Custodial or guardian IRAs (or guardian IRAs) are retirement accounts set up on behalf of minors by parents, grandparent or legal guardians and funded from earned income such as jobs or contract work.
An entity cannot acquire property for personal gain, such as vacation home rentals (as this would violate the prohibited transaction rule), nor invest in life insurance policies or certain collectibles.
Self-Directed IRAs
Traditional IRAs limit your investment options to securities approved for deposit into an IRA account, while self-directed IRAs offer greater freedom. They allow you to invest in alternative assets like real estate, precious metals (provided they meet purity standards), private equity investments and tax liens – these accounts often being managed by independent custodians rather than household brokerage firms that manage other IRAs.
Due to their more complex nature, custodians of self-directed IRAs typically charge higher fees. Furthermore, these firms may fail to properly evaluate your investment opportunities and could expose you to fraud.
Some investors may be drawn to unconventional investment options due to their promise of greater returns and diversifying retirement savings. It is essential, however, to select asset classes and investment managers carefully in order to avoid engaging in any illegal transactions.
Roth IRAs
Roth IRAs provide tax-free growth, making them ideal for anyone seeking to minimize taxes during retirement. Furthermore, these accounts also allow investors to withdraw investments without incurring taxes or penalties upon withdrawing them from an IRA account.
Roth IRA contributions can be made from earned income such as wages, salaries, commissions and bonuses. Contribution limits for single filers and married couples filing jointly is $5,500 annually with eligibility beginning to decrease if earning exceeds this limit.
Roth IRA investors often favor real estate as an attractive option, offering reliable dividend payments. Other investment classes may also provide cash dividends; investors can also choose bonds or certificates of deposit as potential assets to invest in. Unfortunately, not all custodians offer access to such investments – Schwab offers a robo-advisor service which can invest your Roth IRA with real estate at lower fees than many competitors.
Traditional IRAs
IRAs are tax-advantaged retirement accounts that allow you to save for your future while mitigating taxes on investments. An IRA may also provide more investment options than your employer’s retirement plan – such as stocks, bonds, mutual funds, exchange-traded funds (ETFs) and other forms of financial assets.
Traditional IRAs are the most prevalent type of retirement account. You can receive tax deductions on contributions you make and your earnings grow tax-deferred until retirement – when withdrawals will be taxed at your ordinary income tax rate.
Traditional IRAs can be contributed to by anyone earning taxable income, including self-employed individuals and small-business owners. You should, however, be aware of all of their rules and restrictions – such as taking mandatory minimum distributions starting at age 72 – so consulting a financial advisor is often best in helping determine which account would work for your specific circumstances.
SEP IRAs
Simplified Employee Pension Individual Retirement Accounts (SEP IRAs) follow many of the same rules and limits as traditional and Roth IRA accounts; however, they also include special provisions that make them particularly useful to small-business owners and self-employed people.
SEP IRAs stand out by allowing employers to contribute up to 25% of an eligible worker’s compensation; this figure far surpasses other retirement savings plans such as 401(k).
When opening a SEP IRA, look for a provider who makes setting it up easy while notifying employees about eligibility. Compare fees and investment options until you find one that suits your business goals. When speaking with potential providers about their setup process, see if they offer mobile apps or dashboards so you and your employees can easily access accounts; additionally ask whether support services will be provided should questions or issues arise as you work together.
