If you’re considering taking control of your retirement future by opening a new self-directed IRA, chances are good that you’ll consider funding your new account by rolling over assets from one or more of your existing IRAs.
Depending on whether you’re participating in an employee sponsored retirement plan at work, as well as your annual income, you may be eligible to contribute up to $5,000 to your account each year (or up to $6,000 per year if you’re age 50 or older). But these annual contributions will only allow you to accumulate relatively limited amounts in your account. In order to maximize the total value of your self-directed IRA, you’ll probably also want to roll over some of your existing retirement accounts into your self-directed IRA.
Why would it matter that you accumulate as much as possible into your self-directed IRA? Remember that with self-directed IRAs you have the ability to invest in many types of investments, including asset classes such as private equity and real estate. And these investments often require a significant amount of resources – just think about how much money you might need to buy a desirable piece or rental real estate.
So should you roll all of your existing retirement accounts into your self-directed IRA? The best way to come up with an answer to this question is to consider your investment goals. If you want to maintain a significant portion of your retirement nest egg in stock and bond investments, then you might want to consider keeping a portion of your funds in an account that you’re already using to make those types of investments. (Of course, you can generally still make those types of investments in a self-directed IRA, including self-directed accounts offered by Quest Trust Company.)
However, if you want to maximize your opportunities for bigger ticket investments, you’ll probably want to roll over accounts with enough funds into your self-directed IRA that you’ll be able to make those larger investments.
Remember that it’s not just your existing IRAs that can serve as a source for rollover funding. Making rollovers from company retirement accounts such as a 401(k) can often end up contributing significantly more. If you consider the higher annual contribution levels for company sponsored 401(k) accounts, and the fact that many of the 401(k) programs offer company matching funds, a retirement saver’s account can often grow much larger than their IRAs. If you’ve left an employer but kept your account in place with the 401(k) custodian, now may be the time to roll those funds over into your new self-directed IRA.
You can even open your own “solo” 401(k) account if you work as a consultant or otherwise own your own business. Solo 401(k)s have contribution and profit sharing components that allow for an even higher level of contribution than traditional 401(k) plans. (In fact, Quest Trust Company even offers these plans if you’re interested in learning more about the Solo 401(k) structure.)
Chances are you’ll want to roll over most, if not all, of your existing accounts into your new self-directed IRA. Doing so will ease the administrative hassles of managing multiple accounts, and give you the greatest flexibility with your investment choices.