How Do I Set up a Self-Directed IRA?
First, conduct a comparison on Custodians or trust companies for self directed IRA services. Third-party self-directed IRA providers, like administrators and promoters, are generally not custodians. Instead, they work with a trust company to conduct business. It's important to know the difference.
More thank likely, your standard IRA provider or custodian, will not allow you to make investments in tangible alternative assets such as real estate— that's not their expertise.
Opening and Managing A Self-Directed IRA
Once you choose a custodian, opening a self-directed IRA is simple and you can do it yourself online. You can complete a new account application and fund your account with an existing IRA or old 401(k), or you can make regularly scheduled contributions, not to exceed the contribution limits for the year.
There are different types of accounts to choose from. If you are an individual investor, explore the Roth IRA and Traditional IRA. For small business owners, you can look into the SEP IRA , SIMPLE IRAor Solo 401(k).
Transferring funds from an existing IRA to your self-directed IRA is an easy process and it is not a taxable event. You can start an IRA transfer by completing a Transfer Form and submitting it with your new account application. You can also open an account with an IRA contribution . But not to worry, IRAR guides you through this process and rule.
Once your account is funded, you can tell your IRA custodian what to invest in and your custodian will make the purchase. The investment options are yours to make. The investments are titled in the name of the self-directed IRA (not the account holder.) All the expenses for the investment are paid from the self-directed IRA and all of the income is put back in the self-directed IRA. The same is true if you sell the investment- the profits are put back into the self-directed IRA.
