What is a Self-Directed IRA?
A self-directed IRA is an individual retirement account that offers alternative investments that are typically not allowed in standard IRAs. The main advantage of an IRA is its tax benefits. Standard IRAs only have limited choices as investments, while self-directed IRAs have many more options to invest in. This allows greater diversification of an individual’s portfolio. Popular alternative investments held in self-directed IRAs include precious metals and real estate. The account is administered by a custodian or trustee, but fully managed by the account holder. A self-directed IRA can be either a traditional IRA (tax-deductible contributions) or a Roth IRA (tax-free distributions).
Investors using a self-directed IRA must understand how they work, as all the responsibility lies on the account holder. The individual must have the initiative and do their own research, as they cannot receive any investment advice from the custodian. For some investments, while using a self-directed IRA, there are many strict rules the individual must follow. If not followed correctly, it can cause higher taxes, something the account is trying to avoid. There is also a fee structure that the individual should be aware of. The extra investment opportunities in a self-directed IRA can lead to more risk, so the investor must be wary of any possible mistakes.
How Can I open a Self-Directed IRA?
If you are looking to open up a self-directed IRA, GoldClub Direct has a step-by-step guide. To find this guide, go to the GoldClub Direct home page, and at the top of the page is a tab that says Precious Metals IRA. This page will tell you exactly what you need to do to open up an account. This entire process should take just 3 minutes. The steps you will need to take include:
- Open an account with GoldClub Direct
- Open an account with a trusted IRA custodian
- Fund your IRA
- Begin purchasing metals for vault storage
What Are The Requirements in a Self-Directed IRA?
As mentioned above, there are two types of IRA accounts you can open, a traditional IRA and a Roth IRA. These two accounts have different tax rules, eligibility requirements, contribution requirements, and distribution requirements.
With a traditional IRA, you receive a tax break when you contribute to the account, but have to pay taxes when you withdraw during retirement. With a Roth IRA, you do not receive any tax benefits during contributions, but when you withdraw, your distribution is tax-free.
Traditional IRAs include a mandatory minimum annual withdrawal once you turn 72, called required minimum distributions (RMDs). There is no required withdrawal with Roth IRA. With a Roth IRA, once you turn 59 ½ years old, withdrawals are tax-free and penalty-free. You can withdraw your contributions before that age, but if you withdraw your earnings, you will need to pay taxes on that amount. Traditional IRAs are also penalty-free once you turn 59 ½, but you will still need to pay taxes.
Self-directed IRAs must follow the general IRA contribution limits. In 2021, and 2022 the contribution limit for retirement accounts is $6,000 and $7,000 if you are over the age of 50. This amount increased from $5,500 ($6,500) in 2019. In 2020, they removed the age limit to contribute to both traditional and Roth IRAs. Before 2020, individuals over the age of 70 ½ could not make regular contributions to a traditional IRA.
Traditional IRAs do not have income limits to contribute to an account, however, there is an income limit for Roth IRAs. This is based on your filing status and income. That information can be found here. If you would like to find out more information about IRA contribution limits, you can click here.
Which products can I buy for my self-directed IRA?
Precious metals are available to include in self-directed IRAs. Gold and Silver are the most common precious metals stored in self-directed IRAs. Only specific types of bullion are accepted, as self-directed IRAs do not allow collectibles, which include some rare coins. Be sure to choose the approved bullion, as it could be rejected by the depository.
IRA-approved bullion must also meet a specific level of fineness. The minimum gold fineness is 0.995. The minimum silver fineness is 0.999. The minimum platinum fineness is 0.9995. The minimum palladium fineness is 0.9995. The American Gold Eagle is the only exception to this rule due to its popularity.
At GoldClub Direct we offer various products that are approved for self-directed IRAs. In order to see if the product is IRA eligible, go to the product page and click on specifications or coin highlights. Under the specifications or coin highlights tab, it will provide information on the product’s eligibility for a self-directed IRA.
All Updates and Market info are provided as a third party analysis and do not necessarily reflect the explicit views of GoldClub Direct LLC.. and should not be construed as financial advice.