A self-directed IRA allows you to choose the investments you want for your retirement, including mutual funds, individual stocks and exchange traded funds, as well as less usual investments such as real estate and gold or silver. A self-directed IRA puts you in charge of all investment decisions. Once you open that IRA, you can begin enjoying the tax benefits that come with the plan. If you choose a traditional self-directed IRA, you can enjoy an up-front tax break. If you opt for a Roth IRA, you give up that up-front tax break for the promise of tax-free withdrawals once you retire.
Contact the mutual fund company or brokerage firm where you currently have your other accounts. Ask to speak to a retirement specialist. If you do not already have a mutual fund company or brokerage firm that you use, you can start a new relationship with one or talk to your bank or insurance company about making this type of investment.
Tell the representative you wish to open a self-directed IRA. The retirement specialist will help you find the paperwork you need to open the account. In some cases the application and paperwork you need to open the account will be available online. In other cases, you will have to wait for the application to come in the mail.
Complete the application for the self-directed IRA, including your name, address, phone number and Social Security number. Set up an automatic monthly transfer from your bank account to the self-directed IRA if you wish. Just make sure you do not exceed the allowable annual contribution, or you could owe taxes on the excess contributions. For 2010, you can contribute up to $5,000 to a self-directed IRA, plus an extra $1,000 in catch-up contributions if you are age 50 or older.
Make a copy of the IRA application form, then submit it to the address listed on the form. Be sure to include your payment, or your bank account information, with the form.
- Although there are a wide variety of investments you can make with a self-directed IRA, there are some investments that are off-limits, such as life insurance or collectibles, and some restrictions on the kinds of real estate investments you can make. Familiarize yourself thoroughly with what's allowed under these plans.