Self-Directed IRA

A Guide to Funding a Self-Directed IRA with Previously Existing Retirement Funds

So, you have done your research. You know that a Self-Directed IRA can be a great way to give yourself the freedom to invest in non-traditional retirement assets like precious metals, Single Member LLCs, and real estate. But you are not quite sure how you’re going to get the funds you need in that account unless you take previously existing retirement funds and transfer them to your new arrangement. So how do you do it? Let us look at the popular ways to fund a Self-Directed IRA if you already have retirement funds set aside.

The Three Ways to Fund a Self-Directed IRA

The first thing you need to know is that there are three essential ways to put funds into a Self-Directed IRA:

  • Transfer
  • Rollover
  • Direct contribution

Since we are looking for funds that already exist in your retirement accounts somewhere, that takes away direct contribution for now. That is why we will focus on these two methods: transfers and rollovers.

The Self-Directed IRA Transfer: What You Need to Know

How does a Self-Directed IRA transfer work?

One of the most common reasons someone might initiate a transfer is that they plan to move their retirement account from a different job. For example, if they had money in a retirement plan at work and they want to move that retirement money into an independent account, they might take on a transfer.

An IRA transfer is what happens when you move your IRA funds between institutions. This generally refers to when you are transferring between two similar accounts. For example, if you had a Roth IRA before and you want to move to a Roth IRA through a Self-Directed IRA administration firm, you could initiate a transfer. A transfer is then tax-free, assuming that there is no distribution paid out to you.

It is important to note that there are tax rules that apply here. For example, if you withdraw funds from an IRA and then redeposit them within that IRA within sixty days, that transaction is not taxed, since it will not count as a real distribution. After all, you have put the money back into the account. But it does mean that before you think about how you’re going to fund your new Self-Directed IRA, you should know exactly how it’s going to happen before it occurs, so you don’t have any problems along the way.

The Self-Directed IRA Rollover: What You Need to Know

An IRA rollover can be used to partially or fully move funds to an IRA. For example, you might consider rolling the funds already present in a 401(k) account—which you have had through an employer—into a Self-Directed IRA. This would allow you to use the funds already present to make investments into real estate, for example, once you have the Self-Directed IRA properly established. You can also then continue to make contributions to this account once the rollover is completed, treating it as though it has always been in an IRA.

But it’s important to remember that there are also tax implications here. How do you want your retirement money to be taxed once you retire? That is something that you will want to get specific advice upon, where you can inform a tax specialist what your funds are like, what accounts they are in, and what you plan to do.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at