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Self-Directed Traditional IRA

Traditional Self-Directed IRAs

Overview

The Traditional IRA allows you to invest with pre-tax contributions that can compound over time in a tax-deferred environment. Plus, owners may qualify for tax deductions in addition to yearly contributions.

Anyone who has compensation* is eligible to make a contribution to a Traditional IRA.

The owner can begin withdrawing from the account at age 59½ (withdrawals before this are subject to penalty and taxes) and is required to take a distribution each year beginning in January after attaining the age of 72. For more information, see IRA Withdrawal Rules.

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Key Benefit

Grow your retirement account over time tax-deferred, while also possibly qualifying for yearly tax-deductions. While the money is taxed when withdrawn, often owners are in a lower tax bracket at that point in their life.

Traditional IRAs and taxes

IRA Eligibility

You can set up and make contributions to a Traditional IRA if you (or your spouse, if you file jointly) have earned income.*

If both you and your spouse have compensation, each of you can set up an IRA. You cannot participate in the same IRA.

IRA Contribution Limits

The IRS sets limits for how much you can contribute to a Traditional IRA each year. See the current year’s contribution limits.

What Makes a Traditional IRA Self-Directed?

When an IRA is referred to as a self-directed account, it simply means you can use the account invest in areas outside of the traditional stocks and bonds. That’s the primary difference between a self-directed and traditional retirement account — where you put those investment dollars.

With a self-directed IRA or 401(k), you can invest in a variety of areas, including:

  • Real estate
  • Private debt like corporate debt offerings, notes secured by deeds of trust or mortgages
  • Private equity-like stock of C-corporations, limited partnerships, LLCs and REITs
  • Precious metals, including gold, silver, platinum, and palladium
  • Cryptocurrency like Bitcoin

*Compensation is defined as the wages, salaries, commissions, bonus, alimony and any other amount that you receive for providing personal services. For individuals who are self-employed, sole proprietors and partners in a partnership, “earned income” is another term for compensation. Passive income such as interest, dividends and most rental income are not considered compensation for the purpose of funding an IRA.

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