As 2024 comes to a close, self-directed IRA investors face several important deadlines that could impact their retirement savings and tax strategies. From required minimum distributions (RMDs) to Roth conversions, proactive planning can ensure a smooth start to 2025. Here’s a guide to key year-end deadlines and what you need to do.
Take Required Minimum Distributions (RMDs)
Account holders aged 73 or older, and those with inherited IRAs, must take RMDs by December 31, 2024, to avoid penalties. Missing the deadline can result in penalties up to 25% of the missed RMD amount.w
If your self-directed IRA includes illiquid assets like real estate, ensure there is enough liquidity to meet the RMD. Contact your financial advisor to confirm the exact amount you need to withdraw. Calculate your RMDs based on the individual balance of each of your pre-tax retirement accounts, not a cumulative total, with each account’s balance being divided by a life expectancy factor provided by the IRS based on your age.
Complete Roth Conversions
Converting pre-tax funds in a Traditional IRA to a Roth IRA must be completed by December 31, 2024, to count for this tax year. This strategy can lock in current tax rates and allow for future tax-free growth.
Consider converting tax-inefficient or high-growth assets in your self-directed IRA. Consult a tax professional to evaluate the tax implications and explore whether a partial conversion aligns with your goals.
Pay Family Members to Fund Retirement Accounts
If you employ family members, such as children, in your business, paying them by year-end opens opportunities to fund their retirement accounts. Wages earned in 2024 can be used to contribute to accounts like Roth IRAs, which allow for long-term, tax-free growth.
For families using self-directed IRAs, this strategy can enable investments in alternative assets like real estate or private lending.
Make Qualified Charitable Distributions (QCDs)
Investors aged 70½ or older can make up to $100,000 in tax-free charitable distributions directly from their IRA. These QCDs also satisfy RMD requirements, providing a way to meet your tax obligations while supporting causes you care about.
If your self-directed IRA includes alternative investments, plan early to ensure funds are available for the distribution. Your competent tax professional can guide you through the process. Reach out to uDirect IRA Services with your questions.
Set Up a Solo 401(k) Plan
For self-employed individuals or S-Corporation owners, establishing a Solo 401(k) by December 31, 2024, ensures eligibility for full employee and employer contributions for the year. This type of plan allows for high contribution limits and self-directed investment options.
Ensure your Solo 401(k) plan documents allow for investments in assets like real estate or private equity. Starting early can help avoid delays in meeting the setup deadline.
Contribute to Your Self-Directed IRA
While contributions to Traditional and Roth IRAs can be made until April 15, 2025, contributing before year-end maximizes growth potential. Check IRS contribution limits and ensure your account is funded in time.
For details on contributing to your self-directed IRA, visit uDirect IRA Services.
Plan Ahead for 2025
December 31, 2024, is a critical date for self-directed IRA investors. From taking RMDs to meeting compliance requirements for IRA-owned LLCs, addressing these deadlines now will save time and avoid penalties. Whether you’re considering a Roth conversion, setting up a Solo 401(k), or ensuring compliance under the Corporate Transparency Act, there’s no better time to act.
For assistance, contact your custodian or a trusted financial advisor to ensure you meet all requirements and optimize your investment strategy. By staying on top of these deadlines, you’ll start 2025 with confidence and peace of mind.
uDirect IRA Services, LLC is here to help you~! We are not a fiduciary and we do not offer tax or legal advice. We do not recommend specific investments, rather we guide you through the process to self-direct your retirement savings into assets you choose. To get started, we offer a free consultation. Schedule yours HERE – To open an account, click HERE.
