Traditional, Roth and Self Directed IRA Account Information
Nowadays, it is quite confusing to simply think of the retirement plans that are widely offered. This has been developing greatly for everyone to enjoy their golden years. If you are asking which one is the best, well, the only person who could answer that is you. This would depend on your qualifications, investment choices and some other factors. Examples of these retirement accounts include 401k plans, profit sharing plans and IRAs.
Let us focus more on IRA since majority of Americans participate in this plan. IRA or Individual Retirement Account is a retirement savings plan which allows you to invest in various assets as well as acquire great tax advantages. Specific rules and regulations must be known due to the different types of IRAs available. Some of these IRAs are Traditional, Roth and Self directed IRA.
The Traditional IRA account is considered the basic type of IRA. This is managed by an institution (IRA custodian) and processes every transaction done within the account including allowable investments. These investment assets include bonds, stocks, mutual funds and many more. As long as you have a considerable amount of salary, you are eligible to invest in Traditional IRA. In addition, contributions are strictly based on your status, your income level and the availability of the retirement plans. If these requirements mandated by the IRS are met without early withdrawals (withdrawals before 59 ½ years), tax penalties would not be applied to the IRA account.
For a Roth IRA account on the other hand, there are less restrictions and requirements so it would be easier for you to start this up. In terms of tax advantages and withdrawals, out of all IRAs, this is considered the best. Roth IRAs offer the advantage of transferring funds from a deceased holder to his beneficiary. In case that your beneficiary is also a Roth IRA account holder; this could be combined with his current account without tax penalties. The best Roth IRA’s advantage is that you could pass down your account assets to your heirs. Though this advantage is considered the best, Roth IRAs also have their negative sides. As mentioned, there are fewer requirements here but the contributions in Roth IRA are based on how high your salary is. Thus, you may need the help of financial advisers who would identify if Roth IRA is the right plan for you.
Lastly, we have the Self directed IRA account wherein investment decisions are widely offered. Depending on your priority as well as your preferences, you may choose investment options such as bonds, stocks and real estate in a Self directed IRA. You may need to select a qualified custodian that would manage your account on your behalf. As an account holder of Self directed IRA, you are not permitted to purchase investments for you and your families’ benefit. They are considered disqualified parties and could lead to severe tax penalties or you would not be eligible for the account.