A Self-Directed Roth individual retirement account (IRA) is an optimal way to save for retirement. The earnings on your investments are free from federal income tax as long as certain conditions are met.

Contributions may be made even after you are 73 years old and are not required to take distributions. A Self-Directed Roth IRA holder may withdraw the principal amounts and their contributions and invest at any time without tax liability.

For the Self-Directed Roth IRA to qualify for tax-free withdrawals, you must meet two conditions:

Starting when you first open a Self-Directed Roth IRA, the account must be established for a minimum of five years.

  You must be 59 ½ or older.

Example 1: Example 1: If you open the Self-Directed Roth IRA at 58, you will have an entirely tax-free account when you are 63.

Example 2: Example 2: If you open the Self-Directed Roth IRA at 53, you will not have an entirely tax-free account until 59 ½.

Note: The above rules apply to conversions from a Traditional IRA to a Roth also.

If you have more questions such as, “What is Self-Directed Roth IRA?” or other questions about investments, insurance, and other parts of your retirement plans, American IRA is here to help. Get in touch with one of our specialists today to learn more about Self-Directed Roth IRA plans and how it benefits your retirement plans.

 You want tax-free earnings and no taxation on withdrawals.

 You are already saving for retirement with an employer-sponsored plan.

 Your income does not exceed the income limits for contributing (see below).

 You want to invest a retirement plan but may need to access your savings.

 You expect your tax rate during retirement to remain the same or to be at a higher level than your current tax rate.

 You want a plan with no required minimum distributions.

 You want a plan in which, with proper planning, the tax free compounding can reach 100 years with your heirs included.

Please consult your tax professional for the plan that best suits your individual needs.

A Self-Directed Roth IRA may be funded with a contribution, rolling over from an existing Roth IRA, or by converting Traditional IRA funds to a Roth IRA. While converting from a Traditional to a Roth IRA is a taxable event, your earnings will grow tax free.

Contributions can be made yearly (see chart below for contribution limits). When considering a conversion from a Traditional IRA seek professional tax advice.

Now that you’ve understood what Self-Directed Roth IRA is and who it benefits, you can check if you are qualified to open your own account. You can contribute to a Self-Directed Roth IRA if you have taxable income and your modified adjusted gross income is less than:

Married Individuals Filing Jointly:

• $214,000 for 2022
• $228,000 for 2023

Single or Head of Household & Married Filing Separate Returns (did not live with your spouse during the year) :

• $144,000 for 2022
• $153,000 for 2023

Married Filing Separate Returns (you lived with your spouse at any time during the year):

• $10,000 for 2022
• $10,000 for 2023

In 2022, you can contribute up to 100% of your compensation or a maximum of $6,000 ($7,000 if 50 and over.)

In 2023, you can contribute up to 100% of your compensation or a maximum of $6,500 ($7,500 if 50 and over.)