Benefits of Owning Multiple IRAs or HSAs

Multiple IRAs or HSAs: What are the Benefits?

Patricia McCrystal

September 18, 2015

Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs) are powerful tools investors can use to save and invest for retirement or qualified medical expenses, all on a tax-deferred basis. Many investors only open one IRA or one HSA account, not realizing they can open as many HSA and IRA accounts as they desire – and the potential benefits of doing so are nothing to overlook.

You can further the autonomy of your retirement account by opening a self-directed IRA or HSA. Self-directed accounts allow you to invest in nearly any asset you desire (with the exception of life insurance and collectibles). Self-directed IRAs or HSAs expand your investment horizons outside of the stock market and into any asset market in which you may already have knowledge and experience.

All HSAs and IRA account types have a yearly contribution limit that encompasses every IRA or HSA account you own; meaning your contribution limit remains the same regardless of how many accounts you open. However, there are strategic benefits to opening multiple retirement and HSA accounts. Multiple accounts allow you to maximize investment opportunities and diversify your retirement portfolio. Investing in more than one asset class provides autonomy from the potential volatility of any single asset market.

If it helps you to calculate potential returns for each asset, you may want to keep your assets in separate IRA accounts. Some investors prefer to open an IRA or HSA for every asset market in which they want to invest. Multiple IRA accounts can help you keep your assets organized in a way that makes sense to you. Additionally, if one or more of your IRA assets has more liability risk associated with it, your attorney may advise you to keep that asset in a separate IRA.

It’s logical to assume that multiple accounts would mean paying more in fees.  However, the reality is that each new account with New Direction only means a $50, one time fee to set up the new IRA.  In almost every case, the total fees thereafter are the same, whether you have one account or ten.

For instance, if you have an old 401(k) invested in publicly traded securities, you can keep some of the 401(k)  funds with its current provider, and open a self-directed IRA with New Direction to diversify and invest in alternative assets like real estate, private equity, or both – the combinations are limitless.

For HSAs, a tactic some investors may prefer is owning a “liquid” HSA with the amount of money he or she feels comfortable with, in the event of a medical emergency. With the money over and above the “liquid” contingency, investors can open one or more self-directed HSA accounts to invest in specific asset markets for long-term returns on a tax-deferred basis; thereby creating money for a lifetime’s medical expenses. Investors may have an HSA invested in stocks and bonds, and other accounts invested in precious metals or private lending; among many other asset options.

To learn more about opening self-directed IRA and HSA accounts, feel free to call New Direction or visit us online at www.ndira.com. 

Retirement Plan Integration with Self Directed IRAs

Whether you’re getting close to retirement age or you’re just beginning to look into retirement planning, it is important to understand how each type of retirement account fits into your overall retirement plan. Common retirement accounts, such as the Traditional IRA, Roth IRA, and HSA, each play their own role in a well-rounded retirement strategy. Knowing how to utilize each type of account will allow you to develop the best retirement plan for your personal retirement goals.

Each plan type offers a different tax advantage. Traditional IRAs are traditionally thought of as providing tax advantages when funds are placed in the account, and Roth IRAs delay the advantages until funds are removed from the account. While this is generally true, there are many factors that can affect the personal advantages of any particular account. These factors can include the age at which you plan to retire, your current tax bracket, the tax bracket you will be in post-retirement, the cost of living where you plan to retire, and the performance of other investments outside of your retirement accounts. A study of each account’s tax advantages and how those advantages will interact with the factors above may help you to create a personalized retirement plan.

For self directed IRA account holders, determining which accounts will best suit your retirement goals can seem complex. Just because you have a self-directed account does not mean you are alone on your retirement journey. SDIRA account holders can utilize the services of Certified Public Accountants (CPAs), Certified Financial Planners (CFPs), RIAs, trusted friends, and others to form a financial team. This team can help you discover the right combination of retirement accounts for your goals while you maintain the independence that comes with self-direction.

One account to consider for your well-rounded retirement plan is a Health Savings Account. An HSA can help you plan for those medical bills that may be incurred after you retire, allowing you to use your IRA funds to pay for other things. Not only can your HSA help you save for future medical costs, but you may also invest your funds to help grow your account’s value. The HSA also provides another advantage. After the account is opened, any medical costs incurred and paid out-of-pocket may be reimbursed from the HSA at any time in the future. Your financial team can help you determine how best to utilize a HSA as part of your plan.

New Direction IRA is proud to be a part of your personalized retirement plan. The self directed IRAs and HSAs we provide allow you to diversify your retirement investments, use your personal expertise to invest in what you know, and adjust to changing market conditions. We offer education to account holders and non-account holders alike, as well as providing continuing education to CPAs, CFPs, and other members of your financial team so you can make the best decisions possible for your self-directed retirement plan.

What motivates American to save for retirement?

Nearly half of American workers are not confident they will have enough savings to retire according to the Employee Benefits Research Institute’s 2013 Retirement Confidence Survey. Only 13% of those surveyed said they were “very confident” in a comfortable retirement, while 22% of people believe they’ll have to retire later than they planned due to the poor economy, inadequate finances and lack of confidence in social security—only 31% of workers think Social Security benefits will be higher than they are today.

That said, we don’t need a survey to tell us that retirement savings and social security are major issues for the massive generation set to retire within the next 20 years. Many employers no longer match 401(k) funds, further devaluing a 401(k) and demotivating the 401(k) holder. Many workers and financial professionals are clearly not confident that the federal government is prepared to support retirees in the future.

Preparing for retirement not only benefits you, but benefits the entire industry. If millions of Americans are not financially ready for retirement, those who do prepare to retire will be adversely affected by higher taxes or stress on the public safety net or some as-yet-unknown factor.

So how do motivate the millions of eventual retirees who haven’t started to think about their retirement? Is it fear? Is the best way to motivate workers to put a portion of their salary aside this year to paint before them a grisly picture of their golden years?

Let’s look at how fear effects action. If the fear is immediately apparent (say, a drooling bear moving rapidly toward you), it can be a great motivator. But how many of us think about retirement savings while working full-time or overtime, raising a family, practicing hobbies, enjoying friends – basically, while living a full life? Do we look at an unknown retirement as we look at a hungry bear? If the fear of a destitute retirement doesn’t inspire you to save and plan, then it’s not a good motivator.

Many people fear the unknown. EBRI reports that 44% of workers don’t know how much they’ll need for retirement. The numbers indicate, however, that ignorance may not be bliss. If half of all workers still don’t have confidence in the amount they’re saving, then they either must not fear the unknown or be adequately motivated by that fear.

Indeed, we may be motivated by a different kind of fear.

What is real to most of us is the fear of losing our money. What is real is watching the numbers fall every quarter, knowing that money you earned and saved is now gone, due to some individual or some company’s bad decisions or bad luck. Investors don’t always know all they’re options or they think alternative investments are too risky or too complicated to try. In short, they’re paralyzed.

If you’re reading this, you likely already hold a self-directed IRA or you are considering one. Maybe you were able to shake off the retirement paralysis, look at your statement, and do something to change the status quo. Now encourage others to do the same. The more workers who take control of their retirement funds, the better we will all be in the long run.