• Twitter
  • Facebook
  • Linkedin
  • Youtube
  • CLIENT LOGIN
  • FORMS
  • OPEN A NEW ACCOUNT
Call us today: 1-866-7500-IRA(472)
American IRA
  • ABOUT US
    • OUR TEAM
    • TESTIMONIALS
    • CONTACT US
    • CAREERS
  • SELF-DIRECTED IRA/401K ACCOUNTS
    • SELF-DIRECTED IRA – TRADITIONAL IRA
    • SELF-DIRECTED ROTH IRA
    • SELF-DIRECTED SEP IRA
    • SELF-DIRECTED SOLO 401k
    • SELF-DIRECTED SIMPLE IRA
    • SELF-DIRECTED HSA – HEALTH SAVINGS ACCOUNT
    • SELF-DIRECTED COVERDELL EDUCATION SAVINGS ACCOUNT
  • INVESTING
    • SELF-DIRECTED IRA – REAL ESTATE IRA
    • SELF-DIRECTED IRA FOR PRIVATE LENDING/NOTES
    • SELF-DIRECTED IRA FOR PRECIOUS METALS
    • SELF-DIRECTED IRA FOR PRIVATE COMPANIES
    • SELF-DIRECTED IRA FOR TAX LIENS/DEEDS
    • SELF-DIRECTED IRA FOR SINGLE MEMBER IRA LLC
    • SELF-DIRECTED IRA FOR JOINT VENTURES AND PARTNERSHIPS
    • SELF-DIRECTED IRA FOR BROKERAGE ACCOUNTS
    • SELF-DIRECTED IRA FOR OTHER INVESTMENTS
  • FEES
  • EVENTS
  • EDUCATION
    • BLOG
    • THE LOUSY INVESTOR
    • SELF-DIRECTED IRA NEWSLETTER
    • SELF-DIRECTED IRA FUNDAMENTALS
    • SELF-DIRECTED IRA – HOW IT WORKS
    • FAQs
    • CALCULATORS
    • SELF-DIRECTED IRA PROHIBITED TRANSACTIONS
    • SIGN UP
  • PROFESSIONALS
  • Menu
BLOG
Self-Directed Roth IRA

Current Eligibility Rules for Using a Self-Directed Roth IRA

November 1, 2019/in Blog, Roth IRA /by Jim Hitt

The Self-Directed Roth IRA is a powerful way to build wealth, using the taxable income you earn now to put aside money for retirement in an account. With this account, you can then make legitimate withdrawals upon reaching retirement age and not have to pay the tax again—because you have already paid these income taxes.

Because a Roth IRA is such a powerful wealth-building tool, it does have a few caveats. You’ll want to make sure that your arrangements make you eligible for a Roth IRA, for starters.

What You Need to Know About Using a Self-Directed Roth IRA

How do you know whether you qualify for using a Self-Directed Roth IRA? Here are some of the finer points you’ll want to keep tabs on:

  • Earned income. You have to have earned an income to put money aside in a Self-Directed Roth IRA. Because a Roth IRA uses taxable money, you have to first have taxable money!
  • Non-deductible contributions. One of the most important things to understand about using a Self-Directed Roth IRA is that your contributions won’t be deductible. That’s because you are using after-tax dollars in a Roth IRA. The money will grow within a Roth IRA and you’ll be able to withdraw them tax-free—assuming you follow the rules, of course—but that comes with the initial sacrifice of not being able to deduct the contributions at the start.
  • If you make too much money…then you might not be eligible for a Self-Directed Roth IRA. You can find more details about that at the IRS website. For example, let’s say you are a single head-of-household and you make $138,000 per year. You can’t then contribute to a Roth IRA. Keep in mind, however, that this number refers to your Adjusted Gross Income, which of course depends on your individual tax situation.
  • Contribution limits. Your age will also factor into your individual contribution limits. For example, the maximum contribution for people under 50 in 2019 is $6,000. For those 50 and older, it’s $7,000—which is why they call these “catch-up” contributions.

What is Unearned Income?

You might have noticed in the first section that you have to have an “earned income” to be able to contribute to a Self-Directed Roth IRA. So, what is unearned income, exactly?

For IRS reporting purposes, unearned income can include the following:

  • Alimony from a divorce.
  • Child support.
  • Unemployment benefits.
  • Social Security retirement benefits.
  • Income from investments, such as dividends or rental income.

Commissions, bonuses, and tips you earn from working or owning a business would count as earned income. But if you own a rental property, for example, and you collect income from that ownership because you have a tenant, that would count as unearned income that can’t be put towards a Self-Directed Roth IRA. This is important for anyone who makes a majority of their income from real estate ventures.

Should You Use a Self-Directed Roth IRA?

A Self-Directed Roth IRA allows you to put aside earned, taxed income into nontraditional retirement assets like precious metals. The question is: is it right for you? That’s up to each individual. However, those who want to enjoy tax-free withdrawals in retirement flock to the Roth IRA first. In many cases, it’s the retirement account people first put money in, then electing to put money into pre-tax accounts such as a Self-Directed Solo 401(k) plan. As always, the strategy is up to the individual—especially when using self-direction.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at www.AmericanIRA.com.

For more information call us today at 866-7500-IRA(472)

Tags: Self directed Roth IRA
Share this entry
  • Share on Facebook
  • Share on Twitter
  • Share on Google+
  • Share on Pinterest
  • Share on Linkedin
  • Share on Tumblr
  • Share on Vk
  • Share on Reddit
  • Share by Mail
You might also like
Self-Directed IRAs Self-Directed Roth IRA Legislative Alert: Obama Targets Roth “Stretch” IRAs
Private IRA Lending Frequently Asked Questions about the Differences Between Self-Directed Roth IRAs and Traditional IRAs
Self-Directed Roth IRA Building an All-Weather Portfolio with a Self-Directed Roth IRA
Self-Directed IRA What Financial Education Podcasts Don’t Tell You About the Self-Directed Roth IRA?
Self-Directed Roth IRA Tips for Getting More Out of a Self-Directed Roth IRA
Self-Directed Roth IRAs The Basics Behind Investing in a Self-Directed Roth IRA
Self-Directed Roth IRA What Happens with a Self-Directed Roth IRA When You Are Older?
Self-Directed IRAs What are the Main Types of Self-Directed IRAs?

Search

Never miss an article!

Sign up below to be notified when we publish a new article.

Let's Talk!

We know that Self-Directed IRAs can be complex. At American IRA we have 40 years of experience in making the process simple and worry-free for our customers. Schedule a free 15-minute call and we'll walk you through everything you need to know, with no obligation.

Yes, Call Me!Why American IRA?
Sean McKayPresident, American IRA
You'll speak with Sean or another member of our experienced team.

Recent Posts

  • The Advantages of Opening a Self-Directed SEP IRA
  • What You May Miss if You Don’t Consider a Self-Directed IRA
  • The Self-Directed Roth IRA Tips You Might Not Have Heard
  • Self-Directed IRA Rules Everyone Should Know Before Investing
  • Is a Self-Directed IRA Right for a Joint Venture?

Get started today!

1-866-7500-IRA(472)

Proudly Serving 50 States

Contact

135 Broad Street
Asheville, NC 28801
828-257-4949

/
© 2022 American IRA
DISCLAIMER American IRA, LLC, a North Carolina limited liability company, serves as a Third Party Administrator on behalf of the Custodian, New Vision Trust Company, a state chartered South Dakota Trust Company. As a Self-Directed IRA administrator we are a neutral third party. We do not make any recommendations to any person or entity associated with investments of any type (including financial representatives, investment promoters or companies, or employees, agents or representatives associated with these firms). We are not responsible for and are not bound by any statements, representations, warranties or agreements made by any such person or entity and do not provide any recommendation on the quality, profitability or reputability of any investment, individual or company. The terms "we" and "us" refer to American IRA, with offices located in Asheville, NC and Charlotte, NC.
A Thorough Guide to Prohibited Transactions and Self-Directed IRA Rules Prohibited Transactions Self-Directed IRA Florida – A Great Place to Retire
CLAIM YOUR 7 FREE SELF-DIRECTED IRA GUIDESDOWNLOAD NOW
+ +
Download Our Essential Guide to Self-Directed IRAs!

Download Our FREE Essential Guide to Self-Directed IRAs!

At American IRA, we pride ourselves on our exceptional educational materials that cater to everyone from beginners to advanced investors.

Our Essential Guide to Self-Directed IRAs is a great resource whether you’re new to investing or looking for increased diversification for your existing Traditional IRA, Roth IRA, SEP, Solo 401(k), SIMPLE, Health Savings Account, or Coverdell Education Account.

Download Now

  • Why a Self-Directed IRA?
  • How it Works
  • Investing: Popular Options
  • Real Estate
  • Private Lending
  • Tax Liens
  • Single Member LLC (a.k.a. Checkbook IRA)
  • And much more!
Share This
  • Facebook
  • Twitter
  • LinkedIn

Talk to a Specialist

Schedule a Call
Or call us now on
1-866-7500-472
Prefer email? Send us a message

Talk to a Specialist

Scroll to top