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Self Directed Traditional IRA vs. Self-Directed Roth IRA
(Tax Deferred vs. Tax Exempt)

A truly Self-Directed IRA gives you total decision making power.  With this comes the freedom to choose for yourself which type of IRA is right for you.  The main difference between these two types of IRAs is the way the government deals with the taxes. 

A Self-Directed Traditional IRA is a tax deferred account. All earnings (accumulated interest, dividends, and capital gains) are taxed when they are withdrawn from the account.

A Self-Directed Roth IRA has the potential for all earnings to be tax free if you follow certain guidelines.  There are advantages and disadvantages to each type.  You can enjoy tax-advantaged retirement savings with both types of accounts.

PROFILE: Traditional IRA

Tax Advantages
         Tax-deductible contributions- exceptions if you or your spouse has a 401k,403b, or pension plan.  If so the amount you can deduct depends          on your adjusted gross income (AGI). Tax-deferred earnings-earnings are not taxed until distributions are taken.

Eligibility
         Income Limitations- based on MAGI (modified adjusted gross income)
              Full Contribution: Single $52,000 Married $83,000
              Partial Contribution: Single $62,000 Married $103,000
           
Contributions

Annual Contributions limits are: 2007- $4000    2008- $5000

Catch-Contribution limits- If you are age 50 and older you can contribute $1000 per year on top of the annual contribution limit.

Distributions

Penalty free after age 59 ½ and before age 70 ½. (account must be open for at least 5 years).           

Exceptions to penalty- 
             * Higher education costs for you or a family member
             * First time home buyers purchase expenses ($10,000 limit)
             * Death or disability
             * Qualified medical expenses

PROFILE: Roth IRA

Tax Advantages

Tax-free withdrawals- all earnings and principal are 100% tax-free!Eligibility
           Income Limitations- based on MAGI (modified adjusted gross income)
                        Full Contribution:          Single $99,000 Married $156,000
                        Partial Contribution:      Single $114,000           Married $166,000
           
            Age Limitations- none! You can continue to contribute even after age 70 1/2.Contributions
            Annual Contribution limitss: 2007- $4000 2008-$5000           

Catch-Contribution limits- If you are age 50 and older you can contribute $1000 per year on top of the annual contribution limit

Distributions-
           Penalty free- after age 59 ½ and unlike the traditional IRA, a Roth does not require investors to take minimum distributions            after age 70½. (account must be open for at least 5 years).           

Exceptions to penalty- 
            * Higher education costs for you or a family member
            * First time home buyers purchase expenses ($10,000 limit)
            * Death or disability
            * Qualified Medical expenses

So which type of IRA is right for you? 

According to Roccy DeFrancesco of the Wealth Preservation Institute, "Most people are usually best served by a Roth IRA".

Can I contribute to both a Traditional and a Roth IRA?
You do have the option to contribute to both a traditional IRA and a Roth IRA at the same time.  The total amount contributed to all can be no more than $4000 for 2007 and $5000 for 2008.

You can consult your financial advisor to help you decide what's best for you..My Way IRAfreedom to choose!