Many people have heard of the Roth IRA, and many consider it to be the “Cadillac” of retirement accounts. But what are the specific advantages it offers to retirement investors? Let us not only explore what the Roth IRA can do for you, as well as its individual features, but how a Self-Directed Roth IRA can expand your horizons. Here’s a list of the advantage’s investors have when investing with a Roth IRA:
- Tax-free earnings. The money you put into a Self-Directed Roth IRA comes from after-tax contributions. That means that you do not receive tax deductions on your yearly contributions to a Roth IRA. Why is this so great? It means that under the protection of a Roth IRA, that money grows tax-free. Your retirement assets are protected, and when you reach retirement age with a Roth IRA, you can withdraw the money, tax-free.
- No taxation on withdrawals. Withdrawing money after you reach retirement age in a Roth IRA means you will have full access. You have already paid taxes on the money you put in, after all. And because it is a retirement account that protects the growth of the money in the account, you do not have to pay additional taxes upon withdrawing from a Roth IRA. This is one of the most powerful reasons to consider investing in a Self-Directed Roth IRA.
- Easy access to savings. Because the money you contribute to a Roth IRA is already taxed (after-tax contributions), you can withdraw the money you have already put into it with ease. However, it is important to keep in mind that if you withdraw money that is grown in the account, then there will be associated penalties to think about. However, a Roth IRA can be considered a bit more “liquid” than other retirement accounts because of the fact that it contains after-tax contributions.
- No required minimum distributions (RMDs). RMDs are those distributions that you have to begin taking out of a retirement account at a certain age. This regulation is in place for before-tax contribution accounts because the government will expect to see some of those taxes eventually. However, with a Self-Directed Roth IRA, you can continue to let the money grow even after you reach a certain age, which can be great for people who want to allow the money to continue to compound. Since the money you have contributed to a Roth IRA is already taxed, there is no reason for the government to put RMDs in place. This gives you more freedom and control upon reaching retirement age.
- Expanding your horizons. Let us talk about using a Self-Directed Roth IRA for a moment. With a Roth IRA that you direct, you can make investments that include real estate and precious metals—non-traditional retirement investments, in other words. This gives you the freedom to expand your portfolio into a wider range of investments, casting a wider net. Or you can simply choose one type of investment and utilize your experience with that investment to maximize the growth you get out of a Roth IRA.
Add these benefits up and you will see why so many investors turn to a Self-Directed Roth IRA. They realize it is an investment vehicle that allows you to plan for having more income during retirement. By front-loading the taxes now, you can plan for a retirement in which you have a lot more money at your disposal. And because the taxes are already paid, you are free to enjoy a retirement account with lots of flexibility, and no required minimum distributions.