How to Open a Self-Directed IRA Account Setup Basics

How Do You Set Up a Self-Directed IRA?

When setting up a Self-Directed IRA, possessing a clear grasp of the process can make it easier and more efficient. However, before you can learn how to open a Self-Directed IRA, you need to figure out which kind you wish to use. The two most common types are a Self-Directed IRA and a Self-Directed IRA LLC with Checkbook Control. No matter which you prefer, we can make it easy for you to set up your own Self-Directed IRA account.

How to Set Up a Self-Directed IRA

Setting up a Self-Directed IRA is a simple three-step process:
1

Open an Account

Open a Self-Directed IRA with a regulated Self-Directed IRA custodian.

2

Fund Your Account

Fund your Self-Directed IRA by transferring or rolling over all - or a portion of - your funds from an existing retirement account, such as an IRA or 401(k), or by making an initial contribution.

3

Invest in Your Idea

Instruct your IRA custodian to send your IRA funds by writing a check or sending a wire to your investment.

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Step-By-Step Guide to Setting Up Your Self-Directed IRA

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 Custodian
The 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 IRA
There 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 Choice
Complete 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.

How Do You Set Up a Self-Directed IRA LLC?

A Self-Directed IRA LLC starts with opening a Self-Directed IRA and then establishing an LLC which upgrades you to the power of checkbook control to the process. Here's how to set up a Self-Directed IRA LLC:

Open an Account With a Self-Directed IRA Custodian: Research Self-Directed IRA custodians and then open an account with the one that fits your needs.

Fund your Self-Directed IRA: Fund your new Self-Directed IRA by rolling over or transferring funds from an existing retirement account. You can also fund it with an initial contribution.

Set Up an LLC: Your Self-Directed IRA LLC facilitator will establish an LLC for your account. This is a specialized LLC that is specifically designed to conform to all relevant ERISA regulations. Due to the complex structuring necessary for this LLC, you will usually not be able to use a pre-existing LLC that you may already own.

Invest in Your LLC: You will instruct the custodian to invest your retirement funds in the new LLC. This is akin to telling your custodian that you want to invest in a specific stock or company. It's just that in this case, the company you are investing in is your LLC.

Open a Checking Account: Go to the bank of your choice and open a checking account in the name of your LLC. This will give your IRA the ability to invest in any asset without having to go through the custodian. Just simply write a check from this account and the purchased asset automatically belongs to your IRA.

What's the Self-Directed IRA Setup Time Frame?

The entire process of setting up a Self-Directed IRA typically takes two to three weeks from start to finish. For those who need quicker turnaround time, expedited service is available. Visit Madison Trust’s processing timeframes page for more detail.

How Much Are the Setup Fees?

Madison's initial setup fee is $50. The annual fee uses a flat-rate pricing model. This means that Madison Trust's custodial fee is fixed at one price regardless of the amount in your IRA. Compare our pricing to other custodians and you'll see that Madison Trust is a great value!

Interested in learning what it costs to have a Madison Trust Self-Directed IRA? Click here to view Madison Trust's transparent Fee Schedule!

Diversification Beyond Wall Street Awaits

Reach out, and one of our Self-Directed IRA Specialists can assist you with getting started on your self-directed investing path.
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Our Story

Madison Trust is an industry-leading Self-Directed IRA custodian with a passion for empowering individuals to gain control of their retirement investing. Learn more about our story from our President & CEO, Daniel Gleich.

Ready to Get Started? We're Here for You! 

Madison Trust offers Self-Directed IRA services that are easy to get started with! Thanks to our dedicated Self-Directed IRA Specialists, you will be provided with step-by-step guidance from account setup all the way to placing your investment. 

It's time to start investing in what you know and believe in with a Madison Trust Self-Directed IRA!
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Self-Directed IRA FAQs

How long does the setup process take for each Self-Directed IRA?

A Self-Directed IRA account can be opened in 15 minutes. The process takes 2-3 weeks to fund your account and invest in the asset of your choice.

How much does it cost to set up a Self-Directed IRA? 

The cost to set up a Self-Directed IRA at Madison Trust is $50, and $105 per quarter to maintain. You can learn more about Self-Directed IRA fees here.

Can I rollover or transfer my existing retirement account to a Self-Directed IRA?

Yes! To fund your new Self-Directed IRA you may transfer from a previous IRA, rollover funds from a qualified retirement account such as a 401(k) or 403(b), or make an initial contribution.

Still Unsure Which Self-Directed IRA Is Best for You?

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