Guide To Self Directed IRA And Its Benefits
Provided by financial partners, custodians and CPA amongst other licensed and authorized entities, having a self directed individual
retirement account (IRA) is one of the most effective easy ways through which you can save on the taxes that you pay and accumulate
significant savings that you can put to good use in the future.
A self directed individual retirement plan is an arrangement where you establish a retirement account and reserve the sole rights to
dictate on what types of investments your accumulated funds are invested in, on behalf of your retirement plan. Your custodian or
trustee merely serves the role of maintaining the assets and records of
transactions relating to the same. Your custodian also has the
responsibility of filing reports as required under IRS regulations.
There are several benefits that you obtain by establishing a self
directed IRA. They include:
Doing so expands your investment options, meaning that you are
no longer restricted to such traditional investments as CDs and stocks.
Establishing an IRA provides you with the best opportunity to
diversify your investment portfolio.
You have the freedom of choosing where to invest your IRA funds.
Establishing a traditional IRA means you enjoy tax reprieve on your deposits.
The fact that establishing a self directed IRA gives you the freedom to dictate how your funds are invested does not mean that you can
invest in any vehicle you choose. Under IRS regulations, you are prohibited from investing in such vehicles as life insurance, collectibles
(artwork, rugs and antiques) and particular metals. You are also prohibited from irregularly using your IRA such as borrowing cash from
the account, using it to secure a loan and selling property to the account amongst other prohibitions. You are however allowed to
invest your funds in real estate, mortgage, stocks, partnerships, precious metals (gold, silver and platinum) and franchises amongst
other investment vehicles.
There are basically three types of IRA you can establish to grow your retirement funds as an individual:
i. Traditional IRA - At times referred to as Regular IRA, traditional IRA gives you the opportunity to contribute and at the same
time take out a deduction from your contributions. Withdrawals are however only permitted after you have attained a
specified age. Although your contributions remain tax-free, your withdrawals are subjected to tax using IRA calculators.
ii. Education IRA - This is the most suitable IRA you may establish in case you have a child below the age of 18 years. The account
gives you the opportunity to save for specified higher education expenses for your child or other beneficiary with all your
savings being tax-free.
iii. Roth IRA - This is probably the simplest types of IRA that you can establish. It tax regime differs from the other two in that you
pay any applicable tax before making any contributions. This means that any both your contributions and resultant growth are
never subjected to taxation. Furthermore, you can withdraw your funds at any time that you wish.
An IRA is not only available to individuals. Self directed retirement IRA plan is also available for small businesses. You can opt to
establish this in case you operate a small business and reap the tax benefits that accrue. Like with a personal IRA, all contributions to a
small business IRA are also tax deductible.
Your retirement investment options have never been that open with IRA. You only need to ascertain the most suitable type of IRA to
establish. In choosing a type of IRA to establish, it may be necessary to make use of IRA calculator to ascertain the level of taxation you
will be subjected to. You may also choose to establish a personal IRA, small business IRA or both, depending on your retirement