Self-Directed Traditional IRA
Traditional IRAs allow you to save pre-tax money for retirement. If you are eligible to deduct contributions on your income taxes now and you anticipate a lower tax rate in retirement, then this is a good plan to consider.
A self-directed traditional IRA works exactly like a typical traditional IRA. The only difference is the added benefit of using alternative investments to build retirement income. And, there’s a bonus: you are in control of choosing those assets. You can invest in things like real estate and private equity instead of only stocks, bonds, and mutual funds.
If you have an employer-sponsored plan, you can roll those funds into a self-directed IRA. The account can also be funded with cash contributions or by transferring funds from an existing IRA.
Features
- You choose your own investments
- Tax-deferred earnings
- Pre-tax contributions that may be tax-deductible
- Penalty-free distributions start at age 59 ½
- Required minimum distributions (RMDs) begin at age 70 ½ if you turned 70 ½ in 2019, 72 if you turned 72 in 2020 – 2022, and 73 if you turn 73 in 2023.
Eligibility
- Must have received earned income as defined by IRS Publication 590-A
DISTRIBUTIONS
Distributions are included in your annual income tax liability. If you are under the age of 59 ½ and take a distribution, there is a 10 percent early withdrawal penalty in addition to income tax that may be due. There are a few exceptions to the 10 percent penalty:
- You inherited the IRA
- You are disabled
- You pay qualified education expenses for you or your dependents
- You are a first-time home buyer (up to $10,000)
- You pay medical expenses exceeding 10 percent of adjusted gross income
Did You Know You Can Use Your Former Employer Plan to Invest in Alternative Assets?
If you have a 401(k), 403(b), or other savings plan with a former employer, watch this short video to understand how you can use it to invest in a variety of alternatives assets like real estate, mortgages, private placements, cryptocurrency, start-up businesses and more.
Contribution Limits of a Self-Directed Traditional IRA
| Traditional IRA | 2022 | 2023 |
|---|---|---|
| Annual Contribution | $6,000 | $6,500 |
| Catch-Up Contribution (age 50 and older) | $1,000 | $1,000 |
