You may have heard the terms "self-directed retirement account," "alternative IRA," or "real estate IRA," but like most investors, you could probably use some clarity. What exactly is a self-managed retirement account? What benefits does it have? And what possible effects can a Self-Directed IRA have as part of your retirement investment strategy? Get answers from the Self-Directed IRA Specialists at Madison Trust, then get help gaining control of your retirement investments with a Self-Directed IRA:
If you're looking to start investing with a Self-Directed IRA, you're in the right place! We can help you learn:
Self-Directed IRAs give you, the investor, the power to diversify your portfolio, invest in what you know and believe in, and hedge against the stock market.
The fees for a Self-Directed IRA held at Madison Trust are among the lowest in the industry - and are set at a fixed rate regardless of the value in your account.
There are three simple steps to setting up a Self-Directed IRA: open an account, fund the account, and place an investment.
A Self-Directed IRA is similar to a standard IRA. It's a retirement account that you contribute funds to, so that your retirement funds can grow through investments. The difference between a standard IRA and a Self-Directed IRA is the types of investments your account can hold. A standard IRA allows you to invest in publicly traded products like stocks, bonds, and mutual funds. With a Self-Directed IRA, you can choose to invest in almost any type of alternative asset. It's common to use a Self-Directed IRA for real estate, precious metals, and private placements.
A Self-Directed IRA is an individual retirement account that lets you invest in alternative assets beyond stocks, bonds, and mutual funds. You, as the account holder, direct the custodian to perform transactions.
This type of Self-Directed IRA allows you, as the account holder, to perform transactions in real-time. This investing power is achieved through the creation of an entity, such as an IRA LLC or IRA Trust.
A Self-Directed IRA can legally invest in almost any asset. The only assets that are off limits are collectibles, life insurance,
and S-corps. Some of the more popular investments include:
One concept that almost all investors and financial advisors can agree on is the importance of diversifying your portfolio. Investing in a variety of assets, including Wall Street products (stocks, bonds, and mutual funds) and alternative assets (real estate, precious metals, private placements, promissory notes, etc.) may reduce overall risk.
But you still may be wondering, "Which IRA is best for me?" Here are some of the basic differences between a
standard IRA and a Self-Directed IRA.
What are the Fees for a Self-Directed IRA?
The cost to set up a Self-Directed IRA at Madison Trust is $50, and then $100 per quarter to maintain.
How Much Money Can You Put in a Self-Directed IRA?
The contribution limits for a Self-Directed IRA are the same as a standard IRA. If you are younger than 50 years old, you can contribute up to $6,500 in 2023 ($6,000 in 2022). If you are 50 or older, you can contribute up to $7,500 in 2023 ($7,000 in 2022). Contributions for the year prior must be made by the tax filing deadline.
In addition to annual contributions, Self-Directed IRA account holders may also roll over or transfer funds from another retirement account.
What are Prohibited Transactions in a Self-Directed IRA?
A prohibited transaction is an improper transaction between an IRA and a disqualified person. A good rule of thumb is that an IRA may transact with third parties but may not transact with close family members or closely held entities.
When Can You Take Distributions From a Self-Directed IRA?
If you withdraw funds from a Self-Directed IRA before age 59 ½, you must pay applicable taxes and penalties. Once you reach age 72, you must begin to take required minimum distributions (RMDs). A Self-Directed Roth IRA is exempt from taking lifetime RMDs, since taxes are paid upfront.
How Do I Distribute Assets From a Self-Directed IRA?
To make a distribution from a Self-Directed IRA, you should complete a Distribution Request Form that details the distribution type, amount, and frequency of the distribution. If you are distributing an asset, please also submit a third-party certified value (ex: an appraisal, letter from an investment sponsor, CPA-certified valuation, etc.). Depending on the asset, additional documents also may need to be submitted.
After the documents are submitted and approved, Madison Trust will send an assignment of interest to you. This documents the transfer of ownership from your IRA to your personal possession.
How Long Does it Take to Set Up a Self-Directed IRA?
At Madison Trust, we make Self-Directed IRA setup fast and simple. Fill out our online application in about ten minutes. Then, typically, it takes as little as one or two weeks for your funds to be transferred to your IRA or IRA LLC.
We will complete your request within a few days. However, the transfer of funds from another custodian depends on that financial institution's processes and procedures.