Prior to founding Rocket Dollar, I worked for many years as a Certified Financial Planner. Continuing education is a requirement of maintaining my CFP designation, so it’s not uncommon to find me parked in an easy chair on the weekends reading about all types of individual retirement accounts.
The staff at Rocket Dollar lives and breathes this stuff as well. One thing we’ve found through our many conversations with customers is that people often don’t realize they can always speak directly with Rocket Dollar’s team of experts to learn more about the benefits of retirement investing using Self-Directed (SD) Traditional IRAs and SD Solo 401(k)s.
But there’s another type of retirement account that’s often not on a customer’s radar, and it’s one that can significantly impact their long-term retirement savings.
Should You Open a Self-Directed Roth IRA or a Self-Directed Traditional IRA?
A Roth IRA can be a powerful investment tool by itself, and adding in the self-directed benefit brings it to another level. Many customers who had corporate-sponsored retirement plans and rolled them over into a Rocket Dollar SD Solo 401(k)s are unaware of the benefits of opening or converting their accounts into an SD Roth IRA.
It’s important to note that even if you have a traditional IRA or an SD retirement account, you also can have an SD Roth IRA. You are also able to convert your traditional IRA into an SD Roth IRA – call us and discuss your options since there could be significant financial benefits to having an SD Roth versus another retirement account.
We are happy to answer any questions you might have – and these are questions your financial planner probably won’t be interested in fielding, since he or she won’t receive any commissions if you do decide to open an SD Roth IRA.
How a Roth IRA works
An SD Roth IRA follows the same rules as a regular Roth IRA except it has the checkbook control aspect. IRS regulations for Roth IRAs and Roth contribution limits can seem a bit complex, but our team of experts is happy to provide insight into how you can take full advantage of this type of IRA. Rocket Dollar offers Roth versions of both its individual retirement accounts, and converting from an SD traditional IRA to an SD Roth IRA costs just $100.
There are a few key differences to note:
With an traditional IRA, you get a valuable annual tax deduction for the funds you put into the account each year. As that money grows, it is all tax-deferred – you’ll pay taxes on your gains when you take deductions. Also, you’ll have to start taking deductions when you reach age 70-1/2, regardless of whether you need to tap into those funds or not.
With a Roth IRA, you don’t get an annual tax deduction because contributions are made with post-tax dollars. However – and here’s the most crucial part – as your Roth IRA grows, those gains are all tax free since you’ve already paid your taxes.
Tax-free growth and tax-free withdrawals could be invaluable tools to establishing a secure financial legacy for your heirs. Also, there are no mandatory distributions based on age – you can continue to contribute as long as your income falls within certain limits.
Pay Taxes Now, or Kick the Tax Can Down the Road?
Ultimately, it comes down to choice: Do you want to pay taxes on IRA contributions now or later? If it’s the later, then go the route of an SD traditional IRA. But if the answer is now, then consider a, SD Roth IRA.
As we’ve grown, we’ve quickly become a go-to source of information about all types of retirement plans. We specialize in this space, and we are here to answer any questions you might have. Schedule a call with one of our retirement experts today to discuss the finer points of a Self-Directed Roth versus a Self-Directed traditional IRA and which type of retirement savings plan works best for you.