How to Roll Over to a Self-Directed IRA
An IRA can be funded through contributions or through a rollover from other qualified retirement plans, such as an employer-sponsored 401k plan. A rollover is a tax-free transaction that moves money from one tax-deferred account to another without penalty. If you're interested in purchasing less-common IRA investments, such as real estate, precious metals or private equities, you may want to roll over to a self-directed IRA. The process is simple.
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Instructions
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Locate a self-directed IRA custodian that offers investments you want to purchase. The IRS allows various investments but does not require each custodian to offer all options. You can contact existing IRA custodians for referrals locally or find options online for real estate IRAs or gold IRAs, for example.
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Confirm with your existing retirement plan custodian that your name and address are correct. If the information is not updated, do so with the custodian before rolling assets over. If the name or contact information doesn't match, the rollover may be rejected.
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Contact your tax adviser and discuss the additional requirements of a self-directed IRA. You may need to establish a real estate LLC or file other paperwork not required with bank or brokerage IRAs.
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Choose the custodian that meets your needs and open a direct rollover account. Make sure you file rollover paperwork and provide the new custodian with the account number and custodian contact information of the existing retirement assets. It may be helpful to provide a copy of your most recent statement.
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Wait approximately six weeks for the rollover to complete.
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Purchase the assets you want in the IRA. Be sure to follow all IRS regulations regarding your particular investment.
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Tips & Warnings
Obtain professional tax and legal advice for self-directed IRAs. A custodian is not responsible for making sure you understand your legal responsibilities.
You are not allowed to use IRA assets such as real estate for personal use. The "personal use" rule applies not only to you but also to a lineal family member (parent, child or grandchild). This may result in forfeiture of the asset as an IRA asset, which will lead to income tax and penalties.
