Before you eat dinner, you set the table. You put out napkins, pour the water, and make sure every setting has silverware and a plate. Then, when you’re ready, eating is seamless and natural. After all, you have everything you need. The same should apply to your Self-Directed Checkbook IRA.
The Self-Directed Checkbook IRA, after all, can be a complicated thing—just like dinner. But, like dinner, it doesn’t have to be. You can do all sorts of things to prepare yourself for the Checkbook IRA, just as you would for dinner, and make sure the entire process is enjoyable, efficient, and natural.
The only question is, how do you set your financial table to prepare for a Self-Directed Checkbook IRA? Here’s what you’ll need to know.
Get Your Finances Squared Away
It starts with understanding your own finances. A Self-Directed Checkbook IRA is not something that you should throw into an untidy financial life. Instead, it should be something that you add on to an already-organized retirement plan.
Here are some tips for making sure that you’re ready to take on a Self-Directed Checkbook IRA financially:
- Make sure that your taxes are in line and you don’t have trouble filing them each year.
- Make sure that you can find all of your relevant accounts, that your financial house is organized, and that you understand exactly all of your tax responsibilities.
- Make sure that you know the name of a good accountant who can help you with everything listed above.
When you work with a Self-Directed IRA administration firm, they can help you make sure that you have the paperwork and everything else necessary to begin the Self-Directed Checkbook IRA journey. But it doesn’t hurt to keep your accounts organized and your finances clean before you take on something like a Checkbook IRA.
Prepare Your Mindset
For a Self-Directed Checkbook IRA, there’s a good chance that you already have the mindset necessary to succeed. Let’s say you’re an experienced real estate investor and you simply want to use retirement funds to make many of those investments. That’s great! If you already have the mindset to go out and make use of your knowledge and experience, you’ll find that transitioning to investing with a Checkbook IRA is highly intuitive and even natural.
But it also helps to prepare yourself for the rules of a Self-Directed Checkbook IRA. When you use a Self-Directed IRA, for example, you’ll be prohibited from investing with disqualified persons. That means you can no longer invest in real estate and rent it out to someone you know, such as someone in your family. Prepare your mindset ahead of time so you’re not left feeling stuck when it comes time to make the investments.
Understand How the Checkbook IRA Works
Do your homework first. Understand that a Self-Directed Checkbook IRA is what happens when you set up a Single Member LLC within a Self-Directed IRA, and that the IRA itself will own the LLC. But with this established, you can exercise “checkbook control,” even though you’re technically writing checks on behalf of the retirement account that holds the power here. (Side note: since the retirement account belongs to you, ownership can be a complicated thing. Don’t fret.)
When you have a Self-Directed Checkbook IRA, you’ll have a lot of flexibility. But that doesn’t mean that everything will be easy right away. Work with an experienced Self-Directed IRA administration firm to ensure that you have everything ready to go—that the “table is set” for you to begin your new investment strategy. Once the table is set, the next steps become far easier.