Why a Self-Directed Roth IRA Might Be Right for You
Published on June 11, 2015
There are some misconceptions about Roth IRAs that may cause some investors to shy away from them but these retirement plans have some positive attributes to consider.
1 – Tax-free distributions.
Your contributions are taxed when they go into the plan and are distributed tax free.
2 – Unlike Traditional IRAs,
you can continue to contribute (if you meet all other requirements) after you reach age 70 ½. For people with self-directed retirement plans, this is excellent news since you may continue to build up your alternative assets within the Roth IRA for as long as you wish.
3 – No required minimum distributions during your lifetime.
If you’ve built up enough of a nest egg otherwise and don’t need to pull from your self-directed Roth IRA, all the better!
4 – Higher-income earner can derive benefit from a Roth IRA.
The income limits for 2015 Roth IRA contributions begin at $116,000 for an individual and $183,000 for couples; the income cap for conversions was removed in 2010 so that anyone can convert a Traditional IRA to a Roth IRA.
(We recommend you discuss a conversion strategy with your tax professional or financial adviser to make sure you are getting the most benefit out of a conversion from a Tradition to a Roth IRA. There will be a tax hit at the time of the conversion but depending on how long an investment road you have ahead, it could be offset by savings down the road.)
5 – Roth IRA conversions are reversible.
If you suspect you will be in a lower tax bracket when you retire, or you want to pay taxes on those funds later rather than sooner, you can “re-characterize” your Roth IRA conversion by October 15 of the following tax year without penalty. Talk to your financial adviser about this if you feel this situation applies to you.
As always, we invite you to talk about your self-directed Roth IRA with our professionals at Next Generation Trust Services. We offer guidance and support for individuals who are self-directing their retirement plans—be they Traditional or Roth IRAs, SIMPLE or SEP IRAs and other plans. We ensure that you are complying with IRS guidelines regarding alternative assets allowed within these plans and provide all the necessary transaction support and reporting.