Getting Started with a Self-Directed IRA

Traditional IRAs are the most common retirement plans. Anyone with earned income can use a Traditional IRA. Account owners can contribute pre-tax dollars towards retirement. Taxes are due when you take a distribution upon retirement. You can make contributions of up to $6,000 yearly. Those who are 50 or older can make a catch-up allowance of an extra $1,000. Contributions may be tax-deductible, and earnings grow tax-deferred.

Traditional IRA Benefits

• Tax-deductible contributions
• Tax-deferred earnings
• Only pay taxes on withdrawn funds
• RMDs begin at age 72
• Can invest in any permissible alternative asset to build retirement wealth

Who Is Eligible for a Traditional IRA?

• Anyone with taxable compensation received during the given year.
• Individuals under the age of 72 at year’s end.
• Married individuals (under 72) who earned income during the year can open their IRAs.
• Bonus: If married and filing jointly, only one of you has to meet the compensation requirement. The employed spouse can contribute to the account on behalf of the unemployed spouse.
• Traditional IRA account holders who want more control over their investment decisions. They can transfer their existing funds to a self-directed account at Midland. They can also move funds from an old employer 401(k) into a self-directed plan.

2023 Traditional IRA Contribution Limits

Annual Contribution: $6,500
Catch-Up Contribution: $1,000

Roth IRAs are a favored plan for eligible individuals who can make post-tax contributions of up to $6,000 yearly. They present unique savings and distribution terms not available in other plans. Eligibility depends on two factors. One, you must have earned income. Two, your modified adjusted gross income (AGI) cannot exceed the limits set for Roth IRAs.

Unlike a Traditional IRA, you pay taxes on contributions upfront. So, when you are eligible to take a distribution, you don’t pay taxes. The catch-up contribution of $1,000 applies to those 50 or older. Contributions are not tax-deductible. But, after five years from the account setup date, all earnings grow tax-free. You can take withdrawals without any penalty at the age of 59 1/2.

Roth IRA Benefits

• Post-tax contributions
• Tax-deferred earnings
• Roth conversions from Traditional IRAs
• No RMDs (Required Minimum Distributions)
• Can invest in any permissible alternative asset to build retirement wealth

Who Is Eligible for a Roth IRA?

• Anyone with taxable compensation received during the given year.
• Those whose modified adjusted gross income (AGI) is within Roth limits.

2023 Roth IRA Contribution Limits

Annual Contribution: $6,500
Catch-Up Contribution: $1,000

Simplified Employee Pension (SEP) plans are great for small businesses. SEP IRAs allow self-employed, partners, or corporation owners a low-cost, easy way to provide retirement benefits for employees. Employers can make discretionary, tax-deductible contributions of up to 25% of each employee’s compensation or the maximum of $61,000 in 2022. Start providing tax-deferred retirement benefits to yourself and your employees today!

SEP IRA Benefits

• Flexible employer and employee tax-deductible contributions
• Minimal start-up and facilitation fees
• RMDs (required minimum distributions) begin at age 72
• Flexible employer contributions
• Existing IRA or employer-sponsored plan can rollover or transfer into self-direction
• Can invest in any permissible alternative asset to build retirement wealth

Who Is Eligible for a SEP IRA?

• Anyone 21 or older with at least $550 in taxable compensation.
• Employees who have worked three out of five years for an employer.
• Employers are also considered employees. Consult with a CPA or financial advisor for specific contribution guidelines.

2023 SEP Contribution Limits

Annual Contributions: 25% of net earnings up to $66,000

SIMPLE IRAs tailor to small businesses with fewer than 100 employees. Employees may choose to defer a pre-taxed portion of their compensation into the plan. Employees include self-employed individuals. Contribution limits for employees under 50 are $14,000 and $17,000 for those 50 and older. Employers can match this contribution to up to 3% of employee compensation.

SIMPLE IRA Benefits

• Low start-up and facilitation costs
• RMDs (required minimum distributions) begin at age 72
• Employee salary deferral of up to $14,000
• Employer match between 1% - 3% of employee deferral
• Can invest in any permissible alternative asset to build retirement wealth

Who Is Eligible for a SIMPLE IRA?

• Self-employed individuals and/or small businesses with fewer than 100 employees in the previous year who do not sponsor any other retirement plan.

2023 SIMPLE IRA Contribution Limits

Employee under 50 Salary Deferral: $15,500

Salary Deferral Catch-Up Contribution: $3,500

Employer Matching Contribution: Between 1% - 3% of employee’s deferral
Employer Non-Elective Contribution: 2% of employee’s compensation

Coverdell Education Savings Accounts (ESAs) allow tax-advantaged savings benefits for a child's education. These funds pay for qualified educational expenses such as tuition, books, and uniforms. A self-directed ESA provides the ability to invest in alternative assets to build capital towards education. You can rollover or transfer funds from an existing ESA into a self-directed plan.

Education Savings Account (ESA) Benefits

• No need to make yearly contributions
• Contributions are not tax-deductible
• Earnings grow on a tax-free basis if they are less than the account holder’s annual adjusted gross income
• Qualified expenses for educational purposes
• Exceptions are available for individuals with special needs
• Can invest in any permissible alternative asset to build retirement wealth

Who Is Eligible for an Education Savings Account (ESA)?

To qualify, you do not need earned income. But, the account's beneficiary must either be under the age of 18 or an individual with special needs. You must also open an ESA with a cash deposit.

2023 Education Savings Account (ESA) Contributions

Annual Contribution (Per Beneficiary): $2,000

These tax-advantaged accounts allow individuals and families to save for qualified medical expenses. Self-directed HSAs enable plan owners to buy alternative investments. This gives them the potential to increase their capital in the account. Alternative assets include real estate, precious metals, oil and gas options, and more.

Health Savings Account (HSA) Benefits

• Tax-free earnings and withdrawals
• Funds pay for qualified medical expenses
• No loss of funds if you change health care plans
• Funds in the account continue to grow until needed
• No yearly distributions required
• Can invest in any permissible alternative asset to build retirement wealth

Who Is Eligible for a Health Savings Account (HSA)?

• Have a current plan with a high deductible
• Not have other healthcare coverage, including Medicare
• Not a dependent on another person’s tax return

2022 Health Savings Account (HSA) Contributions

Individual HSA Account: $3,850
Family HSA Account: $7,750
Additional Catch-Up Provision: $1,000