If you’re looking for an excellent way to plan for your retirement, consider setting up a self directed Roth IRA with a trusted custodian.
This type of IRA has several advantages over traditional IRAs, one of which is that you are able to withdraw your earnings entirely tax free as long as you follow the withdrawal rules set forth by the Internal Revenue Service. In addition, with a self-directed IRA, you can invest in non-traditional assets that are not available to you in a regular IRA retirement account.
With a traditional IRA, your contributions to your retirement plan are made with pre-tax dollars. While this lowers your tax liability right away and increases your take-home pay, you do have to pay tax on all of your money once you start taking disbursements.
People who are looking to get money when they retire without having to pay the tax man then should always choose a Roth IRA. In addition, a self-directed Roth IRA gives you a lot of flexibility. You can even continue to make retirement investments in some bonds, stocks CODs, real estate, and other commodities even after you reach the age of 70.5.
If this sounds like the retirement plan for you, then it’s time to set one up.
Steps for Setting up a Self Directed Roth IRA:
Before you open your Roth IRA, be sure that you have an emergency fund set aside for emergencies.
You do not want to have to withdraw your deposits before you retire, unless you are doing so for the purpose of first-time home ownership. Withdrawing any of your money before you reach retirement age will result in heavy penalties, since the entire purpose of an IRA is to provide you with income after you leave the workforce.
Next, be sure to settle as much debt as you can before you open your IRA. This is because in most cases, the interest you are paying on debt, including credit card debt, is higher than what you will earn in an IRA account. It is better for you to pay off these debts before you begin saving for retirement so that your money is working harder for you. Otherwise, you are going to be paying more in interest than what you are earning toward retirement. It’s just not a good use of your money.
Once you have an emergency fund set aside and you have paid off as many debts as you can, you will want to decide what kinds of funds or assets you want to invest in. It is also time to look at the fees you are willing to pay. Some investment firms offer IRAs that have very low fees, but they do not have very many investment options. If you are opening a self-directed Roth IRA, you probably want the ability to invest in numerous assets, so be sure to choose a company that will allow you to have as much control over your investments as possible.
Determine how much your minimum investment will be and include this amount in your monthly budget. You want to make sure you make this payment every month so that you meet your investment goals. If you don’t include it in your monthly budget, you could decide not to make a payment, which will put you further behind in terms of your retirement income.
Finally, open a self directed Roth IRA account, fund it, and begin investing. If you don’t have much experience with investing, seek out the assistance of a professional financial advisor to help you make your investment decisions. Having complete control over where your funds go is empowering, but if you don’t know what you’re doing, you could make some dire mistakes that could lead to severe consequences.
Tips for Choosing Your Self Directed Account Provider:
When you establish your IRA, make sure you have the ability to manage it completely online. This will allow you to get statements on demand and give you the ability to set up automatic drafts every month to make sure you actually make the contributions you plan to make.
As mentioned above, if you have the money taken out of your paycheck automatically, it will be easier to let the money go. If you have to make physical payments at the company, you might not make the best decisions.
Be sure to research your investment broker thoroughly before you choose the one to broker your self directed Roth IRA. There are some companies that will charge you a ton of fees for just about everything associated with your account and there are others that will only charge you an annual fee. You have the option of choosing which fee structure is better for you, but keep in mind that the fees you pay will reduce your investment returns over time.
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