how to open an sdira
with most ira providers you can only open a regular ira traditional or roth and only invest in the usual suspects stocks bonds and mutual funds etfs to open an sdira you ll need to remember that sdiras are self directed so custodians aren t allowed to give financial advice 1 as such traditional brokerages banks and investment companies usually don t offer them to their clients this means that you need to do your homework if you need help picking or managing your investments you should plan on working with a financial advisor traditional vs roth sdiraself directed iras can be set up as traditional or roth iras but keep in mind that the two account types have different tax treatments eligibility requirements contribution guidelines and distribution rules a key difference between a traditional and a roth ira is when you pay the taxes with traditional iras you get an up front tax break but you pay taxes on your contributions and earnings as you withdraw them during retirement when you contribute to a roth ira you don t get a tax break but your contributions and earnings grow tax free and qualified distributions are also tax free 5of course there are other differences to consider here s a quick rundown these same rules apply to whichever version of an sdira you have sdiras also have to abide by the general ira annual contribution limits for 2024 that s 7 000 per year or 8 000 if you re 50 or older up from 6 500 and 7 500 respectively for 2023 2investing in an sdiraself directed roth iras open up a large universe of potential investments in addition to the standard investments stocks bonds cash money market funds and mutual funds you can hold assets that aren t typically part of a retirement portfolio for example you can buy investment real estate to hold in your sdira account you can also hold partnerships and tax liens even a franchise business 1the internal revenue service irs forbids a few specified investments in sdiras whether it s the roth or traditional version for example you can t hold life insurance s corporation stocks any investment that constitutes a prohibited transaction such as one that involves self dealing and collectibles collectibles include a wide range of items among them antiques artwork alcoholic beverages baseball cards memorabilia jewelry stamps and rare coins note that this affects the kind of gold that a self directed roth ira can hold 8check with a financial advisor to be sure you aren t inadvertently violating any of the sdira rules advantages and disadvantages of sdirassdiras have lots of benefits but there are a few things to watch out for you can choose the assets you place in the accounttax breaks on earningspersonalized diversityeasy to accidentally violate a rule and distribute the entire accountyou can t get help from a custodiancomplicated fee structuresome investments are not very liquideasy to become a victim of fraud