Let's look at each of these steps in more detail so you can have a better understanding of how to set up your own Self-Directed IRA. Please keep in mind that Madison Trust will guide you through every step of setting up an account. The entire process of setting up a Self-Directed IRA is usually completed within two or three weeks.
Step 1: Create an Account With a Self-Directed IRA CustodianThe first step in opening a Self-Directed IRA is to contact a
Self-Directed IRA custodian and complete an account application. The application will ask basic questions like "What kind of IRA are you opening?" and "How are you funding your new IRA?"
Step 2: Transfer Funds Into the Self-Directed IRAThere are two ways to fund a new Self-Directed IRA: You can make a new contribution directly, or you can transfer or roll over funds from an existing retirement account. If you are transferring funds from an existing IRA, you will complete a
Transfer Authorization Form instructing the Self-Directed IRA custodian to initiate the transfer. The form will then be sent to the current IRA custodian for processing. The current custodian will then transfer your IRA funds, and they will be deposited in the self-directed account.
If you are rolling over funds from a former employer's plan, like a 401(k) or 403(b), you will contact your employer or plan administrator to request rollover paperwork. They will then issue a check or wire to the new Self-Directed IRA account. Before opening a Self-Directed IRA, it's important to research the rules that apply to your current 401(k). Many employers lock their employees into a specific 401(k) plan for the duration of their employment. That means that while you are still working for that company, you may not be able to roll over your funds into a Self-Directed IRA. Of course, if you no longer work for the company, you are free to roll over your 401(k) funds at will.
Step 3: Instruct the IRA Custodian to Invest Funds Into the Asset of Your ChoiceComplete an Investment Authorization Form instructing your Self-Directed IRA custodian to invest your IRA funds directly into your chosen
asset. This form will specify the investment amount and delivery instructions.
Self-Directed IRA custodians serve as passive, non-discretionary custodians and therefore cannot offer any investment or legal advice. It is recommended that investors perform due diligence before placing investments to ensure suitability. Self-Directed IRA custodians like Madison Trust Company are happy to help with any questions or concerns about the investment process but cannot tell you what to invest in with your money.
