Self-directed IRAs offer many benefits, such as access to a wider range of investment options and greater control over asset allocation. By moving your existing account to one of these plans, you can maximize the growth of your retirement funds by selecting investments that offer the highest tax efficiency and returns.
You can transfer or roll over funds to a self-directed IRA from another retirement account in specific situations:
401k or 403b account with a former employer
Employer-sponsored 401k or 403b plans offer significant tax benefits and have higher contribution limits than IRAs. Max out these plans to take advantage of matching contributions while working, and roll over to a self-directed IRA with checkbook control after you leave the job.
To avoid taxes and early withdrawal penalties, make sure the withdrawal is designated as a rollover and choose the right IRA type. Rollover your 403b or traditional 401k plan to a self-directed traditional IRA, and pick a self-directed Roth IRA for an existing Roth 401k plan.
Traditional IRA with a brokerage firm/bank
If you are interested in using self-directed IRA accounts, you can perform a direct or indirect rollover with a traditional IRA. For a direct rollover, funds are directly transferred or a check is made out from your existing plan to the new IRA.
In case of an indirect or 60-day rollover, funds from your existing plan are distributed to you, and you need to deposit them into your self directed IRA within 60 days. A percentage of the amount may be withheld as tax, which you can recover while filing tax returns. However, you need to add this amount while making the deposit.
Roth IRA with a brokerage firm/bank
Existing Roth IRA plans can be moved to self-directed Roth IRAs the same way as a traditional IRA, and will not incur taxes and penalties if they’re handled correctly.
To ensure that these transactions remain tax-free and penalty-free, opt for a direct rollover or transfer from one account to the other. This way, you are not directly receiving the assets from your existing retirement account, so it will not count as an early withdrawal.
If you have an inherited an IRA from a spouse, you can treat the account as your own or roll funds over to your self-directed retirement account.
With non-spouse IRAs, you have two options. You could take full distribution of the account, paying income tax on the funds, or have the plan retitled as an ‘inherited IRA’. For retirement accounts inherited from anyone other than a spouse, you can roll over to a self-directed IRA only if the inherited IRA has been characterized correctly.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
Magic vs. functional mushrooms? Rritual shows the path for fungal profits
Which mushrooms should you invest in? Psychedelic “magic” psilocybin mushrooms, or the growing functional mushroom phenomenon? With functional fungi like...
Cannava: the first medical cannabis laboratory is up and running
Cannava State Society, is a public company of the government of Jujuy, in charge of the implementation of the provincial...
The fintech sector in Peru advances at regional level
Ljubica Vodanovic, leader of the Financial Regulation and Fintech sector of EY Law Peru, pointed out that there are 151...
The three ways blockchain makes the supply chain more secure
One solution that small localized businesses apply to fulfil the constant need of preventing one’s business from any threat emerging...
Marsi Bionics open a round of €1.5 million to manufacture its exoskeletons
The Spanish company Marsi Bionics will use the funds to develop its pediatric products on an industrial scale and prepare...
Featured7 days ago
How are ESG company news deciphered with Artificial Intelligence
Business7 days ago
Four trends transforming the world of venture capital
Business6 days ago
Is having a financial contingency plan a smart business move?
Mining & Energy6 days ago
Prime Mining reports high grades in Los Reyes project in Mexico