- 1). Decide what type of self-directed Individual Retirement Account you wish to use. You can choose a traditional IRA, a Roth IRA, a SEP-IRA, or even a self-employed 401(k) plan. The latter two options will allow you to make much larger contributions than traditional or Roth IRAs.
- 2). Pick a custodian to manage your account. There are many financial entities that wear this hat; you can open your IRA with a life insurance company, a brokerage firm, an independent financial adviser, a mutual fund company or a bank. The type of custodian that you choose will likely depend upon the types of investments that you intend to use inside your account.
- 3). Contact the custodian you choose and ask them what forms you will need to complete in order to open your IRA. They will either send you an application or direct you to one that you can download off of their website.
- 4). Complete a transfer form as well if you are going to transfer or roll over funds from an employer-sponsored plan or other IRA that you already own. Submit this with the application to your custodian. It will probably take a week or two for your transfer to be processed.
- 5). Send a check to your custodian to fund your IRA once it is has been activated. Your custodian will give you an account number that you must put on your check. Remember to deduct your contribution amount from your income if you have opened a traditional IRA.
- 6). Choose an appropriate investment for your account once it is funded. If you will not be withdrawing funds from the account for at least 10 years, a growth instrument such as a stock mutual fund will probably work well for you. Those with shorter time horizons or conservative investment objectives should consider more stable alternatives, such as bond funds or CDs.
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