You might know all about the Self-Directed IRA. You might know that you can open one up and use it to invest in a wide range of retirement assets, from real estate and private companies to precious metals and tax liens. You might know the different types of Self-Directed IRA accounts, such as Roth IRAs, Traditional IRAs, and more. You might know just about everything there is to know—but if you don’t know how to use one, you’re not going to get very far. That’s why we’ve put together this brief guide on using a Self-Directed IRA for the first time.
Step One: Opening Your Self-Directed IRA
The first step is also the most straightforward. If you’re sure that a Self-Directed IRA is right for you, it’s time to open one! Fortunately, this is easy to handle. For example, you might reach out to us at American IRA at 866-7500-IRA and let us know that you want to open one with us—and we can take the rest from there. Opening an IRA is easy to do for any American—the key is in identifying the type of account that’s right for your situation. If you have any doubts about this, make sure to consult with a tax professional to help select the best IRA for you.
Why do you have to open a Self-Directed IRA with an administration firm that can offer custodian services on the account? Simple. To use the IRA that way, you do need a custodian to administrate it, handling issues like buying and selling within the account, not to mention the paperwork involved. This helps maintain the separation between your retirement assets and your personal assets which is so necessary to hold on to the tax benefits of a Self-Directed IRA—or any IRA, for that matter.
Step Two: Funding the Self-Directed IRA
Once you have a Self-Directed IRA of your choice ready to go with an administration firm in your corner, the next question will hit you like a ton of bricks. How do you get money into this thing, after all? There are actually several legitimate options you can use, but they may depend on your specific situation.
For example, a transfer is possible if you already have an IRA of this type—you simply transfer it from one administrator to another. This means that the money you have within the account will not require a taxable event, which preserves the capital you’ve been able to build up inside.
More directly, you might simply begin making contributions to the account. You can do this up to the account’s individual limits, which will depend and vary widely based on the account type. For example, a Self-Directed Solo 401(k) can have a contribution limit in the tens of thousands, while a Roth IRA will only have a contribution limit of several thousand, as of this writing in 2023.
Step Three: Invest!
Once you’re ready to go, you can direct your Self-Directed IRA administration firm to make the purchases you want to make. You can usually do this with an order form. Here at American IRA, we even make these forms available online, so you know what it looks like. It’s not as intimidating as you might think—in fact, it can be easy to get investing in a Self-Directed IRA once you know the basic steps.