Most investors come to a Self Directed IRA after having already invested their retirement funds in a standard IRA or 401(k). This does not present a problem, though, as almost any previous retirement plan can be rolled into any other. However, the specific details of the rollover will differ depending on the nature of the original plan.
The Basic Self Directed IRA Rollover
If you have an IRA with one of the standard third party custodians such as Vanguard, Fidelity, or Charles Schwab, then your first step in the rollover will be to open a new IRA account by a custodian who specializes in self direction. After that, it’s just a matter of some light paperwork to effect the transfer of funds. If, however, your retirement funds are in a company sponsored 401(k), then there’s a very good chance that the plan contract will not allow you to rollover your funds while you are still employed. You’ll have to check with your plan administrator to see if the funds are available for transfer.
Can I Do an Indirect Rollover into a Self Directed IRA?
Yes. An Indirect Rollover occurs when one retirement account is closed, the funds distributed, and then subsequently placed into another retirement account. The question most commonly asked when rolling over the funds into a Self Directed IRA is how can the investor be certain that the IRS will not tax the middle stage of the distribution. The answer to this question lies directly in the procedure of the rollover. The Self Directed Custodian will indicate on the first tax form 5498 that a rollover occurred, and this will notify the IRS that the funds are still not subject to any tax liability.
If I Want to Start the Rollover Process, What’s My First Step?
The easiest thing to do is speak to somebody with experience in the procedure, and then let them guide you step by step. Here at Broad our Specialists have guided clients through thousands of rollovers, and they can definitely answer any questions you may have. Call today and you’ll find out how easy the rollover process can be.