The main advantage of a Roth IRA over a Traditional IRA is that if you qualify to make contributions, all distributions from the IRA are tax-free. Furthermore, unlike traditional IRAs, you may contribute to a Roth IRA for as long as you continue to have earned income (for a traditional IRA – you can’t make any contributions after you reach age 70 1/2).
Self-Directed Traditional IRA | Self-Directed Roth IRA |
Tax deductible contributions | Contributions are not tax deductible – contributions made to a Roth IRA are from after tax dollars |
Distributions may be taken by age 59 1/2 and are mandatory by 70 1/2. | No Mandatory Distribution Age – with a Roth IRA you are not required to ever take distributions |
Taxes are paid on amount of distributions (10% excise tax may apply if withdrawn prior to age 591/2) | No taxes on distributions if rules and regulations are followed |
Available to everyone; no income restrictions |
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Funds can be used to purchase a variety of investments (stocks, real estate, precious metals, notes, etc.) | Funds can be used to purchase a variety of investments (stocks, real estate, precious metals, notes, etc.) |
IRA investments grow tax-free until distribution (tax deferral) | All earnings and principal are 100% tax free if rules and regulations are followed – No tax on distributions so maximum tax-deferral |
Income/gains from IRA investments are tax-free | Income/gains from IRA investments are tax-free |
Purchasing a real estate property and taking possession of the property after 59 1/2 would be subject to tax | Purchasing a domestic or foreign real estate property then taking possession after 59 1/2 would be tax-free |
To learn more about the advantages of converting a Traditional IRA to a Self-Directed Roth IRA LLC please contact one of our IRA experts at 800-472-0646.