What is a self-directed IRA?
A self-directed IRA is an individual retirement account (IRA) that financial institutions offer to their clients when they want an alternative investment option. You’re not limited to just investing in stocks, bonds, or mutual funds, as you would be with other IRAs. You’re given almost endless options People who open self-directed IRAs usually have an investment in mind, such as precious metals, private businesses, real estate, or something as obscure as a chicken farm.
What are the differences between self-directed IRAs, Roth IRAs, Traditional IRAs, and 401Ks?
In the simplest terms, the difference between Roth and Traditional is taxes. A Roth IRA is taxed when contributions are made, and when they’re distributed upon retirement, there’s no additional taxes. A Traditional IRA is essentially the opposite. When a contribution is initially made into a Traditional IRA, it’s not taxed, but when it comes time to take distributions, the funds are taxed. A self-directed IRA can be either Roth or Traditional, but you will be able free to invest in alternative assets. A 401K is a retirement savings program that’s sponsored through your employer. Contributions are made by deducting a predetermined, pre-tax amount that you set.
What types of alternative assets are allowed in a self-directed IRA?
When it comes to what’s allowed, there isn’t much that’s off the table. The point of a self-directed IRA is that you have the freedom to invest in what you choose. The shorter list would be what’s not allowed. The IRS has deemed that there are a certain group of people that are disqualified from directly benefiting from your IRA. They’re referred to as “disqualified persons”. They include the IRA holder, and any ancestors or lineal descendants of the IRA holder. So you yourself cannot directly benefit, nor can your spouse, your parents, your children, and so on. Linear relatives are not considered automatically disqualified persons but should be dealt with cautiously. There are also some prohibited transactions, and those include self-dealing, and certain collectibles, such as: Any work of art Metals or gems Any alcoholic beverage Rugs or antiques Stamps Most coins.
What are the benefits of a self-directed IRA?
One of the biggest reasons that a person opens a self-directed IRA is to:
- Diversify their portfolio
- Get their retirement funds out of the tumultuous and volatile stock market, and into private businesses, or real estate
- Gain control over their financial future
More and more people understand that the future isn’t always predictable, and relying on others for our own security and welfare isn’t realistic. Government programs are getting less and less funding every year, and it’s no longer safe to depend on them.
How do I start investing with my self-directed IRA?
We strive to make our processes as simple as possible. Once your self-directed IRA is set up and funds have been deposited into your account, you’re only two steps away from investing.
- Fill out a Direction of Investment form (DOI) and send it to us however is convenient for you, through email, fax, mail, or online.
- Make sure to send us a supporting document for your investment. For instance, if investing in real estate we need to see an escrow closing doc to prove the value of your purchase. No matter the investment, we need a supporting document. This is needed to check the titling of the investment, price of investment and to verify that the investment is within the guidelines stipulated by the IRS.
Once these steps are completed correctly you can expect the purchase of the investment within 48 business hours.
How do I make a contribution?
Contributions are made by filling out a contribution form and by sending us a check or wire. Once these have been done accurately, your funds will be added to your account within 24 business hours of receiving the check/wire and contribution form.
How do I rollover money from my IRA or 401k to my self-directed IRA?
It’s as easy as filling out our rollover form and sending a check or wire.
How do I transfer money from my IRA or 401k to my self-directed IRA?
Fill out a transfer request form and we’ll take care of the rest. We contact your financial custodian and make sure your funds are deposited to your account. As a side note, unless you are transferring your account from another self-directed IRA custodian you’ll want to liquidate your assets before transferring them over to us.
How much money can I contribute to my IRA annually?
See the graph below for reference.
If I already contribute to a 401(K), can I still have an IRA?
Absolutely, you're allowed to contribute to a 401(K) and an IRA at the same time.
What is self-dealing?
Self-dealing is defined by a couple things, namely the IRA holder investing their self-directed IRA into a company that they own 50% or more of, or that a family member owns. It's also when the IRA holder, or the IRA holder's family stays in a rental property that the self-directed IRA owns.
If I were to invest in a gold IRA, how is my gold stored?
Accuplan and American Estate and Trust partnered up with Brinks to store and care for your precious metals. If you're interested in visiting your gold, let Accuplan know, and we would be happy to arrange a visit.
Am I allowed to borrow funds from my IRA before I hit retirement age?
There are acceptable reasons that funds may be withdrawn from an IRA, such as a down payment on a home, medical expenses, or higher education. Keep in mind that your account may be subject to an early withdrawal penalty, and that with a Traditional IRA, the funds that you withdraw may be subject to taxes. Consult a retirement advisor for further explanation.
Is a self-directed IRA for everyone?
A self-directed IRA isn’t for everyone, they’re mainly for investors who want diversity in their retirement portfolio, and want to get their funds out of the stock market.
I only work part time, can I contribute to an IRA?
You can absolutely open an IRA if you work part time, you can open an IRA as soon as you earn any income.
Will I have to report a rollover on my taxes?
Yes, you will actually need two tax forms. One being IRS Form 1099R, reporting that you took a distribution from your former employer's plan, and an IRS Form 5498 reporting that you made a rollover contribution to your IRA. Even if no portion of your rollover is taxable, still need to report it on your tax return.
If I’m self-employed, what retirement account is right for me?
You actually have a couple great options. The most common retirement accounts for the self-employed are SEP IRAs, Simple IRAs and individual 401Ks. These plans have two factors in common: up-front tax breaks and tax-deferred saving, meaning you don't have to pay taxes until you withdraw the funds while you’re in retirement.
Am i allowed to open multiple retirement accounts?
Yes, you are allowed to have multiple IRA accounts open, and they can even be held with multiple IRA providers. You are just restricted by the yearly contribution limit, and you cannot exceed that limit across all of your accounts.
How much money should I make a year before I open an IRA?
There’s isn’t a set minimum income for retirement savers. In fact, you should be encouraged to open and contribute to an account just as soon as you start earning income, because the younger you start the more you can take advantage of compounding interest.
Are my Roth IRA contributions tax deductible?
Unlike 401K or Traditional IRA contributions, Roth IRA contributions are not tax deductible. According to Roth IRA funding rules established by the IRS, all of your contributions must be made with after-tax dollars.
What if I inherit a retirement plan?
As of almost 10 years ago, a non-spouse beneficiary can roll over all or part of an inherited employer-sponsored retirement plan to a new inherited IRA. Which is great, because in the past, non-spouse beneficiaries only had the option to leave assets in the existing plan, and follow the distribution rules associated with the plan. This allows those who inherited the account to continue to enjoy the tax-free growth.
Will I owe taxes on my rollover?
Usually no if it’s done correctly, and you roll over your money directly from your company plan into an IRA. This means that your company plan will make the check payable to your IRA's custodian, and that check is deposited to your IRA.
How do I access my account with Accuplan?
There are multiple routes you can take to access your account, but the best route is to go to accuplan.net, and in the upper right corner, you will see “Account Login” that’s where you will enter your username and password.
Does Accuplan charge low balance, or maintenance fees for IRA accounts?
We do not charge a low balance fee, but there is an annual fee that depends on what type of account you have, and what you’re invested in (i.e. for a gold IRA, there are storage fees)