A self-directed IRA is a unique way for an investor to invest their retirement savings. Regular IRAs are very limited in terms of the investments allowed. They allow basic financial products such as investments: stocks, mutual funds, bonds, and CDs. A self-directed IRA allows you to invest in broader investments: real estate, loans, businesses, and more. Here’s an overview of how to set up this type of retirement account.

set up account

Find a self-directed IRA provider. There are many companies that specialize in being self-directed IRA custodians. When you set up your account, you’ll need to decide whether you want to set up a Traditional (pre-tax) or Roth (after-tax) IRA. You should consider transferring to existing retirement accounts. Also, be aware of the fees your custodian charges to manage your LLC IRA. These fees can be significant, so make sure you have a good reason to go the self-directed route.

fund your account

Roll money over from another IRA or contribute cash to your self-directed IRA. Remember that this account is still subject to the same IRS contribution limits for IRAs.

Select investments for your account

Find appropriate investments for your account. Most self-directed IRA investors make real estate investments or loans, but there are many other types of potential investments available. Check with your account custodian to make sure your investment is eligible. There are very specific IRS rules you must follow to maintain the status of your special retirement account. If you violate these rules, your account may be considered a non-IRA account and IRA early withdrawal penalties may be imposed.