Transfers, Rollovers, & Contributions for Your Self-Directed IRA

Download our Beginner’s Guide to Transfers and Rollovers: https://directedira.com/beginners-guide-transfers-rollovers/

Have you ever wondered how to fund an IRA? Do you have money in an old 401(k) that you want to move into an IRA?

In this episode, Mat Sorensen and Mark Kohler break down what it actually takes to move money into your account, and why this step can be easier or more frustrating than people expect.

They cover the three primary ways to fund a self-directed IRA: transfers, contributions, and rollovers. Along the way, they explain why IRA-to-IRA transfers are usually the simplest option, why rolling over an old 401(k) can take more time, and how to handle the process without unnecessary delays.

Still have questions about transfers and rollovers? Book a call with our team: https://directedira.com/appointment/ 

For questions or to learn more about this episode's topic, book a call with an IRA specialist here: https://directedira.com/appointment/

Other:

Mat Sorensen: https://matsorensen.com

Mark J. Kohler: https://markjkohler.com/ 

KKOS: https://kkoslawyers.com

Main Street Business https://mainstreetbusiness.com

Transcript

Welcome And Series Context

SPEAKER_00 0:06

Welcome everybody to the Directed IRA podcast. My name is Mark Kohler. I'm here with Matt Sorensen on our top 10 series of the first things you need to know, the FAQs, if you want, the how to get started. Welcome to IRA series. I am so excited. We're part two. We're just getting going.

Step Two Is Funding The Account

SPEAKER_01 0:26

Yeah, this is where the fun stuff happens. We're going to talk about getting money into your self-directed IRA account. We've talked about what is a self-directed IRA already, how you open one. Now we want to talk about getting the money in because that's step two in the process. We're going to get to step three here later, which is actually investing the money. But you need to get money into the account, whether you're doing a transfer, a rollover, or a new contribution. We want to talk about that so you understand the rules and how to access this existing pot of retirement plan dollars you may already have.

SPEAKER_00 0:58

Now, I was about to say this is my favorite part or fun part, jokingly, and then I realized no, this is not, this is not an easy it's not hard, but I want to give you guys a little forewarning. If you listen to our first podcast, you're like, oh my gosh, this is awesome. I want to self-direct. I've heard about this. I have a friend doing it. Okay, I want to get equipped. I want to learn. And you're like, okay, step two, I got to get an account open and fund it. This can be a little um laborious. You know, it's gonna require some paperwork. You might have to rip that, what do they say, that gun from the cold dead hands of your fidelity broker or whatever? You know, like you're gonna have to try to get that money sometimes moved over and it can't be, and sometimes it's not easy. So I I don't want to set the wrong tone here. It could be done in 24 hours. You may make a contribution done tomorrow. But I'm just forewarning you getting the money in there could be a little bit of a challenge. Is that okay to say, Matt? Like, I don't want to be Debbie down here.

IRA To IRA Transfer Process

SPEAKER_01 2:03

Yeah, and I think it's I think it's can be easy, but just make sure you're knowing what to do here. And that's the point. We wanted to walk you through the steps you understand your expectations are set right. And let's just talk about the first one out of the gate and let's just get into it because that because this is actually the easiest way. The easiest part. And and luckily the easiest is the most common, all right? Which is hey, I already have that IRA at TDMeraTrade or Fidelity, and it's a traditional IRA. And I opened up a traditional self-directed IRA with you guys at directed IRA. What do I do? All right, pretty dang easy. Let's say you wanna you want 200 grand to self-direct. If you have 500,000 in that fidelity IRA, you're gonna sell 200,000 of stock or whatever you have there to cash because you're gonna be buying a new self-directed investment, so you need cash. So you're gonna have 200,000 sitting in cash in your Fidelity account. Then you're gonna do a transfer request. This is a form on our end. You will complete it with us. You can do it fully online in our portal. We receive that request. As a license regulated custodian, we can send that request to Fidelity and they will send us the cash from your account. Easy peasy. If it's someone like a Fidelity or a Schwab, this is gonna take three to five business days for this CAPI to show up in their account because it's a transfer. So when you're going IRA to IRA, where this is your Roth IRA at Merrillynch, your traditional IRA at Fidelity, your SEP IRA at you know, Robinhood, I don't care. These transfers come over relatively quick because they're IRA to IRA. And we'll receive those, place them in your account. They usually come by wire, and then they're going to be available to you. So you might have, if you're looking to make an investment, you might have a week's time before that money's ready. So the transfer is an easy one. And the important thing to know is we initiate that for you. So you're completing the request on our form, indicating, hey, this is my Fidelity account. It's account number one, two, three, four. Transfer over 200K. And you can move the whole thing, you could just move a partial amount, whatever you want.

SPEAKER_00 4:07

I love it. And um, I'll let me say it a different way too, maybe even in bigger baby steps, is some of you might want to just go get that transfer form going, but you there's one important step in there. You have to open the account where the money's gonna come. So you have to have that receptacle account, receiving account open. So you can go to our website right now. It's super easy within minutes, hours, whatever, because there's gonna be some emails and it's a it's a financial account highly regulated. So you're gonna have to do double authentication crap and all that kind of stuff. I hate. But anyway, you go open the account, you're gonna get an account number, and when you get on your dashboard, you'll be able to start that transfer. And the the forms are all there. But if at any point you have any problems, we have our chat, um, live chat during business hours, our phone, our people on the phones are amazing. So they're gonna help answer any questions. But get the um account open, get that account number, and then request that transfer into that account number. Um can I say one thing, Matt, on this point, too? Some of you may already be going, Well, I want my Tesla stock to come over here. Well, that's not the purpose here. Leave what Tesla stock you want at Merrillant or Fidelity or Schwab. Bring over the sell what you there's not gonna be a tax when you sell. Sell the Tesla stock that you want that money to do something different, something new. So you can't bring the asset over. You're gonna bring cash over and you've got to sell it to do it. But that's a good thing because now you've got this cash to do this cool project you've been envisioning.

SPEAKER_01 5:50

Yeah, and that's a really important point. Most people are setting up a self-directed IRA because they have a private investment. They want to invest in a real estate deal or in a private fund, or they're gonna do a crypto IRA and buy crypto. They need cash to make that new investment. So you're gonna be typically transferring over cash, but you don't have to. You could transfer over the Tesla stock. You can buy a mutual fund in your accountant directed IRA. All right, we have a no-trade fee on mutual funds now. Um, so we can, it's called an ACAT, we can move that public asset over. It's not the common route, but if you're like, well, I want to just get that money over there. So when I find that private asset, I'm ready. We can do that too. And you can buy a mutual fund or a target date fund or an ETF, or you could buy the Tesla stock here if you want it. Now, most people don't because they're like, well, Matt, buying Tesla stock is free at my Fidelity or Schwab IRA because they get payment for order flow. That's how they make money. Um, we don't do that. So we're a private asset custodian. We're not a broker dealer. So when you so you might, and we have lots of clients who they have their fidelity IRA, their Schwab area. That's frankly most of them. They have their self-directed IRA with us that has that money that they're looking to self-direct. But there's not a wrong or right way to do it. Those are the going to be the options on transferring. One other thing I did want to know, we get this quite a bit. Well, Matt, I have a traditional IRA at Schwab, but when I come self-direct, I want to do a Roth account because I think this investment has a big potential and upside. So we have something called a Roth conversion app. If you're gonna be in that boat where you're like, I want to immediately be Roth when I come over, we have an exact Roth conversion app that opens a traditional IRA and a Roth IRA at the same time. It authorizes a conversion. So we'll receive that transfer of the traditional funds from Schwab into your traditional IRA. We immediately convert it and can close that traditional IRA out. So for any of you that want to just go to Roth from traditional right out of the gate, we have a solution for that. And that's happening in this funding process right when you transfer the funds over.

New Contributions And Backdoor Roth

SPEAKER_00 7:50

I'm just making a note, another point I want to make a little further down the path here. Um can I bring up number two option? Yeah. Contribution. Again, the most important.

SPEAKER_01 8:01

Yeah. Most common would be transfer. Let's go to least common, then we'll come back to the street.

SPEAKER_00 8:05

Make me feel bad. Okay, sorry. This is the most common for me. And I guess this is common for me because I've been an entrepreneur my whole life. And whenever I put money in a retirement account, I'm putting it in. I don't have someone putting money in a 401k for me. That only happened in the last few years of our companies as they've grown, so I can play in a regular 401k like my employees. And and so I think some of you out there, like, well, I'm starting from scratch. Like I want to put money into this account. I'm coming from an entrepreneurship lifestyle. No one put a 401k together for me or whatever the case may be. So, anyway, that's probably why it's common for me. But if you want to contribute, same process. Open your new account that you want to open, say it's a traditional IRA or a Roth IRA. And then once the accounts are open, right there on your dashboard, it can say contribute. And there's different ways to do that through ACH, or you can mail in a check, or you can blah, blah, blah. But you can look at all the options there, and you're just gonna put the money in based on your contribution amount. And I was this is what I wrote down, Matt. I'm gonna piggyback Matt's point. If you say, Well, I want to do a Roth, but I make too much money. No, you don't. There's a way to do it. It's called a backdoor Roth. And so we've already anticipated that for you. So if you're a high income earner and you want to open a self-directed Roth, holy crap, you can do it. And we don't make you open two accounts to do it. We have a fast-tracked method that says, oh, I'll make a traditional deposit and then convert it to Roth on day two. There's no tax. You're allowed to do that because you don't get a deduction when you contribute to a traditional because you make too much money. So the minute you convert it to Roth, there's no tax either. It's freaking awesome. And so that we've got other podcasts on that. But if you want to contribute to a Roth and you make too much money, just know there's a there's a step in there. And it's literally an account type called Backdoor Roth.

SPEAKER_01 10:06

Yeah. And on your contributions, remember, for 2026 right now, it's$7,500 a year plus$1,100 for any of you 50 years older. You can still make your 2025 contributions up until April 15th for the prior year. So we're in this time in March right now of 2026 where you can actually make both years' contributions. So if you haven't funded, you can do make double contributions right now:$7,000 for 2025,$7,500 for 2026. You could put$14,500 into a traditional IRA, Roth IRA, whatever IRA account you wanted to do. If you got a spouse, do the same thing for them. You got kids, let's drop some, if they had earned income and you paid them in your business or they have their own summer job, they could be doing that too. Now, when you open your account, you can link a bank account right there to make your contributions. All right. And a lot of people just do it in a lump sum. So you just, you know, you could do it, you know, payments over time, but you just put the whole lump sum in. That's what I like to do because I'm like, if you've had made that money yet, let's get that whole thing invested. Why wait and draw it out? Let's start investing if you have that available funds to get it in. So um, so that's the contribution method. Now remember, there's an annual amount you can put in each year. HSA is a little different. All the different account types you have an annual amount. And our team can help with that if you have questions. We have a ton of resources on our site. But that's you do that really on your own, right there in the portal, linking your own bank account through Plat and we where it just ACH is right into your account.

SPEAKER_00 11:32

Now, before you um move to number three, Matt, if I can make two other comments real quick, is just as a fun thing I'm doing right now, literally this week, it's on my to-do list, is my grandkids' Coverdale account. So a Coverdale is an educational IRA. It's separate from the Trump accounts or a 529 or a Roth. A Coverdale, you can put up to two grand into anybody's account, and we have a crypto Coverdale. So I can buy a crypto for my grandchild that I think 15 years from now, that crypto is gonna be worth a lot more. And I can do$2,000 per child up to April 15th for the prior year. And if I make too much money, I'm gonna gift it to my kids and they can put it in. So we have a methodology for that. I've got articles and videos on that as well. But you could be saying, hey, well, I'm in the process of this. Think big. Because we're gonna teach you about IRA LCs down the road. You might want to pool money to do some projects. So um get those other accounts funded while you're in the thick of it, while you're getting familiar with the process. Another point that I like that Matt's made over the years, and I wish I could I steal it when I can, is don't wait to say, well, I'll open the account, but then I'll put the money in when the investment's ready. There's this Forbes study, Matt, that you I'd love to hear you talk about it just real quick, that waiting to put the money in is is not your best uh methodology.

SPEAKER_01 13:00

Yeah, I mean, there's a couple of important points on that. One is there's just an analysis of people who had million-dollar plus retirement accounts. They put their money in as soon as possible. That was a trend. Like they didn't contribute on April 15th of 2026 for their 2025 contribution. They contributed in January of 2025 and had a whole year and three additional months or four additional months of investment growth rather than everybody else who waited until the deadline. So the first principle is get your money in and get it invested. Now, you can sit in cash, hear it directed if you have an investment immediately available. If you're like, well, I'm not gonna be in the investment's not gonna come up for three to six months, you can buy a mutual fund for free here. All right, if you want. You don't have to sit in cash. And some people think the market's gonna go down anyway, so they want to be in cash, but whatever your perspective is, you can buy those and be in the market while you're waiting for an investment if if that's where you want to be. The the second point is you want to be ready. You know, there's the a good saying out there. Um, I picked it up from a friend named Hone that is, you know, be ready so you don't have to get ready. All right. So how am I ready to self-direct? Well, you have your money in there. You're ready to go. Whether this is a new contribution, transfer role, or whatever it is, get the money in there so it's ready to go. When you find that deal, you can go act on it. And there's less hustle and stuff you got to do and scrambling. As many of you know, when you make an investment, you know, it's there's some work, you know, there's a process. And if the money's there and ready to go, and maybe it is in the market when you're directed IRA account, maybe it is the free mutual fund purchase you did. Where now it's um, we just need to sell that and your cash is back in your account tomorrow. Done. And you're ready to go into that investment rather than having to transfer it over and get the money over from Fidelity or Schwab.

SPEAKER_00 14:46

Well, since I heard it from you, can I quote you? Matt Sorensen said, get ready, don't be ready. No, be ready.

SPEAKER_01 14:52

Be ready so you don't have to get ready.

SPEAKER_00 14:54

So you don't have to get ready. Can I use that? Can I quote you now?

401k Rollovers And Timing Rules

SPEAKER_01 14:57

You can use that. I mean, these royalties are going to add up though. Cause, you know. All right. Now the third option to fund your account. Which, and I will say transfers is the most common. And a lot of people are surprised that there's more money in IRAs than there are 401ks or another retirement account. So just moving IRA to IRA really easy. It's IRA custodian to IRA custodian. That's the fastest. We talked about contributions, which is we still have a lot of clients do contributions, um, but a lot of times it might be in in conjunction with the transfer or a rollover. You might be funding your account from all three methods, actually. You know, you might be doing a Roth IRA with us, and you got an old, you got a Roth IRA at TD Ameritrade, you got a Roth 401k from an old employer, and you're doing a new Roth contribution, and maybe that's backdoor, maybe it's not. And so you could be using all three funding methods for the same account, even. So let's talk about that third one here, which is the rollover. Transfers and rollovers sound the same, but they're actually different. Transfers means IRA to IRA or HSA to HSA. A rollover is coming from an employer plan to an IRA. So this is your old 401k with your prior prior employer where you don't work, or maybe it's your current employer and you're at retirement age and you can roll out, but you're moving from a 401k plan into an IRA. There's a couple different processes here and timing rules you want to make sure you understand. First, when it's a rollover, your IRA custodian doesn't initiate that. We can't go to, you know, Voya or Vanguard where your 401k is at, or John Hancock and say, hey, transfer this money over. In a 401, you have to initiate a form on their end. You, as the former employee or participant in that 401k plan saying, Hey, I want you to move this whole 401 or X amount of this 401k over to my new IRA at directed IRA. What does the 401k provider do when they get this? It goes through a process. It is archaic. They might require something called a medallion stamp on this, which we have and we can stamp if needed. They may require, um, they may contact you and to confirm it and make and but they may mail you the check to your home. They won't mail it to us, some 401k providers. Now the check will be written out to direct to trust company, but then you're gonna have to receive that check and then mail it to us. And by the way, they do not send that FedEx. All right, they send it like regular mail. And that processing of that check might take a while. So so what I'm trying to make here the point, if you can't tell, is the rollover can be kind of a pain. We've got the process down though. We've done with all the main 401k providers, we've done thousands of them and can help you through the process. We know the form you're gonna need. We can help you through the contact points, but it is something that you sign and gets initiated to the 401k provider, and then it most of the time is a mail process with the check. So what I would say on the rollover is this is not three to five business days like a transfer in a in an IRA once you submit the form. Once you submit the form on a 401k, it might be two weeks before those funds are actually in your account at directed IRA.

SPEAKER_00 18:12

Now tell me if this may be three um tell me if this happens too, Matt, because I um I think a lot of times people um, and I've run into this, they go, Well, I have an old 401k. I guess I gotta do this rollover. Well, isn't it more times than not that your old 401k provider has already kicked it out to an IRA and you just don't know it? And so it's important that you look at the documentation for this old 401k and look up in the corner. Is it say IRA? Does it say 401k? You may even want to call them and go, is this still in an old 401k? What is it in? And is it can I liquidate it and get it to the cash position? Is it in an IRA? Do you recommend that at all? That they kind of do a little bit, they just don't presume um the process. What do you think?

SPEAKER_01 19:05

Um I think the only time it will be automatically kicked to an IRA if it was a small balance account. They they can't, a 401k provider, many of them will kick their accounts to IRAs, but they can only do that for 401k balances that are under 10 grand.

unknown 19:21

Oh.

401k Roadblocks And Hidden Fees

SPEAKER_01 19:22

So otherwise you would have had to initiate that. So there's a Department of Labor rule that allows 401k employers that where you're in a 401k plan to say, hey, you don't work here anymore. We're moving your money to an IRA. We don't want you in our employer 401k plan anymore. You have a small balance. So that will happen on small balance 401ks, where, like you said, they you might be surprised it's actually sitting in an IRA. But generally, most of the 401k rollovers we're going to be receiving are going to be a higher amount than 10. So it's probably still sitting in a 401k. But it is that process still. And the other thing you noted, Mark, is you know, again, it you will have to instruct it to be put to cash and then roll over the cash. We receive the cash, and then we will obviously you can make a new investment at directed into the self-directed investment you have ready. Or again, you can just buy a mutual fund or sit in cash as you're waiting for that investment to come over. But but the point is, is move quickly on the rollover. Do not delay. Um, a lot of people are coming here and they've got a private fund to go into. They've got a real estate deal they want to do. This needs to happen in like a 30-day window. So you want to be engaged in this. Our team's here to help. We have a whole funding team, by the way, that'll walk you through this, that'll go through the form with you, even if it's your accounts at Fidelity or whoever it's at John Hancock. We literally we do, I mean, we do hundreds of these every month with clients. So we can be helpful in that process. You might have done it once or twice before in your life. Let us help you to make sure that your account gets funded. You even book a call with our funding team if you want an appointment to really zero in on it.

SPEAKER_00 20:52

You know, just the way you explain that just makes me more upset because freaking 401k companies like the 401k machine is so huge and so uh evil, do I say? Trillions of dollars. And they they make it hard to get your money. They're gonna keep it if it's a high balance, kick it out if it's a low balance, anything that serves them, which pisses me off. And so I would just hope any of you listening, that old 401k, so so many people I talk to, they're like, I don't even know what's invested in, I don't even know what the return is, I don't even know how to access it anymore. My employer never calls me anymore because I don't work there. Duh. And so it's like this old account, this, if anything, this is a perfect opportunity for you to go get that freaking money and kick it out to an IRA and take control of it. Because holy crap, I can almost guarantee, I can almost Matt will not allow me to say it online here. Almost guarantee you're going to make more money than what it's invested in in that stupid 401k from nine years ago when you decided your investment tolerance in the London. Lunchroom after a pizza party because that's exact probably where it's all started. So right, yeah. I'm just so excited for you guys to have this money.

SPEAKER_01 22:08

Yeah, and I that's a I think a lot of people are surprised what their 401k is even invested in. They don't even know. They have no idea. They're and they're like, well, it's XYZ target date fund. Well, what does that own? I have no idea. They have they have no idea, you know. And so, um, and if that's you, don't feel bad. That's most people. But let's take some awareness, let's get engaged on it. Whether you want to be in the stock market, self-direct, crypto, real estate, private funds, small business. We don't care. We're not telling you what to invest in. I'm just saying get involved, be engaged. The self-directed IRA is an incredible tool tool here. We want to make sure that you're um focused on this money, where it's at, and how it's being invested. And one last point I'll put on this, on the rollover before we wrap it up is your 401k fees, a lot of people are like, oh, your self-directed IRA, you know, that, you know, there's an annual account fee there. I'm not used to that. My 401k is free. No, it's not. 401k is the average 401k is charging you one and a half percent. If you got a hundred thousand dollar 401k, that's 1500 bucks a year. You just don't see it because it's nickel and dimed out of your account every month. And it's coming right out of the investments. You're not cutting the check or paying it. And so it's eating into your returns. So, so just I want to do a little mindset check there and I say a reality check there on your your 401k actually likely has more fees than you're gonna incur with an IRA.

SPEAKER_00 23:34

Oh, totally. And I'm I'll I'll just say one last thing too, on and we've got to wrap it up is use this opportunity to do a little audit. Do a little audit and create a personal financial statement. This is a great opportunity to go, you know what? What the hell does my retirement look like? And create a little Excel sheet and start going through all of the accounts you can find. And what are their balances? What are their account numbers? What is my login and password? I've I do this probably every year. I Patty and I will go through and just like update our financial statement and all of those. And for some reason or another, we got to double authenticate this, I can never say that word. And go and go like double check all the account balances.

SPEAKER_01 24:19

We know it's easy to do.

SPEAKER_00 24:20

And so use this time to really circle the wagons and look at your retirement accounts as a whole, your entire financial statement. And I think you'll find it really rewarding, even though it's gonna be a little scary, but you gotta do it.

SPEAKER_01 24:35

Yeah. The good news is um you have the opportunity, of course, to invest the funds as you want to. And I think with the self-directed IRA, the best thing about the self-directed IRA, and the whole reason we have a job and a company, is not because we want to sell you what we have. We don't want to sell you anything. We only want to sell you the best investment possible, which you get to determine and find. It's not what's on the shelf or on the menu here that we're gonna jam down your throat like other providers. It's open architecture. Invest in whatever you want. As long as it's allowed by law, you can do it with a self-directed IRA. But we got to get it funded. This is that critical point, getting the money in so you can go out and make those investments. And if you have questions, our team is here to help. So you can always get an appointment, book with them. You'll be getting emails through the process when you open your account. You'll see the opportunity to fund your account and book a call with our team if you need that assistance along the way. It's also available to do in the portal. So we're here to help you. Um, get over to directdiar.com. If you want to get started on this self-directed journey, book a call with our sales team. We'd be happy to help you. Make sure you're subscribed to the podcast, you're getting our newsletter, all those things so you can get up to speed on all the things self-directing. Thanks for being here. We'll see you next time.

Disclaimers And Final Reminder

SPEAKER_00 25:47

And thank you everyone for listening. A quick disclaimer and reminder: this presentation does not constitute an attorney or CPA client relationship. And it is always in your best interest to consult competent legal and tax professionals when conducting your own personal transactions.

SPEAKER_01 26:04

We also want to make sure you know this is not investment advice or financial advice. We're just trying to give you education, ideas, and strategies you can take to your professionals or conduct your own research on. We'll see you next time.