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.