What is an Individual Retirement Account (IRA)?
An IRA is a personal account established at a financial institution that allows for an individual to save for retirement. Depending on the type of account established, an IRA may grow tax-free or grow tax-deferred. The type of investments your IRA are limited to offerings of the custodian.
What is an IRA Custodian?
A custodian holds your IRA investments for safekeeping and ensures that all IRS and government regulation are followed. The Bank of Commerce Trust Services, as a directed IRA custodian, executes investment directions from the IRA owner and performs the many custodial and administrative duties that are necessary to preserve the tax-deferred status of an IRA and otherwise administer the account and custody the assets.
What is a Self-Directed IRA?
Through a Self-Directed IRA, the owner of the account directs the custodian regarding all investment decisions. The Bank of Commerce Trust Services specifically serves as a directed IRA custodian with a Self-Directed IRA.
What are unique assets?
With a Self-Directed IRA you may invest in non-publicly traded assets also known as Unique Assets, which could include real estate, LLCs, privately-held companies, notes or mortgages. Special rules apply to Unique Assets and must be followed to avoid a penalty from the IRS.
Other Types of IRAs
- Traditional IRA
A Traditional IRA allows individuals to invest pre-tax income that grows tax- deferred until funds are withdrawn.
- Roth IRA
A Roth IRA allows individuals to invest after-tax income. Income and withdrawals are tax-free once the individual reaches the age of 59½
- SEP IRA
A Simplified Employee Pension (SEP) plan allows an employer or self- employed individual to establish a retirement plan that is immediately 100% vested and allows the IRA owner to direct the investments. The employer receives a tax deduction for contributions.
- Simple IRA
This plan can be used by small businesses to establish a retirement savings plan, directing pre-tax income toward investments that grow tax- deferred until funds are withdrawn. The IRA owner may contribute over $12,500 annually.
Nonbank products are not FDIC insured, are not a deposit and are not insured by any federal government agency.
Additionally, nonbank products are not guaranteed by the Bank and are subject to loss of principal
Most 401(K) accounts can be transferred to or rolled over to a Self-Directed IRA account. The account retains the tax benefits of the 401(K) and gives the plan owner more flexibility to facilitate and direct the investments. It's important to note that the rollover could impact the level of asset protection and removes the ability to borrow against the retirement account. We suggest that you review the pros and cons associated with a 401(K) rollover to ensure that it is right for you.