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How to Set Up a Self-Directed IRA: 5 Simple Steps

How to Set Up a Self-Directed IRA: 5 Simple Steps

How to Set Up a Self-Directed IRA: 5 Simple Steps

Today there are many avenues that can get you to a financially sound retirement. Regular IRAs and 401ks can certainly do the job, but many investors discover that a self-directed IRA allows for far more flexibility and accommodate investment strategies that regular IRAs can’t. 

Although there are many advantages to this type of investment strategy, the term “self-directed” can make some investors pause. The truth, however, is that opening a self-directed IRA is easy when you follow these steps.

How to Set Up a Self-Directed IRA: 5 Simple Steps

1. Choose a self-directed IRA provider

When someone opens a regular IRA, they can typically do so with several providers, including banks, mutual fund companies, insurance companies, and brokerage firms.

If you want to leverage the benefits of a self-directed IRA, then you’ll need to pay particular attention to what options are provided by your chosen custodian. Not all investment providers are approved to open or act as a custodian for self-directed IRAs. 

Look for an experienced provider that offers a wide variety of investment options, has proven experience with alternative investments, and offers hands-on, experts to help you make decisions that are both legal and beneficial.  

2. Determine what type of IRA you want to open

You may already know that you want to open a self-directed IRA, but you’ll still need to choose between the two types of IRAs available to investors: a traditional or a Roth IRA.

Though both types of IRAs offer a means to invest, there are significant differences between the two, the likes of which may make one a better option for you than another.

To help you understand the primary differences between each type of IRA and decide what one is best for you, you can contact our office or review our Traditional IRA vs Roth IRA comparison chart

3. Review your investment options

As mentioned above, one of the benefits of a self-directed IRA is that your investment options exceed those available to regular IRA investors.

This can make for a flexible portfolio that can be matched to your long-term goals, existing opportunities, and current risk tolerance level.

And, even if you want to open a self-directed IRA to invest in a specific non-traditional asset, like realty, it can also be beneficial to consider your other options to create a well-rounded portfolio — all the more reason to work with a trusted custodian that can help you along the way. 

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4. Complete the application

Once you’re ready to officially open your IRA, it’s time to complete the application and fund your IRA. The initial process can vary from provider to provider, so it’s important to speak to your chosen custodian to determine exactly what you need to do to complete the application. 

Typically, you’ll need to provide the following information:

  • Name, address, and phone number
  • Social security number
  • ID
  • Fee preferences (e.g., payment upfront, deducted from the account, etc.)
  • Beneficiary information
  • Funding information, including any accounts you plan to roll into your new account.

5.  Fund your account

Once you complete your application and the account is opened, you can your self-directed IRA. You must choose from one or more of the following:

  • Contributions, or when you make a monetary contribution to your account.
  • Transfers, in which you move funds between the same type of account, a regular Roth IRA to a self-directed Roth IRA, for example. 
  • Rollovers, in which you move funds from one type of account, like a 401k to another type of account, like a self-directed traditional IRA. 

The thought of a self-directed IRA can seem overwhelming or complex, but opening one is quite simple; that’s particularly true when you find a SDIRA custodian that can help you through not only the initial process but all your investment decisions in the years to come. 

Our team of experienced investment professionals is with you every step of the way, whether it’s taking the first few steps into your investment journey or growing and adjusting your investment portfolio to adapt to changing needs or unexpected opportunities. Contact us today and we’ll help you get started.