When you have a self-directed IRA, you decide where you want to invest your retirement fund. You have the option to choose several investment options in bonds, stocks, or use your funds for money market investment. You also have the option to invest in private notes and loans, real estate and limited liability corporations.
With a traditional IRA, your retirement fund portfolio is managed by financial managers or advisors who will make an investment plan and manage your investments for you. Moving some funds from a self-directed IRA to a traditional one sometimes increases your chances for more investment returns.
To move funds between IRAs, here are some tips what on what you need to do.
- Determine how much you funds you are going to rollover and tell your self-directed IRA broker that you intend to make a rollover. Some brokers allow you to do the process online.
- Find a trusted traditional IRA manager and open an account with them. Check online sources to find the right traditional IRA manager. Opt for a trustee-to-trustee direct rollover to avoid penalty and taxes on additional income if you do it yourself. If you resigned or retired from your current employer and failed to open an account for another IRA, your retirement fund will be sent to you. If you are unavailable to open another IRA account within sixty days, the IRS will collect a total of 20% for early withdrawal penalty and taxes on additional income.
- Fill up all the necessary forms with your self-directed IRA broker as well as with the traditional IRA financial advisor and the authorization for the self-directed IRA broker to transfer funds to your new traditional IRA account. The process can take from a month to less than two months.
- Check with the traditional IRA manager that the fund transfer has been completed and have them draw up an investment plan for you. The investment plan is usually based on your age, your risk tolerance and well as the prevailing market conditions.
- Your investment plan may include mutual funds, bonds and stocks. Real estate, collectibles and life insurance are not included in a traditional IRA investment plan as compared with a self-directed IRA. It you want to invest in real estate, you have to sign up with a real estate investment broker.
- Check out the Internal Revenue Service website for updates on new rulings for IRAs. There are considerable reductions in contributions and taxes when your retirement fund is distributed.
- Check and compare the traditional IRA with a Roth IRA. There are differences in these retirement plans that can yield more earnings for you.
- While a traditional IRA can only be funded by cash, rollovers, conversions and transfers allow any asset to be included.
Make sure to check all the instructions, recommendations and limitations when you want to move funds between IRAs. Compare the investment plans presented by different financial advisors to get the highest earnings for your retirement fund’s long-term investments.