A rollover of your Traditional IRA is possible once each year, which means that the IRA funds can be transferred without tax penalties between two institutions. Investors may also decide to use their current Traditional IRA funds toward a self directed IRA.
Be aware that if you wish to take cash from your IRA before you reach retirement age, there will be financial penalties. Investment professionals will frequently advise investors that, when the time comes to perform a rollover, the investor opt for a direct rollover as opposed to an indirect one. The reason for this is that direct rollovers can be completed once annually free of penalties, but indirect rollovers may require the investor to pay early distribution penalties, and also often involve withholding requirements as well.
Transfers between two IRAs tend to be the most widely used practice when investors establish a self directed IRA. This can be achieved by establishing a new IRA account and custodian with the Internal Revenue Service; the custodian will then request that the first IRA transfers its exiting qualified funds to the new account. The custodian will then be able to accept the funds, with your consent, and to invest the money in accordance with your specifications.
Let’s compare the self directed IRA, Traditional IRA, 401k and other retirement accounts. Here, we have an info graphic which shows the ways that a Traditional IRA is similar to other retirement savings methods, as well as ways that each savings vehicle is different.[table id=retirement-pros-cons /]