Self-Directing a Roth IRA like a seasoned investor
A Roth IRA is a savings vehicle designed to motivate us to save for retirement. You might be asking yourself, how are we motivated to save for retirement with a single retirement account? The answer is simple: TAX BENEFITS!
Roth IRAs receive taxed contributions, so there is no tax deduction when you make contributions to this account (unlike a Traditional IRA). So, why would someone want to make taxed contributions to a retirement account? The growth and earnings on investments you make with your Roth IRA grow TAX-FREE, or as some say, TAX-NEVER.
This means you can contribute to this account and earn an uncapped amount on those contributions. When you retire (or at age 59 1/2), you can take tax-free withdrawals from the contributions and the uncapped growth.
Sounds too good to be true? This is one of those rare cases where there is no catch with the IRS. The account grows tax-free, period, hence the motivation mentioned above.
If you have a Roth IRA with a custodian like Directed IRA, that account is also, by default, self-directed. This means your Roth IRA can be invested in a wider range of investment options commonly referred to as alternative assets. For Example, these alternative assets could be real estate, private lending, syndications, small business startups, and many more investment types. If you want to start Roth N’ Rolling today–you can learn more about the investment types available to self-direct HERE.
What makes an investment an “alternative asset”? They are considered “alternative” when they differ from the typical publicly traded assets (i.e., stocks, bonds, and mutual funds) you’re often stuck with when your account is held under a traditional custodian or brokerage firm.
Who can have a Roth IRA?
Anyone can have a Roth IRA but it’s worth noting that there are some simple hurdles to overcome if you “make too much” income, but that doesn’t mean you cannot have your own Roth IRA.
If you have earned income below certain income limits, you can contribute directly to the Roth IRA. If you have too much-earned income, you can contribute to a Traditional IRA and convert it to a Roth IRA regardless of how much you make.
*If you are reading this article after 2024, please refer to the IRS’s website for the most up-to-date income limits for contributing to a Roth IRA.
Here are the limitations for 2024 per the IRS.
| If your filing status is… | And your modified AGI is… | Then you can contribute… |
|---|---|---|
| married filing jointly or qualifying widow(er) | < $218,000 | up to the limit |
| married filing jointly or qualifying widow(er) | > $218,000 but < $228,000 | a reduced amount |
| married filing jointly or qualifying widow(er) | > $228,000 | zero |
| married filing separately and you lived with your spouse at any time during the year | < $10,000 | a reduced amount |
| married filing separately and you lived with your spouse at any time during the year | > $10,000 | zero |
| single, head of household, or married filing separately and you did not live with your spouse at any time during the year | < $138,000 | up to the limit |
| single, head of household, or married filing separately and you did not live with your spouse at any time during the year | > $138,000 but < $153,000 | a reduced amount |
| single, head of household, or married filing separately and you did not live with your spouse at any time during the year | > $153,000 | zero |
Not sure what your Adjusted Gross Income (AGI) is? Check Here
Why Do You Want a Self-Directed Roth IRA?
We call it Roth N’ Roll for a reason! The easiest way to answer this question is with another question: who doesn’t want tax-free growth and income in retirement? Having tax-free income during retirement allows you to enjoy fewer tax burdens during your golden years.
A Self-Directed Roth IRA is perfect for anyone who wants to invest in alternative asset options such as single-family rental homes, multi-family properties, hard money lending, cryptocurrency, and many more. With a normal Roth IRA, your custodian restricts your investment options to only publicly traded assets such as stocks, bonds, and mutual funds.
How you can Roth n’ Roll with a Self-Directed Roth IRA:
You are two easy steps away from having a Self-Directed Roth IRA. This begins by opening a Self-Directed Roth IRA with Directed IRA. As a custodian, Directed IRA specializes in self-directed retirement plans. This means any account type you open with us has the freedom to invest in private or alternative assets.
Here’s the two-step process to getting your Self-Directed Roth IRA started:
- Complete your Roth IRA application with Directed IRA
- Complete a Transfer Request, so we can request your assets from your current “normal” Roth IRA.
That’s it!
By opening a Roth IRA with us and transferring your assets, you can now invest in what you know and are most comfortable with.
Be sure to use this discount code for $50 off your first year’s annual fee: BLOG50.
Check out some of the most common asset classesHERE to start gathering ideas for your next self-directed investment.
With a Self-Directed Roth IRA at Directed IRA, you can truly experience Roth n’ Roll investing – achieving significant growth and enjoying the ultimate tax-free benefits in your retirement.
