Can You Have an IRA Without a Custodian?

Custodial IRAs are individual retirement accounts set up on behalf of your child by their parents, grandparents or legal guardian and converted into standard IRAs when they reach adulthood (usually 18-21 in most states).

Self-Directed IRAs

Self-directed IRAs (SDIRAs) allow investors to have complete control of their investments, with investments that span real estate, precious metals, mortgage notes and startup equity all suitable investments. There are a few rules to abide by with SDIRAs – such as not conducting prohibited transactions with disqualified people; using qualified investment companies only; and not investing in collectibles that don’t meet IRS purity standards.

Not knowing the true cost of alternative assets can be tricky. Custodians typically list purchase prices or purchase prices plus returns in account statements; it is wise to verify information independently by getting a valuation from a third party or researching tax assessment records. It’s also crucial for SDIRA owners to remain alert for scammers that take advantage of them and prey upon SDIRA holders; red flags to watch out for include new investment companies with no track record and claims of high rates of return.

Tax-Advantaged IRAs

IRAs offer special tax benefits, such as pretax contributions and deferral of investment earnings. These accounts are popular among individuals looking to save for retirement and other expenses, and can be invested in assets like real estate, precious metals and limited liability companies.

If your workplace plan offers rollover funds, they can be transferred into an IRA at a bank, broker or robo-advisor. Roth or Traditional accounts provide annual contribution limits as well as withdrawal restrictions.

SEP (Simplified Employee Pension) IRAs provide another tax-advantaged IRA option, specifically tailored for small business owners and self-employed individuals. While similar to a traditional IRA in terms of functionality and reporting requirements, SEP IRAs allow higher contribution limits with reduced reporting requirements – often used for investing in private equity investments, real estate and privately held businesses. When opening self-directed IRAs it’s advisable to speak to an accredited financial planner first as these may also offer tax advantages.

Traditional IRAs

IRAs can offer savers several tax breaks. Often funded with pre-tax dollars, investment earnings grow tax-deferred until retirement. They can be transferred from workplace plans with IRS income limits in mind; or you could inherit one from your spouse and manage it however you choose.

If your workplace savings plan doesn’t offer a company match or simply offers limited investing choices, establishing an IRA might be the solution. Contributions may be deducted from your taxes in the current year and withdrawable contributions may even qualify as tax breaks during withdrawals based on age and life expectancy – potentially saving significant tax costs come tax time! Unlike with some other retirement accounts, withdrawals can still be made penalty-free until age 73!

Roth IRAs

Roth IRAs offer investors with long-term investment goals a great long-term investing solution. Because these accounts are funded with after-tax funds, withdrawals of investment earnings will be tax-free in retirement. However, income taxes and an early withdrawal penalty of 10% may apply if funds are withdrawn before age 59 1/2 unless one of the IRS exceptions apply.

Roth IRAs can be opened at any bank or brokerage firm that offers tax-deferred accounts, but to ensure your money is safeguarded in case of bankruptcy, make sure the institution you select meets FDIC-compliance. Also check that they do not charge trustee or account maintenance fees.

Anyone earning earned income during any year may make contributions to a Roth IRA up to their modified adjusted gross income threshold limit, with those making more than $138,000 single filing and $218,000 joint filing not being eligible for contributions.


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