Different from a traditional IRA, contributions to a Roth IRA are not tax deductible. Withdrawals are generally tax-free. For example – tax free for principal withdrawals and that the IRA owner’s age must be at least 59½ for tax free withdrawals on the growth portion above principal. An advantage of the Roth IRA over a traditional IRA is that there are fewer withdrawal restrictions and requirements. Transactions inside an account which include capital gains, dividends, and interest, do not incur a current tax liability.
A Self-Directed IRA LLC can be funded by any type of IRA including a Roth IRA.
Some of the benefits of using a Roth IRA to fund your LLC include:
- Direct contributions to a Roth IRA may be withdrawn tax free at any time. Rollover converted (before age 59½) contributions held in a Roth IRA may be withdrawn tax and penalty free after the “seasoning” period (currently 5 years). Earnings may be withdrawn tax and penalty free after the seasoning period if the condition of age 59½ (or other qualifying condition) is also met.
- If there is money in the Roth IRA due to conversion from a traditional IRA, the Roth IRA owner may withdraw up to the total of the converted amount without penalty, as long as the “seasoning” period (currently five years) has passed on the converted funds.
- Up to a lifetime maximum $10,000 in earnings withdrawals are considered qualified (tax-free) if the money is used to acquire a principal residence for a first time buyer. This house must be acquired by the Roth IRA owner, their spouse, or their lineal ancestors and descendants. The owner or qualified relative who receives such a distribution must not have owned a home in the previous 24 months.
- Contributions may be made to a Roth IRA even if the owner participates in a qualified retirement plan such as a 401(k). (Contributions may be made to a traditional IRA in this circumstance, but they may not be tax deductible.)
- If a Roth IRA owner dies, and his/her spouse becomes the sole beneficiary of that Roth IRA while also owning a separate Roth IRA, the spouse is permitted to combine the two Roth IRAs into a single plan without penalty.
- Assets in the Roth IRA can be passed on to heirs.
- The Roth IRA does not require distributions based on age. All other tax-deferred retirement plans, including the related Roth 401(k), require withdrawals to begin by April 1 of the calendar year after the owner reaches age 70½. If the account holder does not need the money and wants to leave it to their heirs, a Roth can be an effective way to accumulate tax-free income. Beneficiaries who inherited Roth IRAs are subject to the minimum distribution rules.
- Roth IRAs have a higher “effective” contribution limit than traditional IRAs, since the nominal contribution limit is the same for both traditional and Roth IRAs, but the post-tax contribution in a Roth IRA is equivalent to a larger pre-tax contribution in a traditional IRA that will be taxed upon withdrawal.
- On estates large enough to be subject to estate taxes, a Roth IRA can reduce estate taxes since tax dollars have already been subtracted. A traditional IRA is valued at the pre-tax level for estate tax purposes.
- Most employer spons0red retirement plans tend to be pre-tax dollars and are similar, in that respect, to a traditional IRA, so if additional retirement savings are made beyond an employer sponsored plan a Roth IRA can provide tax risk diversification.
Roth IRAs allow you to invest after-tax funds and also allow you take tax free distributions when you reach the age of 59 1/2. You can remove your contributions (but not your earnings) at any time. The IRS does not tax the gains or income on assets inside an IRA. You can contribute a maximum of $5,000 as of 2012 ($6,000 if you are over the age of 50). Your ability to contribute to a Roth IRA is based on income. You can check current requirements here
A Roth IRA LLC, is an IRS approved structure that allows you to use your retirement funds to make real estate and other investments tax-free. The Self-Directed Roth IRA involves the establishment of a limited liability company (“LLC”) that is owned by a Roth IRA and managed by you the beneficiary of the Roth IRA.
The self-directed Roth IRA LLC allows you to invest in real estate, tax liens, private loans, small businesses, franchises and more tax free. Most importantly is that the self-directed Roth IRA LLC can eliminate transaction, holding or asset-based fees that are traditionally charged by custodians.
To setup your Self Directed Roth IRA LLC with Checkbook Control call us at:
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