Lending Club IRAs
While thinking about improving your investing, it’s also important to consider tax implications that would impact your overall performance. Here’s why:
Investment returns = (Performance of your investments) – fees – taxes
Put simply, to take home more money, you can improve the performance of your investments, lower fees, and/or lower the amount of taxes you pay on your investments.
Lending Club’s solid returns
We’ve got your back when it comes to providing solid returns on your investments. In the 5 years of Lending Club’s existence, our investors have experienced solid returns. But, they don’t tell the whole story. You may be subject to pay taxes on these gains — the IRS treats interest from your Lending Club investments as income.
So if you’re looking for a way to further grow your investments, there’s an easy way to both make money via Lending Club and help manage your tax bill: by opening a Lending Club IRA.
Lending Club IRA: Tax Advantaged Growth
The Individual Retirement Account (IRA) was designed to encourage people to save for retirement (see the IRS guide to IRAs). There are many different flavors of IRAs, from Roth to Traditional to SEP – Lending Club supports them all through our partnership with Self Directed IRA Services, Inc., a subsidiary of Horizon Bank. IRAs receive favorable tax treatment from the IRS which means your investments will grow and you won’t have to pay taxes on them while they are in your IRA account.
Any investor with a valid social security number is eligible for an IRA account.
IRAs aren’t tax free — you’ll either pay taxes before you put your money in them (like with the Roth IRA) or when you withdraw during retirement (like the Traditional IRA). But the point is that they are good vehicles to save for retirement.
As you can see from the chart below, it’s clear how IRAs helps you manage your experience with the Tax Man. As an example, an investor who invests $100,000 and pays taxes each year on the returns could end up with close to $800,000 after 30 years — not too shabby but nowhere near the nearly $1.6 million that same investment would have returned if he had maintained the investment in an IRA[*].
As much as we hate paying taxes, in a way, taxes are a good thing — it means you made money. But understanding how your investments are taxed can mean more money for your account. Lending Club IRAs power long term gains by growing your money with an advantage — a tax advantage.
How to fund a Lending Club IRA
There are two basic ways you can fund an IRA account with Lending Club.
If you currently have retirement savings in either a 401(k) or IRA, you may be able to allocate funds from your current account to a Lending Club account. Alternatively, you could fund a self-directed IRA account with Lending Club directly with an eligible annual contribution.
If you currently have a 401(k) or IRA with another ﬁnancial institution:
- IRA Transfers–you can transfer funds from another IRA to fund your investment through Lending Club.[**]
- 401(k) Rollovers–if you have a retirement plan with a previous employer, you can roll over those funds to a new or existing Lending Club IRA. Our preferred IRA custodian – Self Directed IRA Services, Inc. – offers a fast and easy rollover service.
If you do not currently have a 401(k) or IRA with another ﬁnancial institution:
- Annual Contribution–you can contribute up to $5,500 per tax year (or $6,500 if you are age 50 or older) to an IRA.[***]
Questions? Open a Lending Club IRA today
Here’s what to do next if you are interested in learning more about a Lending Club IRA
- Open an account: Start by completing our online application
- Learn more: Check out our Retirement Options Guide
- Questions: Call Investor Services at (888) 596-3159
- Tax advice: Check with your tax advisor and the IRS
[*] Assumes Traditional IRA with monthly reinvestment of capital, a nominal interest rate of 9.5% per year on investments and a tax rate of 28% on returns.
[**] Limitations and/or fees may apply. Please contact your current IRA custodian for more information.
[***] The information given here is current as of February 8, 2013. Please refer to IRS Publication 590, “Individual Retirement Arrangements”, for additional information