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Self Directed Roth IRA

The idea of a self directed Roth IRA may at first strike you as being something of an uncertain gamble, a risk that seems quite unnecessary to take. Why would anyone want to take on board specific responsibility for negotiating and deciding exactly how their retirement fund is spent, when there are experts who will do the job for you? Let me ask another question - why wouldn't you?

In today's rather turbulent world, it has become increasingly clear that banks and major financial institutions have become somewhat blasé with our money, taking bigger and bigger risks, putting a huge number of eggs in rather shaky looking baskets, and are now reaping from the risks they sowed. The trouble is, that was our money they were sowing, and there don't look to be many crops appearing for the spring as a result.

For this reason, a vast number of people are now considering a self directed Roth IRA as a way to keep a tighter check on their money, and have a very clear say in how and where that money is used. In addition, a self directed Roth IRA also allows you to take advantage of certain possibilities that could well see you make rather more cash than you could ever hope to achieve through a standard Roth IRA. If you like to get your hands a little dirty, and like to feel more in control of your future finances, then read on and find out what the options are for a self directed Roth IRA.

In order to get a self directed account set up the first step which you would normally need to take is to contact a reputable broker, explaining that you wish your Roth account to be self directed. Once you have done this you'll be given two forms to fill in, the first being the application for the Roth IRA account. The second form will only apply if you have an existing Roth IRA account or similar investment which you are converting or rolling over to a Roth IRA account.

You mustn't be in too much of a hurry for the transfer to take place, as it can easily take up to forty-five days for this to finalize. However, it's well worth the wait because by doing it this way you are going to be avoiding many of the usual limiting policies such as the sixty-day rule, and any possible tax liabilities or penalties.

In terms of guidelines, restrictions and regulations, a self directed IRA will fall within the same requirements. If it fails to do this then it may be disqualified as not being legitimate, and you could face severe tax penalties. Your broker should certainly be reliable and trustworthy, well aware of these regulations and make sure that at no point during the course of the investment do the payments cause tax liabilities or penalties to be necessary.

There are limitations on who can manage or set up a Roth IRA for you, and these include only those approved by the IRS. The broker or representative will be classed as the trustee or custodian of the account, and usually this will be a bank, a credit union that is federally insured, a savings association or loan association.

Clearly, it is imperative that throughout the course of the investment, especially if income might alter over time, the custodian or trustee must make sure that no contributions exceed the maximum allowed contributions for that period. It's also worth noting that in this case, all contributions must also be made in cash.

One of the advantages of a self directed Roth IRA account is the fact that you are able to purchase properties which then go on to generate an income. Not many people realize this, and if you have enough capital to invest, or enough capital already invested that you are considering rolling over or transferring to a Roth IRA account, then this can represent a great way to make extra money.

The basic way in which this works is that with your Roth IRA you are able to purchase real estate property with pre tax money, whilst still holding on to the title of the property outside of the remit of the Roth IRA. The property can be either in your name, or in the name of your IRA custodian or trustee. This property can easily generate income from rentals, as well as being an asset highly likely to continue to climb in its basic value.

A self directed Roth IRA is able to allow you the flexibility to decide whether your money is invested in real estate, and if so, which properties and where, or in bonds, stock or other assets which fall within the approved assets permitted. In this way, you have more control over the risks that might be posed, as well as knowing that your money remains tax free, and fully available when you retire. Back to "Roth IRA vs. Traditional IRA".