Traditional IRA

Introduction


 

  • A self-directed Traditional IRA is the oldest and most common type of individual retirement plan.
  • It may be opened by any individual who has earned income and wants to set aside a portion of their savings for retirement with tax advantages.
  • With a Traditional IRA, cash is contributed “pre-tax,” which means that the contribution is taken as a tax deduction from earned income for that tax year.
  • This cash then buys assets (stocks, real estate, gold, etc.) on a tax-deferred basis.
    • In other words, assets can be bought, sold, or traded within the IRA without incurring capital gains tax and without affecting the IRA holder’s personal taxes.
  • When you reach 59.5 years of age, you can begin to withdraw from the account (take a distribution) without penalty, and pay taxes on the amount withdrawn.

 

 

What are the Benefits of a Traditional IRA?

  • You are able to invest for retirement in an account that lets your investments compound each year without being hindered by taxes.
  • By contributing to your Traditional IRA, you may lower your tax bracket.
  • By investing with a Traditional IRA, as opposed to outside of an IRA, you are able to invest more money because taxes have not been deducted.
  • If you anticipate your tax rate at retirement to be lower than your current tax rate , your total tax burden may be less.
  • You can make contributions even if you are not eligible to make a Roth IRA contribution because your income is too high.
  • It can be used to invest in a wide variety of assets including real estate, precious metals, public and private stock, notes, and more.
  • Early distributions may be taken without penalties for unusual circumstances like first home purchase or certain medical expenses.
  • It can be a part of a generational wealth plan.

Traditional IRA Eligibility and Other Rules

  • If you have earned income and want to save for retirement on a tax-deferred basis, you may contribute to a Traditional IRA until you are 70½ years of age.
    • At that time, contributions must end, and required minimum distributions begin.
  • If you are eligible to contribute to an IRA, the amount you can deduct from your taxes will depend on whether you (or, in some cases, your spouse) are an active participant in a retirement plan at work.
  • You may have multiple IRA accounts (as many as you wish).
  • Assets may be moved between Traditional IRAs, without a tax consequence, at your discretion.
  • Contributions to HSAs and Coverdell ESAs do not count toward your annual IRA contribution limit.

It’s Easy to Invest for Retirement with a Traditional IRA

  • Open a Traditional IRA account with one of our listed Self-directed IRA Custodians
  • Put money in that IRA by rolling money over from an old 401(k), transferring from another IRA, and/or making a contribution
  • Buy real estate, precious metals, private equity, loans, and more

Learn more about Traditional IRA Contribution and Traditional IRA Distribution.

For more detailed information, feel free to Contact Us.

 

Facebook Comments: