What is a Self-Directed Roth IRA?
A Roth IRA is a retirement account in which after-tax income is set aside each year. Limits are specified as to how much. Earnings on Roth IRAs grow tax free, and can be withdrawn tax free if the account owner is 59 ½ and the account has been open for at least five years.
A self-directed ROTH IRA simply means that the account holder decides how to invest the funds.
 Benefits of a Self-Directed Roth IRA
Following are five benefits of a self-directed Roth IRA.
You Control the Account: As with all self-directed IRAs, you control how, when and what you want to invest in. You can take advantage of a plethora of investments opportunities. Among them, real estate, notes, tax liens, mortgages, stocks, bonds, mutual funds, etc.
No Limit on Profits: There is no ceiling on the amount of profits a self-directed Roth IRA can earn. Imagine the benefit of this for your retirement portfolio.
Tax-Free Investments: The profits from a self-directed Roth IRA are tax free upon withdrawal. When you consider the vast profits an account like this can amass, this is a critical benefit.
Withdraw Without Penalty: Contributions made to a self-directed Roth IRA can be withdrawn at any time without being taxed or penalized. This includes profits as well, as long as the account has been established for at least five years, and the account holder is at least 59 ½ years old.
Protected Investment: Because it is a retirement asset, a self-directed Roth IRA is a protected asset in most states.
Wealth Transfer: A self-directed Roth IRA is an excellent way to transfer wealth to survivors upon your death. Your beneficiaries can be anyone you choose, eg, a spouse, dependents or an estate. The beneficiary is then allowed to treat the account as if it were their own IRA, leaving it to their survivors.
Everyone Qualifies: A Roth IRA can be set up for almost anyone – even a minor child, as long as they have “earned” income.
Contribution Guidelines of a Self-Directed Roth IRA
Before making contributions to a Self-Directed Roth IRA, be sure to know the contribution rules and limits that apply. For married persons filing jointly, the following contribution guidelines apply for 2008; if you adjusted gross income or AGI is less than $169,000, then you can make a contribution to a Roth. The AGI limit for this year is $116,000 in for single and/or head of household filers.
Phase-out limits starting at around $10,000 lower than the limits listed here do apply.
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