Trust and Entrust Your IRA
Henry Clibborn- IRAs are a popular way for Americans to save for retirement.
- They allow individuals to invest money, and any gains are tax-deferred.
- A traditional IRA allows individuals to defer taxes on their earnings until funds are withdrawn.
- Roth IRAs allow individuals to pay taxes upfront and withdrawals in retirement are tax-free.
If you are nearing retirement or have already retired from work, you may be thinking about your IRA. The IRA is a retirement account that is available to individuals under the age of 701/2.
As you begin to think about what your IRA can do for you, you would do well to consider both what you, as the IRA owner, should want to do as well as what you should consider doing for your IRA.
What Is an IRA?
An Individual Retirement Account (IRA) is a personal retirement savings account that provides tax-deferred growth.
IRAs offer several advantages:
You can contribute to an IRA regardless of your annual income.
You can contribute up to $6,000 in 2019 ($7,000 if you're 50 or older), or $7,000 if you're married and file a joint return (and $1,000 if you're married and file a separate return). These amounts are known as the "annual contribution limit."
You are allowed to contribute up to 100% of your compensation, up to the annual contribution limit, if your employer offers such a plan.
You can take tax-free distributions from your IRA after you turn 591⁄2. Distributions before age 591⁄2 are subject to ordinary income taxes and an additional 10% tax.
Trusts and IRAs
Investors often use trusts to hold assets, such as retirement accounts. However, trusts are complicated and sometimes lasting arrangements. Investors often set up trusts with family members, friends, or lawyers. Trusts can be used for a variety of purposes including:
Holding property
Administering an estate
Protecting assets against creditors
For investors, trusts provide the flexibility to hold assets outside of the estate. This allows investors to avoid probate. Investors can also set up trusts for beneficiaries that are minors or children. Trusts allow investors to protect their beneficiaries from themselves.
A person setting up a trust is called the settlor. The beneficiary is the person or entity named in the trust. The trust property belongs to the beneficiaries, and the trustees are responsible for administering the trust.
Entrust Your IRA
Entrust Your IRA is a custodial provider (IRA custodian) that is best known for its low-cost ETFs.
Entrust's ETF lineup includes 56 funds, with 43 of them being commission-free. Notably, Entrust is the only custodial provider that has a commission-free ETF lineup. Entrust also offers tools, such as Envestnet Advisor Services and Entrust Portfolio Analytics, to help advisors track, monitor, and manage their investors' portfolios.
Entrust's ETF lineup includes products in the following categories: high dividend, fixed income, international, emerging markets, technology, small cap, and socially responsible investing (SRI).
What Are the Advantages of Entrusting Your IRA?
The benefits of entrusting an IRA custodian include:
Tax-deferred growth
No required distributions
No reported taxable income until the funds are withdrawn
A trust can be established for an IRA custodian provided that the trust meets two requirements:
The trust must be irrevocable
The trustee must be the IRA custodian
What Are the Disadvantages of Entrusting Your IRA?
In addition to investing your IRA, you can keep it safe in a rollover IRA or 401(k). Each of these accounts offers its own advantages, including:
Easy access - If you already have another retirement plan, like an IRA, you can open another rollover IRA or 401(k) to access your money. Simply transfer the funds from your previous plan into your new one.
Tax-free funds - Your retirement funds will not be taxed until you withdraw them, allowing you to keep more of the money you earn.
Lower fees - Because you are not directly investing your funds in your IRA, you pay less in fees, which can add up when investing large sums of money.
