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Self-Directed IRAs – Contributions, Transfers and Rollovers

Kaaren uDirect IRABy Kaaren Hall, CEO/President – uDirect IRA Services

Welcome to the world of Self-Directed IRAs!  Guess what?  These powerful investment tools are just like regular IRAs in so many ways (except for investing).  Just as with a typical IRA, a Self-Directed IRA can be funded in three ways:

  • Contributions
  • Transfers (IRA to IRA)
  • Rollovers from previous employer plans

Contributions

Always check with your Tax Advisor before making a contribution.

Whether you have a typical or self-directed IRA the contribution limits are the same:

Traditional IRAs – 2013-2016 – $5,500 (If 50+ $6,500)

Roth IRAs – 2013-2016 – $5,500 (If 50+ $6,500) (You can contribute to a Roth IRA if your income falls below the Roth limits. You’re allowed a prorated contribution if your income falls within the “phase-out” range. If your income exceeds the income range you won’t qualify for a Roth IRA contribution.)

SEP IRAs – 2016 – $53,000 (or 25% of your income, whichever is less)

SIMPLE IRAs – 2015-2016 – 12,500 (If 50+ $15,500)

Transfers

An IRA to IRA transfer is another way to fund a Self-Directed IRA.  You start this process by filing out a Transfer Request Form.

*  Make sure you provide the address of your current custodian’s Transfer Department on the Transfer Form.  This will ensure that your Transfer Form is sent to the department that is designed to facilitate your request.

*  Some but not all custodians require a Medallion Signature Guarantee.  This “medallion stamp” can usually be obtained at your bank.  Ask your current custodian if they require this type of signature guarantee.

* It’s best to contact your present custodian to request your fund be liquidated to cash.  In this way delays can be avoided.  Often times custodians will not accept the attached written request to liquidate funds and do require the customer or client to request this individually.

The latest news on Transfers is that on December 18, 2015, the Conservation Appropriations Act of 2016 was signed into law. A small part of that is the law that you can now rollover from a Qualified Plan or Traditional IRA to a SIMPLE IRA as long as the SIMPLE has met the 2 year requirement.  Before this time you could not rollover an employer plan or Traditional IRA into a SIMPLE.

Rollovers

You can fund a Self-Directed IRA by “rolling over” a previous employer plan.  Usually the company you are working for will not allow a rollover while you are “in-service”.  You can go to the Plan Administrator and ask if you qualify for an “In-Service Transfer”.   These In-Service Transfers are granted if the Plan Document allows for it.

To rollover an employer plan, contact your present custodian and request their Rollover documentation.  Complete their forms and return them.  Once your current custodian receives your request they will respond.  Sometimes these custodians require your new account number in order to process your request.

Your current custodian will need to make the check request.  After your account is established you can provide this new account number to your previous employer’s plan administrator.

Once your Self-Directed IRA is open and funded you can invest!  With a Self-Directed IRA all investments are chosen by you.  Be sure to do your due diligence on investments so as to put your hard-earned retirement savings at as little risk as possible!

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