Maybe you’ve already decided that you know you want a Checkbook IRA. You already know the benefits: fast and flexible investing, minimal account maintenance and ongoing fees, and plenty of freedom for your IRA choices. But there’s still one thing you have to decide upon before you create a Checkbook IRA: what type of account do you want to use?
Generally speaking, Traditional IRA and Roth IRA accounts are great for “everyone” and open to most investors. For the self-employed, a Solo 401(k) plan might be possible—and advantageous, given that it has higher contribution limits. Let’s explore these in a little greater detail so you have a better sense of the landscape of Checkbook IRAs for yourself.
Traditional IRA: The Classic Choice for Retirement Savings
A Traditional IRA is a well-known, widely used option for retirement investing. Its key advantage? Contributions are typically tax-deductible, meaning you can reduce your taxable income for the year you make contributions.
This setup works well if you expect to be in a lower tax bracket when you retire, given that withdrawals are taxed as ordinary income. With a Checkbook IRA, type of account offers the same level of flexibility, allowing you to invest in assets like real estate or private equity without the delays and fees associated with custodial approval.
Roth IRA: Pay Taxes Now and Enjoy Freedom Later
For those who want to focus on long-term tax-free growth, the Roth IRA is a nice alternative. With a Roth IRA, contributions are made with after-tax dollars. This means you won’t receive an immediate tax deduction. The payoff comes when you retire: withdrawals, including any gains, are tax-free as long as you’ve held the account for at least five years and meet certain age requirements.
Roth IRAs are particularly helpful for younger investors or those who anticipate being in a higher tax bracket during retirement. With a Checkbook IRA set up as a Roth account, you can make tax-free investments in opportunities that meet your tastes, experience, and needs. This account type also sidesteps RMDs entirely, giving you more control over when and how you access your funds.
Solo 401(k): Big Savings for the Self-Employed
If you’re self-employed or run a small business with no full-time employees other than yourself and possibly your spouse, a Solo 401(k) plan might be your best option. This account type allows for significantly higher contribution limits, which gives you more “runway” as an investor.
Choosing the Right Fit for Your Financial Goals
Which one of the above is right for you? Well, we can’t say for sure—since everyone reading this is going to have different needs and experiences. The right Checkbook IRA account type depends on your situation, including your employment status, expected retirement tax bracket, and how much you plan to contribute. Each option has unique strengths. That might be the tax-deferred benefits of a Traditional IRA, the tax-free growth potential of a Roth IRA, or the high contribution limits of a Solo 401(k). By carefully considering what works best for you, you’ll be in a better position to choose the account that works best for your financial future.
Want to know more about getting started with Checkbook Control? This article is a step in the right direction because it will help you understand the choices available. You can also reach out to us and let us know if you have any questions. Give us a ring at 844-8876-IRA (472) to learn more and we’ll be glad to talk to you about your next steps.
Want to find out more about starting up your Checkbook IRA for the first time? Contact TurnKey IRA at 844-8876-IRA (472) for a free consultation. Download our free guide or visit us online at www.turnkeyira.com.
