Self-directed IRAs allow you to invest in alternative assets such as real estate, cryptocurrency or collectibles – but be wary of IRS regulations which limit certain investments such as life insurance policies or properties in which you reside.
Direct rollover is the most efficient method for moving funds from an existing employer retirement account into your SDIRA, avoiding withholding taxes and penalties in the process.
Taxes
Many investors find the increased flexibility offered by an IRA attractive. Investors can select their investments themselves or hire someone else to manage it on their behalf; if managing it themselves they’ll need an experienced SDIRA custodian.
Direct rollover is the optimal method for converting a 401(k) plan to an IRA account, avoiding a 20% withholding required when withdrawing funds from your old plan.
When self-employed, you have the option to convert your 401(k) into a Solo 401(k), similar to an IRA but used for investments such as real estate or private equity investments. To determine what tax implications might arise from such conversion, contact an experienced accountant.
Fees
Many people opt to switch their retirement savings into a self-directed IRA because it gives them more control and allows them to protect against market fluctuations. With such an account, your investment options become nearly limitless and include real estate, private equity investments, notes, precious metals and cryptocurrency.
Self-directed IRA custodians will give you greater control of your investments while at the same time helping ensure compliance with IRS regulations, such as making sure purchases don’t violate prohibited transactions rules.
Before investing in alternative assets, it’s essential that you perform due diligence and understand the rules that apply to your new account. If you require assistance or have any queries, feel free to reach out Horizon Trust now so one of our self-directed IRA specialists can guide your decisions regarding where best to place your retirement savings – our services are offered free of charge!
Investments
If you’re transitioning funds from an employer-sponsored retirement plan (such as a 401(k) or 403(b) into a self-directed IRA, direct rollover is the most efficient means of transfer because no funds leave the account and avoid tax withholding at 20%.
Self-directed IRAs allow investors to utilize their retirement assets for alternative investments, including real estate, private equity, lending money to startups and precious metals. There are certain rules you must abide by as the IRS disfavors investing with certain individuals like family or business partners.
Choose between traditional, Roth, or SIMPLE IRAs; rollover funds from an old 401(k), other retirement accounts or select an IRS-approved custodian who will handle paperwork compliance with IRS rules and provide personalized investment options that best meet your unique situation.
Compliance
If you want to transfer your 401(k), qualified retirement plan or other retirement account into a self-directed IRA (SDIRA), custodial services will be necessary for tax protection and will allow rollovers from all types of IRA plans, including traditional, Roth, SEP and SIMPLE accounts. It is also wise to check whether your existing retirement account qualifies before making this transfer decision.
Self-directed IRA custodians typically only allow you to invest in approved securities; however, with a self-directed IRA you have more investment flexibility by purchasing real estate, promissory notes, or tax lien certificates. Unfortunately, this openness may expose your IRA to fraud; look out for red flags such as brand new investment companies claiming unrealistically high returns or no third-party oversight; choosing a reliable SDIRA custodian can mitigate such risks.
