Frequently Asked Questions About Self-Directed Traditional IRAs

Frequently Asked Questions About Self-Directed Traditional IRAs

A Self-Directed Traditional Individual Retirement Account (IRA) gives you more control over your retirement savings. With a Traditional IRA, you can choose from a wide range of investment options, including stocks, bonds, and mutual funds. But with a Self-Directed Traditional IRA, you can also invest in things like real estate and private loans, which gives you more access to flexibility when retirement investing.

The Self-Directed Traditional IRA has some key benefits that make it an attractive option for retirement investors. For one, it allows you to diversify your portfolio beyond the stock market. And because you’re in control of your own investments, you can take a more active role in growing your nest egg. But as with any retirement account, there are some things you need to know before you get started. Here are answers to three of the most frequently asked questions about Self-Directed Traditional IRAs.

  1. How much can I contribute to a Self-Directed Traditional IRAs?

As of 2022, You can contribute up to $6,000 ($7,000 if you’re 50 or older) per year to a Self-Directed Traditional IRA. This contribution limit applies to all of your IRAs, both Roth and Traditional, combined. So if you have both types of IRAs and contribute the maximum amount to each one, your total contribution for the year will not be $12,000 ($14,000 if you’re 50 or older). Instead, your contribution limits will apply to all Roth and Traditional IRAs you have, no matter how many you’ve opened. Also, keep in mind that these numbers are year-dependent—what happens in 2023 and beyond may reflect the changing realities that come with inflation and new policies from the federal government.

  1. Are there any income limits for contributing to a Self-Directed Traditional IRA?

No, there are no income limits for contributing to a Self-Directed Traditional IRA. What you’ll want to do is seek out a qualified tax professional to answer these questions for you. That’s part of the freedom—and the responsibility—of using a Self-Directed Traditional IRA. You’ll have to seek out qualified advice with the taxes and laws that regulate what you can and can’t do with your Traditional IRA. After all, when the power is in your hands, it means you’re also responsible for handling things in such a manner that you don’t encounter unnecessary taxes and fees.

  1. What are the tax benefits of a deductible contribution to my Self-Directed Traditional IRA?

Using a deductible contribution to your Self-Directed Traditional IRA can be advantageous if you want to save money now, anticipating that your tax burden now is higher than it may be in retirement. Of course, no one has a crystal ball, so there will be no predicting the future. But generally, as a rule of thumb, many investors seek out deducible contributions for IRAs when they have some degree of faith that their current income is higher than it will be in retirement—which then increases their tax burden. Making deductible contributions to a Traditional IRA, rather than a Roth IRA, can be advantageous if you seek to use before-tax money in a retirement account.

A Self-Directed Traditional IRA is a great way to take control of your retirement savings and invest in things beyond the stock market. If you’re considering opening one, be sure to consult with a financial advisor first to get started on the right foot—and don’t forget contributions up to $6,000 (or $7,000 if you’re 50 or older) per year are allowed!

Additionally, seek out more information by talking to us here at American IRA. Not only can you continue to read our blog, but you can give us a call at our phone number: 866-7500-IRA.