A Self Directed Roth IRA Offers Investment
Diversity as Well as Possible Tax Benefits

During the economic recession, many of my friends lost value in their IRAs.

Most of them had their IRAs in mutual funds that were heavily invested in the stock market. As the stock market fell, so did their retirement funds.

A friend of mine, April, always had a smug look on her face when everybody else would start griping about their IRAs.

One day I grabbed her in the parking lot after work and asked her, “Why do you look so satisfied when everybody else starts whining about their retirement money?

” Her answer surprised me. “Because I have a lot of my retirement money in gold. And it’s gone through the roof!” “How is that possible?

” I asked her. “I thought IRAs were just for stocks and bonds and so forth.” “No,” April explained. “I have a self directed IRA. I can invest in virtually anything.

And it’s a self directed Roth IRA, at that, so I don’t have to pay taxes on the money when I withdraw it.” Wow. That would explain her smug, satisfied looks.

Are you confident enough to manage your own investments? Do you plan to be in a higher tax bracket when you retire than you are now? Do you think the value of your investments is going to rise rapidly? Then a self directed Roth IRA may be the retirement choice for you.

What Is A Self Directed IRA?

A self directed IRA is one in which you choose and manage all your own investments. Legally, you may invest in virtually anything except life insurance and collectibles with one of these IRAs. Real estate is one of the most common investments with a self directed IRA, but you can invest in precious metals, private equity, franchises, tax liens, and almost anything else you can think of. You cannot, however, “self-deal,” that is, you couldn’t invest in a beach house and then go live there, at least not until retirement. You also can’t invest in your own business.

What About A Self Directed Roth IRA?

A self directed Roth IRA combines the features of a traditional Roth IRA with the diversity of a self directed IRA. Remember, with Roth IRAs, your investments are taxed when you contribute, but not when you withdraw them at retirement. Also, you are not required to stop investing at age 70 1/2 nor do you have to make minimum withdrawals at that point.

We already saw how April was able to avoid losing money in her IRA by investing in gold as it was skyrocketing. Let’s look at another example of how a self directed Roth IRA could benefit your retirement portfolio.
Doug Janssen has always been a smart real estate investor. When Roth IRAs were created back in 1997, he immediately opened a self directed Roth IRA and started leveraging his investments in real estate through his retirement fund. He was 32 years old at the time.

One of his properties is a beach house on a very ritzy section of the Florida coast. Doug has two problems right now: Because the investment is tax-free at withdrawal, he cannot take the normal real estate deductions now. The second problem is that the real estate market is suffering right now – Doug’s property has lost some value in the last couple of years.

He’s a smart shopper, though. He feels certain that the market will recover in a few years. Even though he doesn’t get to take any deductions now, he is only in his mid-40s. He believes that the property wills more than double in value by the time he retires. His profits on the sale of the house at that point will far outweigh the value of the deductions now.

The benefits of having a self directed Roth IRA can be many.

You have to be a savvy investor, though.

If you choose to manage your own investments in a self directed IRA, you had better know what you're doing.

As for the tax benefits of a Roth IRA versus a traditional IRA, talk to a professional financial adviser about what kinds of investments you'd like to make and whether taxing the money now or later would make more sense.

You may be able to beat the market and the IRS, too!

Return from Self Directed Roth IRA to Self Directed IRA


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