Four Funding Options for Self-Directed IRAs

Let’s take a look at four funding methods for Self-Directed IRAs and which might be the best for you:

If you’ve been doing a lot of reading and a lot of researching, you’ve likely come to the same conclusion that so many American investors have:

IRAs are a great way to take the reins of your own financial future.

Of course, knowing that and doing something about it are two entirely different things. It’s one thing to like the idea of a Self-Directed IRA; it’s another thing entirely to fund it and begin investing as you see fit. Luckily, the gap between knowing and taking action doesn’t have to be so wide if you simply understand the different options you have for funding your IRA and getting started with your new account as soon as possible.

Option #1: Contributions.

Most people are familiar with IRA contributions—heck, they’ve been doing them since they started their IRA. The quickest and simplest way to get started with your Self-Directed IRA may be a direct contribution. There are certain limitations on these contributions that you’ll want to be aware of, as well as tax implications, but for the most part, direct contributions are simple to understand.

The option of directly contributing to your Self-Directed IRA is even more interesting when you consider the fact that you can set up regular contributions, such as a monthly contribution, similar to any other type of IRA you’ve built up in the past.

Option #2: Conversion.

If you want to really get started with a bang, then you can use this method. The “conversion” isn’t as complicated as it sounds; it’s simply a strategy in which you withdraw all or part of the cash you have in a traditional IRA and reinvest them into a Roth IRA, for example.

A conversion is a quick way to put your already-saved assets into a new form of IRA, which has the advantage of giving your new account a “head start.” It means you don’t have to wait around for your contributions to pile up a second time just because you wanted to start a different IRA strategy.

Option #3: The Rollover. The tax-free distribution of cash and/or assets from your retirement account so that you can contribute them to another retirement account is known as a “rollover.” You are generally given one rollover per year, and with this limitation you generally have no taxable consequences, assuming that the cash/assets in question are put into a new retirement account within 60 days of distribution. The Rollover allows you a little more flexibility in choosing exactly how much money gets put into a new type of account.

Option #4: Transfers. Directly transferring your cash/assets from one IRA account to a similar account is known as a “transfer.” It requires that you make it a trustee-to-trustee transfer, so that the investor doesn’t actually take hold of the cash/assets in question. A transfer is essentially a direct way of moving money between retirement accounts, and the fact that you never take direct possession of the assets in question means that you can have unlimited transfers per year.

If you’re up on your IRA strategies—and even if you’re not—you can take advantages of these funding methods to create a portfolio that best suits your individual retirement strategies. Allocating assets the way you see is similar to how Self-Directed IRAs work, allowing you greater control over your financial future. Want to know more about Self-Directed IRAs? Be sure to call us at 866-7500-IRA(472) for more information and to get started today.