Individual Retirement Accounts are a popular way for many people to save for retirement thanks to the tax benefits they provide. And that’s a practice that goes back to the first IRAs, which are today known as Traditional IRAs in the United States. But there’s more to this Traditional IRA than meets the eye. For example, you can exercise more control when you use a Self-Directed Traditional IRA.
A Self-Directed Traditional IRA allows you to take control of your investments, diversify your portfolio, and potentially maximize your returns. Here are some key things to know about Self-Directed Traditional IRAs and how they can help you build wealth for retirement.
Self-Directed Traditional IRAs can Help Maximize Your Retirement Savings Budget
With a Self-Directed Traditional IRA, you can make annual contributions of up to $6,500 (or $7,500 if you are 50 or older) to help you build your retirement nest egg. These contributions may be tax-deductible, which can provide a significant tax benefit while allowing your investments to grow tax-deferred until you withdraw them during retirement. In other words, you can get more savings in the short-term thanks to the tax-deferred status of Self-Directed Traditional IRA contributions. This is particularly important in a time of high inflation, when stretching every retirement dollar counts.
Using a Self-Directed Traditional IRA to Diversify Your Portfolio
Recent events in the banking system have shown how important it is not to put all of your eggs into one basket. And a Self-Directed Traditional IRA—or any Self-Directed IRA—offers all sorts of opportunities for diversification. How? A Self-Directed Traditional IRA can help you diversify your investments beyond traditional stocks and bonds. You can invest in a variety of assets, such as real estate, private equity, precious metals, and even cryptocurrencies. By diversifying your portfolio, you can potentially reduce risk and improve returns.
Taking Control of Your Investments
A Self-Directed Traditional IRA gives you complete control over your investments, allowing you to choose where your money is invested. This allows you to take advantage of opportunities in the market that may not be available through traditional retirement accounts. By taking control of your investments, you can potentially improve returns and increase the growth of your retirement savings. Keep in mind that there are some limits to this, of course, as you can’t use retirement investments for personal benefit. Additionally, you can’t hold assets like life insurance within a Self-Directed IRA.
Enjoy Tax-Deferred Growth
One of the biggest advantages of a Self-Directed Traditional IRA is the tax-deferred growth it provides. This means that your investments can grow tax-free until you withdraw them during retirement. This can significantly increase the amount of money you have available to live on during your retirement years, assuming you were able to stock away money through contributions for a consistent period of time.
Maintain Traditional IRA Benefits
A Self-Directed Traditional IRA offers all the benefits of any Traditional IRA, including the potential for tax-deductible contributions, tax-deferred growth, and the ability to withdraw funds penalty-free after age 59 ½. It also provides the added benefit of allowing you to choose where your money is invested, providing potential for higher returns.
A Self-Directed Traditional IRA is a powerful tool for building wealth and securing your financial future. By diversifying your portfolio, taking control of your investments, and enjoying the tax-deferred growth we discussed, you can potentially maximize your returns and build a comfortable retirement nest egg for you and yours.