Self Directed Roth Iras

Written by Johnny Kitchens
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The major difference between the Roth IRA and a traditional IRA is when taxes are levied. Contributions to a traditional IRA are deductible in the year of the contributions but contributions to a Roth IRA are not. This means that taxes have already been paid on your Roth IRA when you reach retirement age. There are, however, various conditions that have to be met (concerning your age, the age of the Roth IRA, and other factors) in order to avoid penalties and additional fees.

Most financial consultants will tell you that the Roth IRA is the way to go and they are usually correct. Assets from your other retirement accounts (like 401[k]s, traditional IRAs, and SEPs) can be rolled over into a Roth IRA, as well. Your age, the size of your IRA, and its age are all factors that can influence the efficacy of rolling your assets over into a Roth IRA. You will also need to look for companies that specifically offer self-directed Roth IRAs, if that is what you want.

Self-direction simply means that you have control over what investments are included in your Roth IRA and what sorts of future investments are included. It means that you have "checkbook control" of your account. (If you are not at least somewhat disciplined with your finances, "checkbook control" might not be right for you.) The key to success with a self-directed Roth IRA lies in your choice of advisors. The advisor will help ensure you meet Roth IRA guidelines and avoid penalties.

Roth IRA Rules and Regulations

The Roth IRA is not a congressional gift to the taxpayer. If you step outside of the rules governing Roth IRAs, the IRS will step in and apply whatever penalties and fees it can. The IRS describes most of what you need to know in publication 590, which focuses on individual retirement arrangements. Self-directed Roth IRAs are subject to the same guidelines no matter how you invest. Self-direction can yield a much broader range of non-traditional investment opportunities, but you must make certain you follow the letter of the law.


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