A self-directed IRA (SDIRA) is a retirement account that allows you to invest in non-traditional assets, such as real estate and precious metals. You can set up an SDIRA as a traditional IRA (tax-deductible contributions) or a Roth IRA (tax-exempt withdrawals). A self-directed Roth IRA is a type of retirement account that receives the same tax-advantaged treatment as a regular Roth IRA. You won't receive any tax benefits in the year you make a contribution, but the contributions invested will grow, accrue, and receive tax-free dividends.
When you withdraw money from a Roth IRA, you usually don't pay taxes either. A self-directed Roth IRA is subject to Roth's usual income limits. Self-directed Roth IRAs open up a wide universe of potential investments. In addition to standard investments (stocks, bonds, cash, money market funds and mutual funds), you can hold assets that are not usually part of a retirement portfolio.
A self-directed Roth IRA is an individual retirement account that gives you control over how your money is invested. These accounts are offered by brokerage firms, just like any other type of IRA. You choose which brokerage agency acts as the account's custodian. Once you make the minimum initial deposit, if necessary, you can decide how your money will be invested.
This means that the brokerage agency acting as a custodian cannot offer you any investment advice; you actually manage your account on your own. Consult with a financial advisor to ensure that you are not inadvertently violating any of the SDIRA regulations. The main advantage of using a self-directed IRA is the ability to make investments in alternative assets. The depositary, which can be a bank, credit union or other financial institution, manages the SDIRA, maintains the investments in the account for safekeeping, and ensures that the SDIRA complies with IRS regulations.
Investing in a self-directed Roth IRA isn't right for everyone, and there are a few important things to know before you start. Of course, you should exercise due diligence before opening an account and seek the help of a financial advisor to ensure that an SDIRA is right for you. According to Scott Butler, a financial planner at Klauenberg Retirement Solutions in Laurel, Maryland, a self-directed IRA might not be the best account for everyone. What's more, unlike a traditional IRA, you can continue to contribute to a Roth IRA as long as you earn income.
The self-directed IRA website provides a list of account custodians qualified by the Internal Revenue Service (IRS). However, in a self-directed Roth IRA, account owners can invest in things other than those offered by most IRA custodians. Available as a traditional IRA (to which tax-deductible contributions are made) or Roth IRA (from which tax-exempt distributions are obtained), self-directed IRAs are best suited for experienced investors who are already familiar with alternative investments and want to diversify into a tax-advantaged account. Contact IRA Financial at 1-800-472-0646 or complete the form to learn more about opening a self-managed retirement account.
If you have income from working for yourself or someone else, you can create an IRA and contribute to it. The biggest difference between a self-directed Roth IRA and a traditional self-directed IRA are tax benefits. The main difference between an SDIRA and other IRAs are the types of investments you can keep in the account.