July 26, 2022

How To Transfer Funds to a Self Directed IRA: Step-by-Step Guide

Key Points 

  • An IRA transfer is the movement of funds directly from an IRA at one financial institution to an IRA at another.

  • A rollover is the movement of funds from a qualified retirement plan - 401(k) or 403(b) - at one financial institution to an IRA at a different institution.

  • A Medallion Signature Guarantee may be required to complete a transfer.

  • To have a smooth transfer, transfer between like IRAs, complete all forms, address any fees, and communicate consistently with each institution involved.

Congratulations, you have decided to open a Self Directed IRA and gain control of your retirement investments! Before you can start investing in alternative assets like real estate, precious metals, promissory notes, and more, you must first fund your Self Directed IRA. One of the most common ways to move funds into your new retirement account is known as a transfer. You may be wondering,  

  • How do I transfer funds into a Self Directed IRA?
  • What is the difference between an IRA transfer and a rollover?  
  • Do I need a Medallion Signature Guarantee?  
  • How can I make the transfer process as smooth as possible?   
Illustration of transferring funds to a Self-Directed IRA

Let’s explore these questions and more about transferring funds into a Self Directed IRA.   

What is a Direct IRA Transfer?

A business meeting with investors looking at graphs and talking about Self-Directed IRA investments.

A direct IRA transfer (also called a trustee-to-trustee transfer) is the direct movement of funds from an IRA at one institution to an IRA at another, without the funds being held by the accountholder. For example, a transfer can be the movement of funds from an IRA at Fidelity to a Self Directed IRA at Madison Trust.   

Since the funds are not held by the accountholder, there are no tax penalties. There is also no limit on the number of transfers you can make in a year.  

What is the Difference Between an IRA Transfer vs. Rollover?

Another way you can move funds into a Self Directed IRA account is by completing a rollover. Although they result in the same outcome, a transfer and a rollover involve different processes and rules. 

A rollover is the movement of funds from a qualified retirement account, such as a 401(k) or 403(b), to an IRA. There are two types of rollovers.

1. Direct Rollover – The direct movement of funds from a qualified retirement plan into an IRA.  

Typically, the funds will be moved directly between institutions. However, some custodians may make the check payable to the financial institution FBO Your Name (e.g., Madison Trust Company FBO John Boy) but mail it to you, instead of mailing it directly to the receiving custodian. If this is the case, please forward the check to Madison Trust’s address provided in the Delivery Instructions below. 

2. Indirect Rollover (also known as a 60-Day Rollover) – The indirect movement of funds from a qualified plan into an IRA within 60 days. 

The difference between an IRA transfer and an IRA rollover.

How is an Indirect Rollover Different?

  • First, the funds are distributed to the accountholder.  The check is made payable directly to you.  
  • Then, the accountholder must deposit the funds into the new IRA within 60 days.  

* If these specific rules are not followed, the accountholder will be taxed and penalized if younger than 59 ½ years old.   

* Only one indirect rollover can be made in a 12-month period.

To start the rollover process, please initiate it with your current plan administrator. Here are our Delivery Instructions.

Let's Dig Deep into the Details!

What is the Difference between an ACAT and a Non-ACAT Transfer?

There are two types of transfers that can take place between financial institutions, ACAT and Non-ACAT Transfers.  

The Automated Customer Account Transfer Service (ACAT) is an automated system used to transfer assets from an account at one brokerage to another. Typically, the entire account balance must be moved for the transfer to occur through the ACAT system. In order to use the ACAT system, the firm must be a qualified National Securities Clearing Corporation (NSCC) full service member or Depository Trust Company (DTC) bank participant. 

Non-ACAT Transfers are the movement of funds from one non-ACAT-eligible firm (bank, credit union, mutual fund company, annuity/insurance company) to another. This system must be done manually. Madison Trust operates on the non-ACAT system, as do most alternative investment custodians. We submit the completed transfer paperwork to the institution you are looking to transfer from on your behalf. 

What is a Medallion Signature Guarantee?

When transferring funds into your new IRA you may be told to obtain a Medallion Signature Guarantee. A Medallion Signature Guarantee is somewhat similar to a notary; however, it is exclusively used for financial transactions. A Medallion Signature Guarantee is an authorized signature that protects you by making it harder to steal your assets and securities. 

Example of a Medallion Signature Guarantee on a Transfer Authorization Form

Why Do I Need a Medallion Signature Guarantee for my IRA Transfer?

The purpose of the Medallion stamp is to ensure that the signature on the form is genuine. It is used as a protection against any forgery and fraud.

Madison Trust Company does not require a Medallion Signature Guarantee; however, some other institutions do. The custodians who require a Medallion Signature Guarantee will often reject the transfer request if the stamp is not included on the form. This causes the transfer process to start all over.

Some custodians only require a Medallion stamp for large transfers of cash, while others require it for all transfers. Some institutions also require the original copy of the Medallion Signature Guarantee. If so, please mail the original document to Madison Trust so that we can proceed with your transfer request. If you are unsure of your broker’s requirements, please see their website or contact them directly.

Where can I Obtain a Medallion Signature Guarantee?

The front of a stone building that says "Bank", where an account holder can obtain a Medallion Signature Guarantee

You should be able to obtain a Medallion Signature Guarantee from a bank you have a relationship with. It is recommended to call ahead of time to ensure the branch you are using can provide the service and the person authorized to use the stamp is present at the time you wish to go.  

When you go to the bank, be prepared with an unsigned copy of the Transfer Authorization Form so you can sign it in front of the Medallion officer.

Tips for a Smooth and Successful IRA Transfer to a Self Directed IRA

Tips For A Smooth Transfer Infographic. (1) Transfer to a Compatible IRA (2) Submit Any Asset Transfer Documents (3) Address Any Fees (4) Liquidate Publicly Traded Assets (If applicable)
(4) Complete All Forms (5) Communicate Consistently (6) Sign and Date the Transfer Authorization Form in Ink

Why Choose Madison Trust for Your Self Directed IRA?

At Madison Trust, it is our goal to provide you with exceptional service, evident as the industry’s highest-rated Self Directed IRA Custodian.    

Our knowledgeable, CISP-trained (Certified IRA Services Professionals), and friendly team has expertise in all the Self Directed IRA rules, regulations, and processes. Our low, flat fee structure saves you money so you have more to invest and save in your retirement account. You also have the freedom to diversify your portfolio with the asset of your choice. You want to enjoy a richer retirement and we want to provide you with a pleasant journey getting there. 

Are you new to self-direction? We’ve got you covered! Click below to learn more about the Self Directed IRA and Transfers Process. 

Conclusion: Let's Put It All Together

The first step toward investing in alternative assets and achieving your retirement dreams is to open and fund your Self Directed IRA. The most common way to fund your account is through an IRA transfer. It is a simple and quick process that one of our Self Directed IRA Specialists can guide you through.

A couple smiling and looking at their finances on their laptops

Accountholders who transfer compatible IRAs, submit additional documents, address any fees, and complete the forms correctly often have a smooth transaction. It is also helpful to speak to your current custodian about additional requirements, such as a Medallion Signature Guarantee.  

Madison Trust’s Self Directed IRA Specialists understand the rules that govern transfers and rollovers. We are here to answer any questions and ensure all guidelines are followed so you can keep your funds in a tax-advantaged account. 

Got Questions?

Speak with a Self-Directed IRA Specialist.
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