The Self-Directed Traditional IRA vs. the Self-Directed Roth IRA

Self-Directed Traditional vs. Roth IRA: Which is Right For You?

There are many different factors to consider when deciding which type of IRA is right for you. But one of the first questions you may ask yourself is whether you want a Traditional IRA or a Roth IRA. Both have their own benefits and drawbacks, so it’s important to understand the difference before making your decision. Here’s a quick rundown of the pros and cons of each option to help you decide which is right for you.

What is a Traditional IRA? What is a Roth IRA?

A Traditional IRA and Roth IRA are two of the most popular types of Individual Retirement Accounts, or IRAs. A Traditional IRA is an account in which individuals can contribute pre-tax dollars, reducing their taxable income for the year. Taxes are paid on the withdrawals made when in retirement. On the other hand, a Roth IRA allows individuals to contribute post-tax dollars, which grow tax free as long as specific conditions are met when withdrawing funds. Contributing to either a Traditional or Roth IRA is a great way to save money while also taking advantage of certain tax benefits.

What are the Benefits of Self-Directed IRA Investing?

Self-Directed IRA investing enables individuals to take advantage of a wide range of investment possibilities that are not possible without this specialized investing tool. Such investments vary from real estate to accounts receivable, providing a degree of diversification seldom found in other types of investments. Moreover, Self-Directed IRAs also provide investors with privacy and tax advantages.

For example, contributions to these accounts can be made pre-tax, meaning that taxes need only be paid on the money when it is withdrawn. Furthermore, the IRS allows investors to use Self-Directed IRA investing to purchase real estate and other physical properties, making it easy for investors to expand their portfolios and build their wealth throughout retirement. Keep in mind that both Traditional and Roth IRAs allow for Self-Directed IRA investing.

How Does a Traditional IRA Compare to a Roth IRA?

There are strict requirements for who may qualify for a Roth IRA based on their earnings, while Traditional IRAs are open to most wage earners, making them much more accessible. Overall, both types of accounts offer significant benefits and investors should be mindful of the differences when selecting an option that best meets their needs.

How Do You Know Whether a Traditional or Roth IRA Fits with Your Retirement Goals?

How to determine which retirement tools may be the best fit for your plan can be a daunting task. When looking at IRAs, Traditional and Roth accounts offer different tax benefits that should be understood in order to select the one that best suits your needs. Traditional IRAs have tax-deductible contributions, but withdrawals are taxed when made after age 59 ½ is reached.

Those looking for immediate tax deductions might choose this option. On the other hand, with a Roth IRA, no taxes are levied on the contributions or withdrawals when made after five years and reaching the age of 59 ½, which is great for those wanting withdrawal flexibility or who will be in a higher tax bracket during their retirement years. Ultimately it is important to consider your goals, tax situation and likelihood of future earnings when deciding which option best matches your needs. Talk it over with a tax professional, because a Self-Directed IRA administration firm isn’t going to offer specific investment advice. When you self-direct, you’re in charge. Want to know more about how it all works?

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

Want more answers to Self-Directed Roth & Traditional IRAs? Visit: Difference Between Self-Directed Roth IRAs and Traditional IRAs – FAQ (