Getting the Engine Running: 3 Ways to Fund Your Self-Directed IRA
An IRA account is one of the most effective ways to save for retirement and to secure your financial future. There are numerous types of IRA accounts available including traditional, Roth and self-directed. Unlike a traditional IRA account, a self-directed account provides investors with numerous investment vehicles including real estate, commodities and precious metals. According to Investopedia.com, a self-directed IRA account provides the investor with "greater opportunity for asset diversification outside of the traditional stocks, bonds, and mutual funds."
An article from Forbes.com also discusses the benefits of this account type, stating "This new style of investing is increasing in popularity as more investors want more exposure to other assets and do not want to be limited by the offerings that brokerage firms have traditionally sold."
The key is getting started now so your savings can grow through the magic of compounding. Once you make the decision to start saving and open your account, all you have to do is start funding it. Funding your account can be conveniently accomplished using various methods. Here are three ways to get the ball rolling:
Set up an Account
The first step in funding a self-directed IRA account is to choose a custodian and get an account opened. Companies like The Entrust Group can assist you with all of the necessary paperwork and will provide numerous other services including account maintenance and regular reporting. These companies are highly regulated banks, trust companies and financial institutions that have the tools in place to act as a fiduciary and to hold your funds. Comparing custodians can be done online from the comfort of your own home or office.
Have an old 401k account collecting dust? How about a traditional IRA that is invested in just stocks and bonds? You have the ability to roll-over other retirement accounts into a self-directed IRA account to start enjoying the benefits and flexibility that these accounts can provide. Simply complete all of the necessary paperwork, and your IRA account administrator will handle the rest. Once your funds arrive, you can then choose from a variety of investment choices based on your investment objectives, risk tolerance and time horizon.
Start Making Contributions
If you have an income, you can start making contributions to a self-directed IRA account on a pre-tax or post-tax basis depending on account type. Your account custodian can help you determine applicable contribution limits per IRS guidelines. You should also discuss your eligibility with your tax professional to make sure that you make the most of the account and your savings.
There are other ways to make contributions as well. Any windfall income, such as from a tax refund or asset sale, may also be contributed up to regulatory limits. You may even consider getting a part-time job if your regular job does not leave much left over after expenses and invest that money into a self-directed IRA account. Contributions, even small ones, do add up substantially over time and any extra money you can put to work in a retirement account can pay significant dividends over time.
Setting up this type of account has never been easier than it is today. A self-directed IRA account may not only help you save for the future, but may also potentially offer you some tax savings and advantages. With a simple and convenient process, there is no better time to get started than now!