A self-directed Roth IRA LLC is a unique marriage that brings together the complete investment authority and tax benefits. With a Roth LLC, you serve as the manager of the LLC with power to make any transactions as long as the IRS does not prohibit them. With a Roth version of a retirement account, you contribute after-tax dollars or money the government has already taxed. Therefore, in retirement, the IRS gives you a favor in return by allowing you to withdrawal the Roth IRA earnings and original contribution tax-free. Many investors believe their money will work better for them in a Roth account. Moreover, for people who wish to buy real estate with a self-directed IRA, the Roth version provides a lot of flexibility for the future. For example, you can buy a retirement home with a Roth because you won’t owe taxes when you decide to reside in the home in retirement. However, moving into an investment property bought with a traditional self-directed IRA would result in a “distribution,” triggering hefty taxes.
Enjoying the best tax advantages
Some people make too much money to contribute to a Roth IRA, or at least that’s what they imagine. In reality, you can make “backdoor” contributions by converting money every year even if you don’t qualify to make typical Roth contributions. Experts say the traditional IRA isn’t as tax efficient for real estate unless you want to use it as a legitimate rental property investment for passive income. Profit from a Roth self-directed IRA are tax-free and the money also grows tax deferred. Whether you invest in a real estate property that goes up in value over time, precious metals, joint ventures or franchises that make you millions, you don’t pay taxes on the growth now or in the future. Even though investing in a 401(k), traditional IRA or traditional self-directed IRA lowers your taxable income, it’s difficult to argue about the advantages of the Roth for the future.
Taking control of your future
With a Roth IRA LLC, you enjoy complete investment authority because you have the required custodian but the custodian only performs reporting functions demanded by the IRS. With checkbook control and a LLC account, you make investments by writing checks. The key is having a LLC or limited liability company owned by the IRA and managed by you instead of a third-party administrator.
Knowing your limits
While the IRA forbids investors from putting retirement money into some items and forbids conflicts of interest, Roth IRA LLC helps many people meet their retirement goals. The IRS does not want investors to put money into alcoholic beverages, life insurance, some collectibles, gems and several other assets. Alternative investments give many investors the chance to dream, especially if they are late to the retirement savings push. Even if you retire in less than a decade, you can often increase the odds of fattening your retirement fund with alternative investments including raw land, tax liens, S-corporation shares, farms, FOREX, art galleries, ranches, commodities and privately held businesses.
When you retire, a Roth IRA account gives you another pleasant surprise. You don’t have any RMD or required minimum distributions with a Roth. With a traditional account, the IRS mandates you start taking money out of your account at certain ages. If you decide to use before-tax dollars with a traditional self-directed IRA, keep some money in cash reserves so you can take out the mandatory money without having to sell real estate or other important assets just to make the RMD.
At New Standard IRA, we enjoy helping our clients in need of self-directed IRA providers who provide maximum freedom and flexibility. For more information on the Roth IRA LLC, please contact us.