Types of Self Directed IRAs

A Self Directed IRA is the “true” form of IRA. When Congress created the Qualified Retirement Plans (such as the IRA) back in 1974 the idea was simple:

To allow you to grow your investment faster by giving IRA accounts TAX FREE STATUS during the accumulation period.

However, over the years many IRA companies have placed artificial restrictions on IRA owners. These restrictions limit what investments your IRA can hold. It is important to note that these restrictions are artificial and not part of the ACT as written by Congress.

Unlike many IRA companies, IRA Club allows the IRA owner (you) to select investments that are best for your future. The IRA Club does not place artificial restrictions on your investments. This allows for an opportunity for enhanced returns.

There are a few things to consider when choosing the type of accounts such as age, when you wish to retire, your tax bracket and your contribution capability. Please seek out the services and advice of a tax professional.

Self Directed Investment	Traditional	Roth	SEP	SIMPLE
May make any investment that is not a prohibited transaction	YES	YES	YES	YES
Money In
Contributions	Are Income Tax Deductible	Are Not Income Tax Deductible	Are Income Tax Deductible	Are Income Tax Deductible
To make a new contribution to an IRA	Must have Earned Income	Must have Earned Income	Must have Earned Income	Must have Earned Income
Transfers from one IRA account to another IRA account	Unlimited Amount	Unlimited Amount	Unlimited Amount	Unlimited Amount
Earning Limits	Are Unlimited	Are Unlimited using a Backdoor Roth	Are Unlimited	Are Unlimited
Money Out
Qualified distributions are	Taxed as Ordinary Income	Income Tax-Free	Taxed as Ordinary Income	Taxed as Ordinary Income
Must take an annual Required Minimum Distribution	YES-Must start at age 72	NO Required Minimum Distribution	YES-Must start at age 72	YES-Must start at age 72
Passes to a beneficiary	As a Traditional IRA Account	As a Roth IRA Account	As a Traditional IRA Account	As a Traditional IRA Account
When You Pass Away
Can your beneficiary keep investing the funds in the Inherited IRA	YES	YES	YES	YES
Super Bonus for all IRAs Will the IRA be subject to probate?	NO IRAs do not go through Probate if there is a named beneficiary	NO IRAs do not go through Probate if there is a named beneficiary	NO IRAs do not go through Probate if there is a named beneficiary	NO IRAs do not go through Probate if there is a named beneficiary

 

Traditional IRA

• A Traditional Self Directed IRA is a tax-deferred retirement savings account. Self Directed IRAs may make a wide range of investments. With a Traditional Self Directed IRA, you receive an income tax deduction at the time of your IRA contribution.

Roth IRA

• A Roth Self Directed IRA is a retirement savings account that allows your money to grow tax-free. Self Directed IRAs may make a wide range of investments. You fund a Self Directed Roth IRA with after-tax dollars, meaning the taxes have already been paid. With a Roth Self Directed IRA, you receive an income tax benefit at the time of distribution. This can be very beneficial if your investments grow in value.

SEP IRA

• A SEP (Simplified Employee Pension) Self Directed IRA is a type of traditional IRA ideal for any small business owner, or 1099 employee, who has no or very few employees. Self Directed IRAs may make a wide range of investments. SEP Self Directed IRAs allow large annual contributions. For 2022, business owners can contribute up to 25% of income or $61,000, whichever is less.

SIMPLE IRA

• A SIMPLE (Savings Incentive Match Plan for Employees) Self Directed IRA is a type of traditional IRA for small businesses and self-employed individuals. Self Directed IRAs may make a wide range of investments. Unlike a Traditional IRA where only the Individual makes the contributions, a SIMPLE IRA requires both the individual and the business to make the contribution. The maximum contribution for 2022 is $14,000 plus a $3,000 catch-up is you’re 50 or older.

Health Savings Account

• An HSA is triple tax-free. Contributions to an HSA are tax-deductible, the growth in value inside the HSA is income tax-free, and the distributions to pay medical costs are not taxable. In addition, idle funds inside your HSA can be invested just like the funds inside a Self Directed IRA. If you are enrolled in a high-deductible health insurance plan, you qualify for an HSA.

Learn more about the other types of Self Directed IRA accounts we offer or contact us today to learn more! 312-795-0988