How to Set Up a Self Directed IRA: A 5 Step Guide

Investing for retirement is something worth beginning as early as possible.

Current annual costs for someone over the age of 65 are approximately $50,000. So you’ll need a significant amount in your retirement account in order to live comfortably during this time.

One of the best ways to begin saving is a self-directed IRA, but not everyone knows how to go about it.

Not sure where to start? Don’t worry, we’ve got you covered.

Let’s take a look at everything you need to know about how to set up a self-directed IRA.

1. Select a Provider

In order to get started, you’ll need to work with a financial institution or firm that facilitates the opening of IRA accounts. When searching, though, there are some things you’ll want to keep in mind.

A provider with plenty of experience in this area that also offers a large range of investment opportunities is one you should prioritize. Additionally, your provider should also have experts willing to help you make the right investment decisions for your situation.

2. Choose What Type of IRA You Want to Open

Although you’ll be opening a self-directed IRA, you’ll still need to decide between a Roth IRA or traditional IRA.

Both allow you to invest in your retirement, but they have fairly different attributes. The best one for you will depend on your current finances and how much you plan to have invested by retirement.

You can learn more about the differences here.

3. Understand Your Investment Options

The main benefit that a self-directed IRA provides is the increased flexibility you’ll have when creating your investment portfolio. So, you’ll be able to fine-tune your investments to meet your long-term goals while remaining within your tolerated level of risk.

Working with a reputable provider will help you optimize your portfolio even further.

4. Apply For an Account

After you’ve decided who to work with and what type of IRA account you want to open, you’ll be required to complete an application.

You’ll need the following on hand in order for everything to go as quickly as possible:

  • Government ID
  • Social security number
  • Account information used for funding
  • Fee payment method
  • Info regarding your beneficiary

Depending on your provider, you may need to provide additional information.

5. Start Saving

After everything’s up and running, you can decide how you’d like to fund your account.

These come in three categories:

  1. Transfers: Funding your newly created IRA account from another IRA account
  2. Contributions: Sending money to your IRA account from a non-retirement account, such as from a checking or savings account
  3. Rollover: Transferring money to your IRA account from a different type of investment account, such as a 401K

Once you have money in your account, you can change how you’d like to contribute in the future if you need to. 

Understanding How to Set Up a Self-Directed IRA Can Seem Difficult

But it doesn’t have to be.

With the above information about how to set up a self-directed IRA in mind, you’ll be well on your way to financing your future as early as possible.

Want to learn more about how we can help? Feel free to get in touch with the team at Quest today to see what we can do.

Know the Difference: IRA Transfer vs. Rollover

In order to live comfortably during retirement, you’ll need to start saving as soon as you can. Opening an IRA account is widely known as one of the most reliable ways to invest in your future.

There are two major ways to fund your IRA: transfers and rollovers.

Not everyone understands the difference between the two, though. Not sure where to start? Don’t worry, we’ve got you covered.

Let’s take a look at everything you need to know about IRA transfer vs rollover.

An IRA Transfer

When you move money from one IRA account to another, it’s known as a transfer. The same concept applies as when you move money between two separate checking accounts at different banks.

When you move funds from an IRA at one firm to an IRA account managed by another firm, the transfer isn’t reported to the IRS and no taxes are incurred. This is due to the fact that the money in the original IRA account never actually reached the account owner.

If the owner were to instead withdraw the funds and then reinvest them into another account, they would incur taxes upon withdrawal. There may even be tax penalties depending on why the money was taken out of the account.

An IRA Rollover

A rollover occurs when money is either moved from an IRA account to a retirement plan or from a retirement plan to an IRA account. When the money never reaches the account holder, it’s known as a direct rollover.

This type of rollover differs from a conventional transfer because it involves two different types of plans.

Although direct rollovers are reported to the IRS, they generally aren’t taxable since the money was never made payable to the account holder.

During an indirect rollover, the money is distributed to the account holder. But, it isn’t taxed if the money is reinvested in an IRA account within 60 days. This will allow the account funds to remain tax-deferred.

How Should I Prepare For One?

Above all else, it’s important to understand that a rollover will likely take a couple of weeks to complete. This is crucial for those handling indirect rollovers to keep in mind, as penalties occur after 60 days from when the funds are distributed to the account holder.

Additionally, most institutions will require you to fill out paperwork in order to begin the process. Some providers may have specific requirements regarding rollovers that may become a factor when reallocating your funds.

Knowing The Difference Between IRA Transfer Vs Rollover Can Seem Difficult

But it doesn’t have to be.

With the above information about an IRA transfer vs rollover in mind, you’ll be well on your way toward putting money away toward a peaceful retirement.

Want to learn more about how we can help? Feel free to get in touch with us today to see what we can do.