Steps to Setting up a Self-Directed IRA
Steps to Setting up a Self-Directed IRA
Steps to Setting up a Self-Directed IRA
The first step to setting up a self-directed/real estate IRA is determining your eligibility. There are two types of self directed IRAs available: Traditional Self Directed IRA and a Roth Self Directed IRA. In order to be eligible for a Traditional IRA, the applicant must be under 70 years of age and have earned income. Earned income includes salaries, tips, commissions, personal fees, taxable alimony and/or any other monetary compensation received in exchange for providing personal services. Eligibility for a Roth IRA is based on meeting certain income level (Modified Adjustment Gross Income) requirements. For 2011, if your tax filing status is
1. Single filer, Head of Household or Married Filing Separately (and you did not live with your spouse during the year), you cannot make a contribution to a Roth IRA if your modified adjustment gross income is greater than $122,000.
2. Filing jointly with a spouse, your modified adjusted gross income cannot be greater than $179,000
3. Married Filing Separately and you live with your spouse, then your modified adjustment gross income may not exceed $10,000
After determining your eligibility, decide which type of IRA you want to have. With a traditional IRA, your contributions are not taxed but your withdrawals are; and with a Roth IRA, your contributions are taxed (and tax deductible), but your withdrawals are never taxed unless you make a withdrawal before the age of 59 . Once you are certain of what IRA you're eligible for and which type of IRA you're willing to invest, all that's left to do is find a brokerage firm, fill out an application and decide how you want to fund your self directed IRA. You can fund your self directed IRA in two ways:
1. Make annual contributions to your IRA
2. Rollover from an existing IRA (one that is not self directed), 401k or retirement plan
Managing your own IRA will allow you to start using your savings for investments that will further expand your portfolio regardless of the current economic climate. One example is using a non recourse loans to invest in real estate. Real estate is amongst the more "recession-proof" of possible investments when used as a rental. Not only does the income from real estate investments stay steady during times of economic hardship, it is also available at lower and more attractive prices due to tax liens and foreclosures. You could use non recourse loans to help you with your investment if you do not have enough saved up yet and use your newly acquired property to generate more income for your retirement funds.
Another example of a potential investment is business financing. As long as you do not personally own more than 50% of the business/franchise and it is not owned by a "disqualified person," you can utilize a portion of your IRA to expand an existing business. The income generated from the business you fund can go back to your IRA account, just the same as the income acquired from any other investment.
While real estate and business investment are only two of many possible options, any investment that you make with your IRA funds will both expand your retirement funds and be eligible for tax deferment privileges. Investing in real estate allows for using non recourse loans to finance real estate purchases, which can garner even faster gains given the right purchase. Getting started on setting up and building your self directed IRA is a great way to take control of your financial future. A self-directed (or real estate IRA) is quite simple to set up and assistance is available if you need it.
Be considerate to be selfish Enjoy Your self In Avoriaz Rediscover yourself while to trek Choosing Service Over Self-interest Empowerment: Self-mastery Choosing the Wedding Gown for Yourself Infidelity Help - How to Stop Comparing Yourself to Her Treat Yourself – Have a Spa Day Treat Yourself – Have a Stress Free Holiday This Summer How to Fix Your Credit Yourself Using LED Camping Lights Should You Acquire Yourself A Nintendo Wii Console This Season Protect Yourself by Performing Your Own Background Check