Are you interested in funding a self-directed retirement plan? There are four different ways to get your account at Midland IRA funded: personal contribution, transfer of assets, direct rollover, or indirect rollover. Here we will break down each one to help identify how your IRA can be funded.
A contribution is when you fund your account using personal funds. Depending on your account there are different contribution limits that you’re limited to each year. For traditional and Roth IRAs the limit is $5,500, and if you’re over the age of 50 you can contribute $6,500.
Transfer of Assets
If you are moving money between like accounts (i.e. Roth IRA to Roth IRA), your request can be done as a transfer of assets. When funding a self-directed retirement plan with a transfer of assets, your money moves from your current custodian to the accepting custodian. The defining characteristic of a transfer of assets is that the accepting custodian will initiate the request on your behalf. After you have completed and pen signed our Transfer Form, Midland will send and follow up on your request.
This type of movement is not tax reportable and there is no limit to the number of transfers you can complete. It is important to check with your current custodian to find out what additional requirements they may have before submitting your transfer request.
If you are moving money from a qualified retirement plan (i.e. 401k) into your Midland IRA, the movement is done as a direct rollover. With a direct rollover, you need to initiate the request with your current custodian and complete their required paperwork. Since you are responsible for initiating the request, you are also responsible for following up with your current custodian. Midland also requires you to complete our Rollover Certification Form.
You need to check with your current custodian to determine how your funds are able to be sent to your Midland account. If your current custodian issues a check, it will be made payable to your Midland IRA. In the instance your check is mailed to your personal address, it is important to forward that check to Midland for processing.
A direct rollover may be may be reportable. If you are moving pre-tax funds into a Roth IRA, your direct rollover may also be taxable. However, there is no limit to the number of direct rollovers you can complete.
An indirect rollover is the movement of money from an IRA at one custodian to an IRA at another custodian, or even back into the same IRA. The defining characteristic of an indirect rollover is that you take receipt of the funds. An indirect rollover is processed as a distribution with a subsequent rollover contribution. To complete an indirect rollover contribution into your Midland IRA, you will need to complete our Rollover Certification Form.
It is crucial to note that you have 60 days from when you take receipt of the funds to reinvest them. Indirect rollovers are reportable, with the distribution being reported on Form 1099-R and the contribution reported on Form 5498. The IRS only allows one indirect rollover per 12-month period.
After learning more about these four types of ways of funding a self-directed retirement plan, you may know which option best fits your scenario. You can find the applicable forms, as well as submit completed forms using our secure document upload online under the Resources tab on our website. You can always reach out to one our associates with any additional questions about the process. Should you have questions about your personal tax liability, you may want to consult your tax professional.
For more information call (239) 333-1032, or go to www.midlandira.com.