Setting Up a Self Directed IRA -What You Need to Know
Ever wondered how so many people are opening their own self directed IRAs and starting their journey to sure financial security? Well, stop wondering and get informed now, because time is of the essence.
Setting up a self directed IRA is so easy that there's no excuse to not get started right away.
Just make sure you do your homework and find the right account trustee/custodian for you and your goals.
Trustee/custodian offerings and fees can and will almost always vary from company to company, sometimes greatly.
It's important to know that if you want to take advantage of the most options possible you'd be better off not going with a brokerage.
Primarily because they will only offer more traditional investment avenues such as stocks, mutual funds, bonds, etc.
On the other hand, other trustee/custodians will offer amazing choices such as real estate, notes, tax lien/sales, and just about everything else allowable by the law.
You do have to be careful though because some of these companies will charge fees on a per transaction basis.
This is not good for you, the investor.
Especially if you're making real estate investments which can bring many miscellaneous fees that are associated with these kind of transactions.
The better choice would be a company that charges a flat fee on an annual basis, with no additional per transaction fees.
Okay, so you found the right trustee/custodian.
You opened an account.
The next thing to do is to close your traditional account and initiate your self directed IRA rollover.
This is easy, as you simply contact your current trustee/custodian and notify them of your intentions to start the self directed IRA rollover, and you're half way there.
Of course the next step is the transfer of funds.
Your new custodian will need you to provide them with the account information so you or your existing custodian can wire the funds directly into the new account.
It's helpful to transfer directly from one account to the other to avoid possible taxation.
Transferring the funds can take a little longer than most would think because the investments of your traditional account must be sold and liquidated before allocation into the new account.
For example, you can't just transfer stock holdings as if they were cash, they must be sold first.
All of this, of course, will be handled by your current trustee/custodian.
In the mean time you can immediately start looking for your first investment avenues for you new account.
Look at properties to buy, get some education about various real estate investing topics, and most importantly, find a good advisor for your investments.
Setting up a self directed IRA does not require you to make such important choices immediately, but some custodians will charge a fee for uninvested cash balances if you have money sitting around not doing anything.
Just another important reason to choose your trustee/custodian very carefully before making the switch.
Another reason for searching for an account that charges no uninvested funds fee, is if you DO decide to invest in such avenues such as real estate, you need cash on hand in the account to cover costs associated with holding real estate.
The absolute best time to invest in real estate would be right after the rollover when you have a large cash balance in the account.
The account can borrow money to buy a property, but that could subject the earnings whether it is rental income or profits from a sale to UBIT taxes.
There are a number of IRS publications that may want to brush up before making such investments, just so you know what makes the most sense for you and your investments prior to procurement.
Take a closer look at IRS Publications 529, 550, 560, 575, 590, and 598.
I'll be honest, you don't need to even learn them all, but you can look over them quickly for any information that may be relevant to you and your investments, and you can do it all online at the IRS's website.
In a nutshell these particular publications are relevant to you because they would cover rules on self directed IRA rollovers, allowable investments vehicles, and all taxes, withdrawals and deductions.
So there you have it! Get out there and make it happen, and don't let a lack of information frighten you because there's tons of sources online that can help you understand just how easy it is you set up your own self directed IRA account today.
Setting up a self directed IRA is so easy that there's no excuse to not get started right away.
Just make sure you do your homework and find the right account trustee/custodian for you and your goals.
Trustee/custodian offerings and fees can and will almost always vary from company to company, sometimes greatly.
It's important to know that if you want to take advantage of the most options possible you'd be better off not going with a brokerage.
Primarily because they will only offer more traditional investment avenues such as stocks, mutual funds, bonds, etc.
On the other hand, other trustee/custodians will offer amazing choices such as real estate, notes, tax lien/sales, and just about everything else allowable by the law.
You do have to be careful though because some of these companies will charge fees on a per transaction basis.
This is not good for you, the investor.
Especially if you're making real estate investments which can bring many miscellaneous fees that are associated with these kind of transactions.
The better choice would be a company that charges a flat fee on an annual basis, with no additional per transaction fees.
Okay, so you found the right trustee/custodian.
You opened an account.
The next thing to do is to close your traditional account and initiate your self directed IRA rollover.
This is easy, as you simply contact your current trustee/custodian and notify them of your intentions to start the self directed IRA rollover, and you're half way there.
Of course the next step is the transfer of funds.
Your new custodian will need you to provide them with the account information so you or your existing custodian can wire the funds directly into the new account.
It's helpful to transfer directly from one account to the other to avoid possible taxation.
Transferring the funds can take a little longer than most would think because the investments of your traditional account must be sold and liquidated before allocation into the new account.
For example, you can't just transfer stock holdings as if they were cash, they must be sold first.
All of this, of course, will be handled by your current trustee/custodian.
In the mean time you can immediately start looking for your first investment avenues for you new account.
Look at properties to buy, get some education about various real estate investing topics, and most importantly, find a good advisor for your investments.
Setting up a self directed IRA does not require you to make such important choices immediately, but some custodians will charge a fee for uninvested cash balances if you have money sitting around not doing anything.
Just another important reason to choose your trustee/custodian very carefully before making the switch.
Another reason for searching for an account that charges no uninvested funds fee, is if you DO decide to invest in such avenues such as real estate, you need cash on hand in the account to cover costs associated with holding real estate.
The absolute best time to invest in real estate would be right after the rollover when you have a large cash balance in the account.
The account can borrow money to buy a property, but that could subject the earnings whether it is rental income or profits from a sale to UBIT taxes.
There are a number of IRS publications that may want to brush up before making such investments, just so you know what makes the most sense for you and your investments prior to procurement.
Take a closer look at IRS Publications 529, 550, 560, 575, 590, and 598.
I'll be honest, you don't need to even learn them all, but you can look over them quickly for any information that may be relevant to you and your investments, and you can do it all online at the IRS's website.
In a nutshell these particular publications are relevant to you because they would cover rules on self directed IRA rollovers, allowable investments vehicles, and all taxes, withdrawals and deductions.
So there you have it! Get out there and make it happen, and don't let a lack of information frighten you because there's tons of sources online that can help you understand just how easy it is you set up your own self directed IRA account today.
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