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The Individual Retirement Arrangement or IRA account was established to help taxpayers save for retirement while enjoying tax privileges. IRA accounts enable the fund to grow and overtake inflation by way of investing in assets that could generate income – tax-free.
There are several types of IRAs, namely:
• The traditional IRA – Contributions are deductible from the taxable income of the owner. Any income derived from asset investments are pooled together with the total contributions until retirement. All qualified withdrawals made from the account are treated as ordinary income and taxable as such.
• The Roth IRA – Allows an account owner to make tax-free withdrawals upon retirement but contributions are taxed as part of the regular income of the individual.
• The SEP IRA for small businesses
• The Savings Incentive Match Plan for Employees or SIMPLE IRA – This is an employer-based account similar in structure to the 401K where the employer is required to match the contributions of the employees
• The self directed IRA – This account allows the account owner to make decisions regarding investments in behalf of the account.
In light of the recent recession and the stock market crash, many account owners have decided that a self directed IRA could provide them with tools required to help them achieve their retirement goals: the flexibility of investment types and control over the account administration. However, the total control is not possible even in a self directed IRA because the IRS mandates the appointment of a custodian or trustee to act as overseer for the account. The IRS prohibits an account owner to be his own account’s custodian.
The custodian or trustee may be a brokerage firm, a bank, a savings & loan organization, a credit union or any similar organization duly accredited by the IRS to provide custodial services for self directed IRA accounts. Custodians are generally tasked with basic functions such as: holding of assets owned by the account in its behalf; the provision of administrative duties such as documentary processes; and, the delivery of information regarding the rules and regulations that pertain to the account and its investments.
While these are basic services provided by custodians for self directed IRA accounts, some of them would offer more such as collection services for real estate leasing arrangements. Hence, self directed IRA fees can also vary from one custodial firm to another, depending on the degree of their involvement in the account’s transactions. These fees can also differ depending on the amount of the transaction, if transaction fees are billed. However, some custodians waive some self directed IRA fees for larger accounts like transaction fees because these are embedded in the retainer fees they charge.
Custodial rates as well as level of service could be so varied among qualified custodians that it would be prudent to shop around for the best fit for your specific needs. Reputation should also be one among the most important criteria for selection aside from your rapport with the chosen custodian rather than the cost. After all, it is your future, your retirement dreams and aspirations that are at stake here.
There are several types of IRAs, namely:
• The traditional IRA – Contributions are deductible from the taxable income of the owner. Any income derived from asset investments are pooled together with the total contributions until retirement. All qualified withdrawals made from the account are treated as ordinary income and taxable as such.
• The Roth IRA – Allows an account owner to make tax-free withdrawals upon retirement but contributions are taxed as part of the regular income of the individual.
• The SEP IRA for small businesses
• The Savings Incentive Match Plan for Employees or SIMPLE IRA – This is an employer-based account similar in structure to the 401K where the employer is required to match the contributions of the employees
• The self directed IRA – This account allows the account owner to make decisions regarding investments in behalf of the account.
In light of the recent recession and the stock market crash, many account owners have decided that a self directed IRA could provide them with tools required to help them achieve their retirement goals: the flexibility of investment types and control over the account administration. However, the total control is not possible even in a self directed IRA because the IRS mandates the appointment of a custodian or trustee to act as overseer for the account. The IRS prohibits an account owner to be his own account’s custodian.
The custodian or trustee may be a brokerage firm, a bank, a savings & loan organization, a credit union or any similar organization duly accredited by the IRS to provide custodial services for self directed IRA accounts. Custodians are generally tasked with basic functions such as: holding of assets owned by the account in its behalf; the provision of administrative duties such as documentary processes; and, the delivery of information regarding the rules and regulations that pertain to the account and its investments.
While these are basic services provided by custodians for self directed IRA accounts, some of them would offer more such as collection services for real estate leasing arrangements. Hence, self directed IRA fees can also vary from one custodial firm to another, depending on the degree of their involvement in the account’s transactions. These fees can also differ depending on the amount of the transaction, if transaction fees are billed. However, some custodians waive some self directed IRA fees for larger accounts like transaction fees because these are embedded in the retainer fees they charge.
Custodial rates as well as level of service could be so varied among qualified custodians that it would be prudent to shop around for the best fit for your specific needs. Reputation should also be one among the most important criteria for selection aside from your rapport with the chosen custodian rather than the cost. After all, it is your future, your retirement dreams and aspirations that are at stake here.
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