What is an IRA (Individual Retirement Arrangement)?
While there are many types of IRA, an IRA is simply a savings plan that allows you to put away money for retirement, all done through a tax advantaged arrangement. Further, the IRS defines an IRA as:
“a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. The account is created by a written document. The document must show that the account meets all of the following requirements…”
The original IRA first established is what is typically referred to as a “Traditional IRA.” Typically, with a Traditional IRA, you can deduct some or all of your contributions in a “pre-tax” manner and the funds are not taxed until one takes out distributions from the IRA. To contribute to one’s IRA, they must be under the age of 70 1/2 and must have compensation received. Also, as the “I” in IRA refers to Individual, an IRA may not be co-jointly owned, but may be passed on to beneficiaries upon death.
In addition to the Traditional IRA, other IRAs potentially available to individuals are Roth IRAs, SIMPLE IRAs and SEP IRAs. All of these IRAs can be self-directed as well.
So, learn more about the exciting prospects of self-directing your IRA. Think of all the possibilities at your finger tips by having “checkbook control” of your IRA assets and investing as you see fit, not based upon how your broker tells you to invest!