How you can make the most of a Roth IRA when saving for retirement
As the economy continues to face ongoing volatility, many retirement savers are opening self-directed Roth IRAs to enable complete flexibility over their assets. Self-directed Roth IRAs allow you to direct your own assets instead of relying on a custodian to make decisions on your behalf. Plus, Roth IRAs can offer additional advantages in terms of tax benefits, portfolio diversification, and profit potential. Here, U.S. Money Reserve explains what you can and can’t buy with a Roth IRA so that you can make a fully informed decision about which type of account to open.
What Is a Self-directed Roth IRA?
A self-directed Roth IRA is an individual retirement account that can offer tax advantages for retirement savings. You can contribute to a Roth IRA if you have taxable compensation and your modified adjusted gross income is less than a certain amount. Though contributions are taxable, qualified withdrawals aren’t. Qualified withdrawals—or distributions—are earnings that you withdraw when your account is at least five years old, and you are at least 59½.
If you’re choosing between a Roth IRA and a traditional IRA, it’s helpful to know the main differences. Unlike traditional IRAs, Roth IRAs have no required minimum distributions (RMD). Also, while most contributions to traditional IRAs aren’t taxable, qualified withdrawals are.
What Can You Hold in a Self-directed Roth IRA?
You can purchase numerous traditional assets through a self-directed Roth IRA, such as bonds, mutual funds, individual stocks, certificates of deposit (CDs), and exchange-traded funds (ETFs). You can also use a self-directed Roth IRA to purchase many alternative assets, including the following.
- Undeveloped land: Unused land can serve as a portfolio diversifier that can offer tax advantages and asset appreciation. Plus, land is an asset that is a finite resource.
- Real estate: Holding property in your self-directed Roth IRA can improve your cash flow, generate impressive returns, diversify your portfolio, and offer tax advantages. Office buildings or apartment buildings can be great places to start.
- Promissory notes: Including a promissory note in your self-directed IRA can help you to generate a greater return than you would if you kept your funds in a low-interest bank account.
- Tax lien certificates: Purchasing a tax lien certificate means you’re buying a delinquent tax lien on a property and earning profit from the liquidation of the collateral securing the loan or earning profit while the property owner pays interest on the certificate. Purchasing a lien certificate can reduce the amount of capital you need, generate an advantageous return rate, and offer a single payment once your tax lien has been resolved.
- Water rights: These rights enable property owners to access bodies of water adjacent to land that they control, generating income from a scarce resource.
- Start-up companies: Time it right, and you could benefit from a budding company’s emerging products or services. Buying shares in a company during or before its pivotal growth period has the potential to offer generous rewards.
- Livestock: Whether you opt for pigs, cattle, horses, or chickens, including livestock in your IRA can diversify your portfolio, especially as your livestock breed.
- Gold coins and other precious metals: Holding IRS-approved gold, silver, palladium, and platinum bars and coins in an IRA can help you diversify your portfolio and protect against the risk of inflation. U.S. Money Reserve carries a vast range of precious metals to help its clients develop strong portfolios.
Although a self-directed Roth IRA can hold numerous alternative assets, you can’t include the following items in your account: real estate for personal use (such as vacation homes), artwork, jewelry, stamps, fine wine, life insurance policies, antiques, gems, comics, and collectible coins.
Holding Assets in a Self-Directed Roth IRA
You can transfer funds from a traditional IRA, SIMPLE IRA, or SEP IRA into a new or existing Roth IRA, or you can simply open a brand-new self-directed Roth IRA.
It’s worth keeping in mind that the SECURE Act has now raised the age for taking required minimum distributions from 70½ to 72. However, those who are younger than 72 could take a voluntary distribution and convert it to a Roth IRA, which can be a good move to make when estate planning. Either way, a self-directed Roth IRA can be ideal for those looking to diversify their portfolios while accumulating retirement savings.
If you’re interested in holding precious metals in a Roth IRA, U.S. Money Reserve can help you learn about the benefits of gold, silver, platinum, and palladium coins. Download the free precious metals IRA information kit to learn more.
About U.S. Money Reserve
U.S. Money Reserve was founded in 2001 and has helped over 550,000 clients learn about the benefits of diversifying with precious metals. U.S. Money Reserve prides itself on offering peace of mind for clients who are looking to add precious metals to their portfolios and take advantage of their long-term financial benefits. U.S. Money Reserve offers a wide selection of government-issued gold, silver, platinum, and palladium coins, each of which is fully backed for its purity, weight, and content.
Learn more about U.S. Money Reserve.