As tax season approaches many taxpayers are looking at socking some money away in an IRA.  Before you open an IRA consider whether a Roth IRA is your best bet.

Roth Individual Retirement Arrangements were established by the Taxpayer Relief Act of 1997.  The Roth IRA was named for its chief legislative sponsor, the late Senator William Roth of Delaware.  Senator Roth was a strong proponent of tax cuts.  In 1981 he co-authored the Economic Recovery Tax Act of 1981.  As the legislative sponsor of the Roth IRA he brought forth an IRA that gives tax-free growth.

A Roth IRA is the least complex and possibly the most efficient tax sheltered account conceivable. It's most important benefit is its tax structure.  It is subject to the same rules that apply to a traditional IRA; however, you cannot deduct contributions to a Roth IRA.  Since taxes are paid prior to contributions all investment earnings into the Roth are tax-free.  It really comes down to the old adage, "would you rather pay on the seed or the crop?".  There are no required minimum distributions and qualified distributions are tax free.  Unlike the traditional IRA contributions may be made to it after you reach age 70 ½ and you are able to leave amounts in your Roth for your entire life.

An added benefit is that your Roth IRA can be self-directed into non-traditional assets.  Traditional investments such as stocks, bonds and mutual funds are not the only thing allowable.  Non-traditional investments include real estate, mortgage notes, first deeds of trust, tax liens, REITs, TICs, private placements and more.  Most traditional custodians of Roth IRAs do not allow these non-traditional assets.  You will need a custodian that specializes in self-directed IRAs.  Just as you perform your due diligence on your investment do the same for your custodian. A Roth IRA and a self-directed IRA are a dynamite combination that can grow your retirement account tax-free.