Saving for retirement is an important financial goal to achieve. While we all may have the same basic goal, each of our journeys to retirement is unique. Based on your investment preferences, you may seek to open one retirement account type over another.
Some investors may look to receive a tax break now by contributing to a Self-Directed Traditional IRA. Other investors may want to receive their tax break in retirement through a Self-Directed Roth IRA. For those who desire even more flexibility and control, a Self-Directed Roth IRA LLC may be a better option.
Let’s explore what a Self-Directed Roth IRA LLC is, how it differs from a Self-Directed Traditional IRA, and its benefits.
Before diving into the details of a Self-Directed Roth IRA LLC, it’s essential to understand the basics of a Roth IRA, Traditional IRA, and Self-Directed IRA.
Roth IRA – An individual retirement account (IRA) that allows account holders to contribute after-tax dollars, which grow tax-free. Then, when you make a qualified distribution in retirement, you won't owe income tax on the money you withdraw, including earnings.
Traditional IRA – An IRA that allows account owners to contribute pre-tax dollars, which grow tax-deferred. Then, in retirement you are required to pay taxes on the contributions and earnings.
Self-Directed IRA – An IRA that allows account holders to invest in a broader range of investments outside of Wall Street including real estate, cryptocurrency, and private equity. You can open a Self-Directed IRA as a Self-Directed Roth IRA or Self-Directed Traditional IRA.
One of the most appealing features of a Broad Financial Self-Directed IRA is its ability to have checkbook control. This is where the Self-Directed Roth IRA LLC comes in.
A Self-Directed Roth IRA LLC (also called a Checkbook IRA) is a powerful retirement account that allows you to manage your IRA’s assets on your own time, without going through your Self-Directed IRA custodian for every transaction.
By adding an entity, such as a Limited Liability Company (LLC), and a checking account in the name of your LLC, you get to perform you get to perform your everyday transactions on behalf of your IRA. This includes most of the transactions that typically must go through a custodian including investment purchases, sales, and maintenance.
By using your Self-Directed Roth IRA LLC checking account, you can invest in real-time by simply writing a check or sending a wire. This also allows you to avoid paying everyday transaction fees usually associated with classic Self-Directed IRAs.
Similar to a standard Roth IRA, the earnings within your Self-Directed Roth IRA LLC grow tax-free. You pay taxes when you contribute to the account, so in retirement you can make tax-free distributions.
By establishing an LLC for your Self-Directed IRA and a checking account for your LLC, you gain checkbook control. This gives you direct control over your funds to make real-time investments while saving on everyday transaction fees.
With a Self-Directed IRA you can diversify your portfolio across several alternative asset classes, which generally reduces risk and increases the potential for steady returns.
Under the umbrella of your Self-Directed Roth IRA LLC, you can manage multiple investments under one entity. This may simplify record-keeping, reporting, and tax-filing requirements.
Investing through an LLC can add a layer of liability protection to your retirement account. All investments are in the name of your Self-Directed Roth IRA LLC, not in your personal name.
Next, transfer or rollover all – or a portion of – your funds from an existing retirement account such as an IRA or 401(k) or make an initial contribution.
Broad Financial creates a specialized, IRS-compliant LLC for your IRA and takes care of the paperwork. You are appointed as the LLC’s non-compensated manager, authorizing you to place all investments.
Then, open a checking account in the name of the LLC at the bank of your choice. This upgrades your IRA LLC to the power of checkbook control. After, instruct Madison Trust to send funds to the IRA LLC checking account.
Invest by simply writing a check or sending a wire from your new LLC checking account! Since the specialized LLC is owned by your IRA, all assets purchased are automatically part of your tax-advantaged retirement account.
Selecting the right retirement account is an important decision when planning your financial future. Investors looking to maximize their retirement savings and have greater control of their investments may want to consider a Self-Directed Roth IRA LLC.
Broad Financial’s dedicated team is here to answer all of your questions about self-directed investing. Schedule a free discovery call today to get your questions answered!
Disclaimer: Broad Financial LLC does not provide legal, tax, or investment advice. Please consult with your tax or legal advisor before making investment decisions.
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