged plan. We offer client education through webinars, on our blog, and  complimentary education sessions to help you evaluate if self-direction is the right direction for your retirement goals. If you have a specific question or want to know more, you may also contact the Next Generation team by phone at 888.857.8058 or by email at NewAccounts@NextGenerationTrust.com.

Has the COVID-19 Pandemic Affected Business Owners and Retirement Readiness?

COVID-19 has affected the American economy across a number of sectors and business owners nationwide are feeling the effects. Last month, TD Wealth released the results of a survey conducted in July among 1,296 business owners and individuals in two groups: high-net-worth business owners and individuals with investable assets of more than $500,000, and mass affluent business owners and individuals with investable assets between $100,000 and $499,000. The survey was about the pandemic’s impact on revenue and how or if that affected their retirement planning.

• The majority of respondents in both groups (67% and 73% respectively) said they were concerned about achieving their financial goals due to economic or political uncertainly.
• Among all business owners surveyed:
  • Eighty-seven percent said their revenue had been affected by the pandemic,
  • Forty-seven percent said they reduced their operations,
  • Twenty-five percent experienced temporary or permanent closures.

However, 85% of respondents said they had not altered their retirement planning in spite of the pandemic’s negative economic effects on their businesses. Further, it appears they feel retirement-ready:

• Of those with a long-term investment plan, 94% said they were somewhat confident of achieving their financial goals.
• Among the high-net-worth respondents, 94% expressed confidence about their financial plan generating the income they would need in retirement.
• In the mass affluent group, 82% said they were somewhat confident about having the retirement income they’d need from their financial plans.

The TD Wealth survey also showed that together, retirement savings and investment portfolios comprised more than half of the retirement income across all survey respondents.

Get Retirement Ready with Self-Directed Retirement Plans

Savvy business owners already know a lot about running their businesses and are already comfortable making decisions that affect their operations every day. They could be building a diverse retirement portfolio with a range of alternative assets they also know a lot about—and make their own investment decisions regarding those assets—with a self-directed retirement plan.

Business owners may open several types of self-directed retirement plans based on their business situations, with all having the same benefits as their traditional counterparts but with added advantages—the ability to include nontraditional investments they already know and understand, and create a hedge against stock market volatility.

SEP IRA: SEP stands for Simplified Employee Pension plan; it’s an easy, flexible, option if you are self-employed, or a partner or owner of a corporation with 25 or fewer employees.

SIMPLE IRA: For larger companies of up to 100 employees, the Savings Incentive Match Plan for Employees enables employers to make contributions towards their retirement as well as their employees’ retirement.

Solo 401k: The individual/solo 401(k) is for sole proprietors who employ only themselves, their spouse, or partners. It has deduction and contribution benefits similar to a regular 401(k).

At Next Generation, we offer free education to help individuals make informed decisions about which type of self-directed retirement plan to open—including Traditional and Roth IRAs as well as health savings accounts (HSAs) and education savings accounts (ESAs). We always recommend you speak to a trusted financial or tax advisor who knows your specific financial situation to determine if, as a business owner, a SEP IRA, SIMPLE IRA, or Solo(k) will be the plan to help you meet your financial goals.

Once you decide which type of account to open, we make it easy with our starter kits and detailed instructions for funding a new account. As a self-directed investor the rest is up to you—selecting and researching the alternative assets you wish to include, conducting your full due diligence on each investment, and then providing Next Generation with instructions to execute the transaction.

If you are interested in learning more about self-direction as a retirement strategy, please sign up for a complimentary educational session with one of our representatives. Alternatively, you may contact our team directly via phone at 1.888.857.8058 or email NewAccounts@NextGenerationTrust.com.

The Answer to the DOL’s Final Rule on Environmental, Social and Governance (ESG) Investments

The Department of Labor (DOL) has issued a final rule, “Financial Factors in Selecting Plan Investments,” concerning environmental, social and governance (ESG) funds in private employer-sponsored retirement plans, such as 401(k)s. While the final rule does not prohibit these investing choices for workplace retirement plans, its goal is to provide clear regulatory guidelines for ERISA plan fiduciaries, with the suggestion that ESG investing conflicts with their fiduciary responsibilities.

ESG investments advance positive social change such as improving the environment or promoting human rights. According to the DOL, decisions about these investments are not primarily pecuniary (in other words, determined and expected to be in the plan participants’ best financial interests, with a material effect on the risk and return), so plan fiduciaries may be cautious about recommending or including them in the workplace plans.

According to DOL Secretary Eugene Scalia, rather than further social goals or policy objectives, “This rule will ensure that retirement plan fiduciaries are focused on the financial interests of plan participants and beneficiaries, rather than on other, non-pecuniary goals or policy objectives.”

Therefore, employees who are saving for retirement through a 401(k) or other workplace plan may now experience some roadblocks when it comes to including ESG funds or individual investments in their retirement plans.

ESG investments can be held in self-directed IRAs as an alternative
Self-directed IRAs allow individual investors to embrace social investing and include alternative assets that align not only with their financial goals but their values as well. For example, the self-directed IRA can invest in funds and initiatives that combat climate change, nefarious labor practices, or human trafficking; or support green energy, fair trade cooperatives, and other investments that address inequities in the economic landscape, promote sustainability, and support positive governance practices.

With a self-directed IRA, investors have access to the same types of account types as they would with a brokerage firm, such as a Traditional IRA, Roth IRA, SEP IRA, or even a Solo 401(k).  Individuals with these retirement plans can include a broad array of non-publicly traded alternative assets in addition to ESG-related assets, such as real estate, private equity, hedge funds, precious metals, private lending and more.

It is unclear whether there will be a lot of pushback about this final rule or how it may be amended in the future. However, for investors who want to proactive take control of their financial futures, opening a self-directed retirement plan is a great step forward. At Next Generation, we invite you to schedule a complimentary educational session to learn more about self-direction as a retirement strategy.

Alternatively, you may contact us directly via phone at 888.857.8058 or email at NewAccounts@NextGenerationTrust.com.

Has the Pandemic Affected Your Retirement Confidence?

The Transamerica Center for Retirement Studies issued its 20^th annual survey of retirees last month, titled “Retirees and Retirement Amid COVID-19.” The report focuses on financial stability and readiness in retirement amid the pandemic. Findings are based on a survey done in November/December 2019 and again in June 2020; it polled people 50+ years of age who consider themselves fully or semi-retired, and who worked for a for-profit company for the majority of their careers.

The study reported that among those retirees surveyed:

• The majority (76%) stated their confidence in being able to maintain a comfortable lifestyle has not been altered by the pandemic. Among that group, 29% are “very confident” and 47% are “somewhat confident.”
• A smaller group, 15%, cited a decline in confidence in light of COVID-19 while 4% reported increased confidence in financial stability.
• Social Security will be/is the primary source of income for 69% of respondents, but 40% have other savings and investments (such as checking and savings accounts, retirement plans, credit cards).
• Approximately 35% of retirees said they expect income streams from IRAs and workplace retirement plans with another 30% of retirees saying they have company-funded pension plans.

However, eating into the financial security for nearly half of those surveyed is household debt (student loans, car loans, credit cards, medical bills) and nearly a quarter of respondents are paying off mortgages.

Even though many retirees are not feeling shaken financially by COVID-19’s economic ramifications, Transamerica noted that relatively few were “very confident” before the pandemic. The study concluded that many retirees are in danger of outliving their financial resources or lack income to cover healthcare expenses or pay for long-term care. Another sobering revelation: the lack of a financial strategy for retirement. Of those who said they have a plan (58%), only 18% have it in writing. That leaves 42% without a financial strategy amid the pandemic.

Self-directed retirement plans—an effective financial strategy at any time
Self-directed IRAs are ideal for investors who are confident in making all of their own investment decisions, and those who may already be investing in alternative assets outside of a retirement plan. Whether you are in your early- or mid-career phase, nearing retirement, or already retired, you have the option to use the many different nontraditional investments allowed through self-direction to build retirement wealth.

Self-directed IRAs enable investors to include a wide range of non-publicly traded alternative assets that typical plans do not allow, such as real estate, private equity, social causes, precious metals, secured and unsecured loans, and many more. In short, while the pandemic and politics can create instability in the stock market, self-directed IRAs provide a valuable hedge against that volatility, with a more diverse retirement portfolio and better control on investment returns.

If you’re thinking of diversifying the investments in your retirement plan, are comfortable conducting your own due diligence and research about those investments, Next Generation has the tools you need to get started. Please considering registering for a complimentary educational session. Alternatively, you may also contact our team directly via phone at 888.857.8058 or email at NewAccounts@NextGenerationTrust.com.

Further Expansions to “Accredited Investor” Definition

Last month, the Securities and Exchange Commission amended its “accredited investor” definition that goes beyond income and net worth criteria; the expanded definition allows investors to qualify based on defined measures of professional knowledge, experience, or certifications. There is also an expanded list of entities that may qualify as an accredited investor, including tribal governments, family offices and certain other organizations.

This status allows individuals to participate in private placements—equity investments such as those allowed in self-directed IRAs. This amendment to the final rule aligns with self-directed investing in another way—using an investor’s knowledge or experience as a basis for participating in investment opportunities. Self-directed investors make their own investment decisions about the alternative assets they wish to include in their retirement plan, based on what they have researched, know, and understand—decisions not based solely on wealth.

The SEC’s previous rule used income or net worth as factors of financial sophistication—individuals had to meet the test of a net worth of at least $1 million excluding the value of primary residence, or income of at least $200,000 each year for the last two years (or $300,000 combined income if married). The amended rule goes beyond wealth as the criterion for purposes of the accredited investor definition.

What the amendments include
The amendments revise Rule 501(a), Rule 215, and Rule 144A of the Securities Act to:

• Include as accredited investors, with respect to investments in a private fund, natural persons who are “knowledgeable employees” of the fund
• Clarify that limited liability companies with $5 million in assets may be accredited investors
• Add SEC- and state-registered investment advisers, exempt reporting advisers and rural business investment companies (RBICs)
• Add a new category for any entity, including Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries
• Add family offices with at least $5 million in assets under management and their “family clients,” as each term is defined under the Investment Advisers Act
• Add the term “spousal equivalent” so that spousal equivalents may pool their finances for the purpose of qualifying as accredited investors

Self-directed IRAs for investors of all kinds
Several years ago, the SEC implemented the JOBS Act in full, which opened up equity crowdfunding platforms to even more individuals, including nonaccredited investors who did not meet the income/net worth tests but wanted to take advantage of equity funding opportunities. For those who want to be angel investors in an early-stage company and/or wish to participate in equity crowdfunding platforms, a self-directed IRA is a valuable vehicle for making these types of investments. The flexibility of these retirement plans and the many non-publicly traded, alternative assets, they allow offer a great way to build a diverse retirement portfolio—and a hedge against stock market volatility with potential to earn greater returns.

At Next Generation, we’re here to help our clients understand the many options available to them as self-directed investors. If you’re wondering what types of investments you can include in a self-directed retirement plan, or have questions about how private equity/private placements can be part of your self-directed portfolio, you can sign up for a complimentary education session to learn more about this retirement wealth-building strategy. You may also contact our team directly with questions, via phone at 888.857.8058 or via email at NewAccounts@NextGenerationTrust.com.

Has Your Work Situation Changed? You Can Roll Your 401(k) Funds into a Self-Directed IRA

Do you have a retirement plan that is still with an employer where you are no longer working? If you have recently lost a job due to COVID-19, or are in job transition, make sure you don’t leave your old 401(k) plan behind. If yours is still with a previous employer, you can rescue those funds and roll them over into a self-directed IRA.

Right now, it’s unclear for many workers if or when there will be a new employer with a new workplace retirement plan. However, one thing is clear: opening an IRA (Roth or Traditional) is an option that enables individuals to make sure their retirement savings stay with them. Moreover, if that new retirement plan is self-directed, there is a much wider range of potential investment options available that account holders—not their employers—control.

Rollovers into self-directed IRAs

Since most 401(k) plans are limited in terms of allowable investments, rescuing and rolling over those funds into a self-directed IRA opens up the door to greater investment opportunity, without the limits imposed by most plan sponsors on the defined contribution plans they offer. As you may know from your existing 401(k), most of those plans are limited to investing in mutual funds or exchange traded funds, stocks, and bonds. Opening a new self-directed IRA will enable you to include an array of alternative assets that you may already know and understand, such as real estate, private equity, precious metals, hedge funds, secured and unsecured notes/loans, energy investments, and more.

Through self-direction, you’ll build a more diverse retirement portfolio, create a hedge against stock market volatility, and gain better control over your investment returns as part of your retirement strategy. You’ll also have the flexibility of buying and selling your investments when you choose, rather than according to a prescribed schedule that most 401(k) plans follow.

You can choose to do a rollover into a new Roth or Traditional IRA, or a SIMPLE or SEP IRA, depending on your employment status, overall tax situation and how far out you are from retirement. As always, we recommend you discuss your unique scenario with a trusted advisor. You may also have to check with the current plan administrator to see if there are any restrictions concerning the type of IRA allowed for a rollover from the existing 401(k).

How to roll funds over into a self-directed IRA

At Next Generation, our comprehensive starter kits walk you through all the steps needed and required documentation to submit in order to open a new self-directed retirement plan with us, and include a rollover form for Traditional, Roth, SEP, or SIMPLE IRAs (we have starter kits for other types of plans as well). Moreover, our helpful team of professionals are available to answer questions about opening a self-directed IRA or about the many types of non-publicly traded, alternative assets, these plans allow. You may schedule a complimentary education session; or you may contact Next Generation by phone at 888.857.8058 or by email at NewAccounts@NextGenerationTrust.com.

Social Investing Through a Self-Directed IRA

Self-directed investors are avoiding the stock market roller coaster by investing in non-publicly traded, alternative assets, through their self-directed IRAs. These retirement plans offer the same tax advantages as regular IRAs, but allow for a broader array of nontraditional investments that traditional brokerage accounts do not. This also enables individuals to build retirement wealth through investments that reflect their personal interest or, in other cases, their ethics. One such class of nontraditional investments is social investing, also called sustainable investing or impact investing.

Examples of social investing are assets that fit into the broader category of environmental, social, and corporate governance (ESG); they foster positive social change, social justice, and protect the environment. Investors are discovering ways to invest in causes that are meaningful to them; these may be renewable energy options that reduce carbon footprint, shares in cooperative farms that lift people out of poverty, or funds that include corporations with excellent employee relations or human rights records.

As with any self-directed investment, social investing means taking the time to research and conduct one’s due diligence. Investors who want to make a difference through their retirement plan can look for ways to support sustainable or impact investing projects, or funds that are managed in a socially responsible way. Maybe you know of a startup that’s bringing clean energy projects to market or clean water to remote villages; or perhaps you want to invest in a minority-led company as a way to diversify your retirement portfolio—and support economic diversity.

Once you’ve done your research and selected sustainable investments to include in your retirement plan, Next Generation—as the self-directed IRA custodian and administrator—will first conduct an administrative review of the asset documents to ensure it meets internal guidelines for self-directed retirement plans. We will then process your transaction based on your instructions, hold the assets, and manage all the paperwork and mandatory filing associated with the investment (mandatory IRS filings of 5498s, or Fair Market Value and 1099s if required).

If you have questions about self-direction as a retirement strategy, or about the many other nontraditional investments these retirement plans allow, you may schedule a complimentary educational session with one of our knowledgeable representatives. You can read more about various types of alternative assets these plans allow here; or contact us directly via email at NewAccounts@NextGenerationTrust.com or call 888.857.8058.