Self-Directed Roth IRA

Common Answers to Self-Directed Roth IRA Questions

The Roth IRA—you’ve probably heard of it. This is one of the most popular accounts for retirement because it’s one of those rare cases where investors can use after-tax money—meaning money that is already taxed—to contribute to it. This gives you a tremendous amount of freedom later in life, because you don’t have to take required minimum distributions (RMDs) on the account. After all, it’s already been taxed. So, what should you think about if you’re considering a Self-Directed Roth IRA? Let’s create some answers to the most common questions investors have about Self-Directed Roth IRAs.

Should I Own a Self-Directed Roth IRA?

This is a great question—and unfortunately one that we can’t necessarily answer for you. Everyone’s individual preferences and situations will always have an impact on the specific choices you might make with retirement accounts. But there is one thing we can tell you. Many investors make their decisions on Roth IRAs based on whether they anticipate having more money or less money in retirement. After all, the fact that the distributions you take from a Roth IRA later in life won’t be taxed can be a major advantage if you do have more money upon hitting retirement age—that is to say, you would be part of a higher tax bracket. This can create tremendous tax savings with a Roth IRA.

What is Self-Directing the Roth IRA?

Not every Roth IRA is self-directed. So, what does this tag mean? Self-directing a Roth IRA means that you’re working with a Self-Directed IRA administrator to handle the account. You make the decisions, issuing buy and sell orders to an administrator who carries them out and administers the account. If you can find a Self-Directed IRA administration firm like American IRA who is willing to offer services like administering buy/sell orders on real estate, for example, you can then invest in real estate.

The truth is that retirement accounts always allow transactions like this. But you may need to self-direct your account to ensure that you’re able to. Otherwise, working with a traditional brokerage may limit you to the stock market and a selected group of offerings such as funds for retirement. And there’s nothing wrong with that—unless you want to achieve greater diversification within your retirement portfolio.

When Can I Realize the Advantages of a Self-Directed Roth IRA?

Over time, you can simply make contributions to a Roth IRA in a straightforward way. You won’t get a tax break for these contributions. You’ll simply make contributions using income you already have—that has been taxed via the income tax. This is another way of saying that you front-load the taxation on this money when you invest in a Roth IRA.

Think of it as delaying pleasure. You’re taking a little temporary pain in the present to potentially have a better retirement portfolio in the future. As time goes on and you begin to see the Roth IRA grow, you can rest secure in the knowledge that there’s going to be no taxation on the Roth IRA distributions you take upon hitting retirement age, assuming those distributions are valid.

One additional advantage later in life is that you can keep the Roth IRA invested without taking distributions, potentially compounding your returns even more.

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