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Self-directed traditional IRA

A Traditional IRA is the oldest and most common type of retirement plan. A Self-Directed Traditional IRA allows you to select the investments that you choose within your plan. The most common technique of funding a Self-Directed Traditional IRA is by making a contribution to your account. You can also roll funds from an existing employer plan, such as a 401(k), pension plan or another Traditional IRA. If your current Traditional IRA does not allow self-direction, you may also transfer those funds to a Preferred Trust Self-Directed Traditional IRA so that you may choose your investments. If you have earned income and want to set aside a portion for retirement on a tax-deferred basis, you can contribute to Self-Directed Traditional IRA until you are 70½ years of age.

Other reasons to consider a Self-Directed Traditional IRA:

  1. You are eligible to deduct your contribution now and anticipate your tax rate at retirement to be lower than your current tax rate.
  2. If your income is over $114,000 (single) or $166,000 (joint) for 2007, and $116,000 (single) or $169,000 (joint) for 2008, since you are not eligible to make a Roth IRA contribution.
  3. You need a tax deduction, lowering your current tax bill. (Some investors still contribute to a Traditional IRA even without the tax deduction).
  4. You are looking for a larger choice of investment options for your funds.

If you are eligible to contribute to an IRA, the amount you can deduct from your taxes will depend on whether you (or, in some cases, your spouse) are an active participant in a retirement plan at work.

How Much Can You Contribute to a Traditional IRA or Self-Directed Traditional IRA?

  1. 2007 - $4,000 plus $1,000 catch-up if you are age 50 or over. (See Internal Revenue Service Publication 590 for more information.)
  2. 2008 - $5,000 plus $1,000 catch-up if you are age 50 or over. (See Internal Revenue Service Publication 590 for more information.)