self-directed roth IRAs

A Roth IRA is an individual retirement savings account you can contribute to using after-tax dollars, paying Income tax on the initial contribution. All earnings grow at a tax-free rate, and when you retire, you can withdraw all distributions tax-free.

With a self-directed Roth IRA, you can diversify outside the traditional portfolio of stocks, bonds and mutual funds. You can use your saved retirement funds to invest in alternative assets. Roth IRA alternative investments include real estate, private equity, precious metals and so much more.

Roth IRA Contribution Limits

Currently, the annual contribution limit is $7,000 for savers under 50. But if you are older than 50, you can contribute $8,000 per year. This contribution limit applies across all IRA accounts. So, if you own multiple IRAs, you can spread the annual limit across them all.

Tax Benefits of Roth IRAs

There are a few significant tax benefits to a Roth IRA.

  • First, you pay taxes on the contribution of funds. The advantage is that all funds and any increase will grow at a tax-deferred rate and are available to withdraw tax-free. 
  • Second, you can leave your funds untouched for as long as you desire. A traditional IRA requires you to start taking distributions. 
  • Lastly, you can take distributions out penalty-free at any time if you follow the qualifying reasons listed below under distributions.

Taking Distributions from Your Roth IRA

To avoid paying a 10% penalty, you may need to meet specific criteria.

  • IRA holder has completed age 59 ½
  • Death or disability of the account holder
  • The account holder is a first-time homebuyer who takes a maximum withdrawal of $10,000

Calculating Your Modified Adjusted Gross Income

To contribute to your Roth IRA, your income must first be within the federally set income limits. If your income is within the limits, you must calculate your modified adjusted gross income to get your annual contribution amount. If your MAGI surpasses the allowed limits, your Roth contributions will phase out.

To determine the percentage of the annual contribution limit, retirement savers within the phase-out range will subtract their income from the maximum level and divide that amount by the phase-out range.

If you contribute more than federal law allows, you may have to subsequently withdraw the excess contributions. If not remedied, the offending account will be liable for tax penalties. The excess contributions will be subject to a 6% tax rate per year that they remain in the IRA.

Roth IRA income limits for 2021 and 2022:

If your filing status is
And your modified AGI is
You can contribute
Married filing jointly or qualifying widow(er)
Less than $198,000
Up to the limit
More than $198,000 but less than $208,000
A reduced amount
$208,000 or more
Single, head of household, or married filing separately and you didn’t live with your spouse at any time during the year
Less than $125,000
Up to the limit
More than $125,000 but less than $140,000
A reduced amount
$140,000 or more
Married filing separately and you lived with your spouse at any time during the year
Less than $10,000
A reduced amount
$10,000 or more

How to Open a Self-Directed Roth IRA

how to open a self-directed Roth IRA

Opening a self-directed Roth IRA is a relatively simple process. Here is a general guide on how to open a self-directed Roth IRA.

  1. Determine your eligibility: Before opening a Roth IRA, ensure you are eligible to contribute.
  2. Complete the application: Next, you must complete an application form. You’ll need to provide your name, address, Social Security number and employment details.
  3. Fund the account: After your application gets approved, you will need to fund your Roth IRA. You can do this by withdrawing money from your bank account, transferring funds from an existing IRA or 401(k) or rolling over funds from a qualified retirement plan.
  4. Choose your investments: With a self-directed Roth IRA, you can choose from many investment options, including stocks, bonds, mutual funds and alternatives such as real estate, precious metals and private equity. You will be responsible for managing your account and making all investment decisions.

How to Diversify a Roth IRA

Diversification is a valuable investment strategy for any retirement account, including a Roth IRA. Diversification can reduce risk and increase potential returns by spreading your investments across different asset classes, sectors and geographic regions. Here are some ways to diversify a Roth IRA.

  • Invest in different asset classes: Roth IRAs offer various investment options, including stocks, bonds, mutual funds, ETFs, real estate and alternative investments. To diversify your Roth IRA, consider investing in a mix of these asset classes based on your savings goals, risk tolerance and time horizon.
  • Choose different sectors and industries: Within each asset class, you can further diversify your portfolio by investing in diverse industries. For example, if you invest in stocks, you can choose from sectors such as health care, technology, energy and consumer goods.
  • Consider international investments: Investing in international stocks and bonds can provide exposure to different regions and economies and help diversify your Roth IRA. You can invest in international mutual funds, ETFs or individual stocks and bonds.
  • Rebalance regularly: As your investments grow and change over time, frequently rebalance your portfolio to maintain your desired asset allocation and risk level. Rebalancing involves selling some investments and buying others to realign your portfolio with your investment goals.
  • Seek professional advice: Diversifying a Roth IRA can be a complex process, and requesting professional advice from a financial adviser is crucial. They can help you develop a diversified investment strategy based on your unique needs and goals.

Diversification can help reduce risk and increase potential returns over the long term.

Roth IRA Alternative Investments

One of the advantages of a self-directed Roth IRA is that it allows for a broader range of investment options, including alternative investments. Alternative investments typically do not fit into traditional asset classes, such as stocks and bonds, and may have different risk and return characteristics. Here are some alternative investments that can be in a self-directed Roth IRA.

How Does Accuplan Improve the Roth IRA?  

You can do more with a Roth IRA from Accuplan. Invest beyond traditional stocks and bonds. With Accuplan Benefits Services, you can open a self-directed Roth IRA and invest in alternative assets like real estate or precious metals. Take control of your retirement with a self-directed IRA and invest the way you want.

Frequently Asked Questions

Below are some frequently asked questions we receive regarding Roth IRAs.

Anyone can set up and contribute to a Roth IRA if they meet the following eligibility requirements.

  • The account owner has received a taxable salary or wage over the calendar year.
  • The MAGI of the account holder does not exceed the IRS-mandated Roth IRA income limits.

Depending on your MAGI, you may not be eligible to contribute to a Roth.

If your MAGI is below the limits decided by the IRS and you have earned income in the contribution year, you may put money into both a 401(k) and Roth IRA. Your MAGI will determine many different benefits you may receive. Still, for retirement accounts, it determines if you are eligible to contribute to a Roth and if you can deduct your traditional IRA contributions.

To calculate your MAGI, you’ll first calculate your adjusted gross income. Then, you’ll add any deductions specified by the IRS. MAGI is always the same or greater than your AGI.

The primary difference between these two account types is when taxes are due. Roth IRA contributions and investments are immediately taxable, while traditional IRAs delay taxes until taking distributions.

Roth IRA owners pay taxes upon contributing to the IRA but receive no tax break benefits. However, they benefit from paying zero taxes on their IRA funds when they retire.

Traditional IRAs are almost exactly the inverse. You’ll pay no taxes while contributing to the IRA, and contributions can be fully or partially tax-deductible. Taxes for traditional IRAs are then due upon retirement when you withdraw distributions.

Open a Self-Directed Roth IRA With Accuplan

open a self-directed Roth IRA with Accuplan

At Accuplan, we offer self-directed retirement accounts, including Roth IRAs. Our self-directed IRA allows you to invest in a wide range of alternative assets, such as real estate, private equity and precious metals, which may not be available through traditional IRA custodians. We also provide educational resources and support to help you manage your self-directed IRA. Open a self-directed Roth IRA with us at Accuplan today.