If you’re still not convinced starting an Self-Directed IRA (individual retirement account) is the best move for you, here are some considerations to can help you decide.
Your Current Contributions Can Be Tax Deductible
Self-Directed IRA contributions can generally be deducted from your taxable income. This deductibility is determined by your income level and whether or not you are covered by a 401(k) or another workplace retirement plan. If you are qualified to make partially or fully deductible contributions, it’s best to seize the opportunity to start a Self-Directed IRA today and reap its benefits in your retirement.
Your Anticipate Your Tax Rate at Retirement To Be Lower
Since withdrawals from a Self-Directed IRA will be taxed at retirement, creating one is a smart move if you expect to be in the same tax bracket (or lower) in the future. This allows you to enjoy the enhanced compound growth of your investments.
You Need a Tax Deduction
Since you are making contributions on a pre-tax basis, funding your IRA lets you lower your tax obligations while growing your savings simultaneously. For example, if you contribute $6,000 to your individual retirement account, you can deduct that amount from your taxable income.
This is different from Roth IRAs, which take a post-tax approach and allow individuals to enjoy tax-free withdrawals in the future.
You Are Looking for More Investment Options
Various Self-Directed IRA alternative investments are available today, and hiring Self-Directed IRA services gives you access to these options. Besides conventional assets like stocks and bonds, you can diversify your portfolio with real estate, a business partnership, or precious metals.
You Are Not Eligible for a Roth IRA
Not everyone is qualified to open a Roth IRA as it has specific income limitations. If your earnings exceed those limits, a traditional individual retirement account may be the best for your unique situation.
You Want to Maximize Your Savings
As mentioned, you can use your Self-Directed IRA for real estate, precious metals, or other investments of your choice. More importantly, traditional IRA accounts also let you make contributions even if your income exceeds the earning limit. While these contributions will no longer be tax-deductible, they can still grow tax-deferred in your account.
Please consult your tax professional for the plan that best suits your individual needs.