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News #3

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Fund Your Account

Fund your account before you put it to work

Before your self-directed account gets its investment freedom, you must first fund it by making a new contribution and/or transferring or rolling over an existing account to your financial custodian (that’s us). 

Once your funds are secure, you’re free to focus on the big picture while we process your transaction.

Transfers and rollovers are relatively similar transactions in that both involve the movement or consolidation of tax-advantaged money from one retirement account into another, while a contribution is a deposit of non-tax-advantaged funds into a self-directed account. 

TRANSFERS

ROLLOVERS

CONTRIBUTIONS

Graph detailing rollovers, transfers, and contributions against investment power

TRANSFERS

A transfer is the movement of funds between identical or similar account types, such as:

  • Traditional IRA to Traditional IRA
  • Roth IRA to Roth IRA
  • SEP IRA to Traditional IRA 
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How do I initiate a transfer?

We will contact the resigning custodian on your behalf and begin the transfer process once we have received a Transfer Form. Your custodian may accept a faxed copy of the form, but they may also require a signature on an original copy. Some custodians will allow for an ACAT transfer.

 

You can view a list of custodians who will accept our ACAT transfer requests here, or you can reach out to your previous custodian directly to confirm. To initiate an ACAT transfer, please use this link via the Client Portal.

 

If your resigning custodian will accept a fax, please complete the following steps:

  • Log in to the client portal.
  • Click “Messages” at the top of the screen.
  • Compose a message to specify that you’re submitting a transfer request.
  • Click “Choose File(s)” to attach your completed Transfer/Rollover form to the message.
  • Click “Submit” to send the form directly and securely to NDTCO.

If your resigning custodian requires your signature on the original paperwork, please print, sign, and mail the form to our office for processing:

 

New Direction Trust Company
1070 W Century Drive
Louisville, CO 80027

How will my assets be transferred to NDTCO?

Your previous custodian will send transferred cash and assets directly to us for deposit into your self-directed account, with the exception of precious metals. We will direct shipment of transferred gold, silver, platinum, or palladium to the depository of your choosing.

Is the transfer transaction reported to the IRS?

No. Because the funds are moving directly between custodians, the IRS will not be notified about transfer activities.

Will I have to pay taxes on my transferred assets?

No. Direct transfers between custodians do not carry tax implications.

Can I do an in-kind transfer without having to liquidate my assets?

Yes. You can move or consolidate assets in the same manner as cash for transfers and rollovers. For example, if your account owns precious metals, you can transfer those assets to another IRA without having to liquidate them first.

Are there any limitations on IRA-to-IRA transfers?

No. The IRS does not limit IRA-to-IRA transfers. However, there are limitations on IRA-to-IRA rollovers: you may only complete one 60-day rollover during a 12-month period.

How do I transfer an asset out of my account?

Contact your receiving custodian to complete their transfer paperwork and learn about their transfer process. NDTCO will accept a faxed copy of transfer paperwork from your receiving custodian.

ROLLOVERS

A rollover is the movement of funds between dissimilar account types with the same tax statuses, such as:

  • 401(k) to Traditional IRA
  • 403(b) to Traditional IRA
  • Roth 401(k) to Roth IRA
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How do I initiate a rollover?

Contact your current plan holder to initiate the Rollover process. Please note, NDTCO does not initiate the Rollover process. Once that is done, please click here to let us know the Rollover is on its way. 

 

Some custodians will require a letter of acceptance to release the funds. If so, please contact NDTCO, and we will draft one for you.

How will my assets roll over to NDTCO?

Rollovers can occur directly or indirectly. With a direct rollover, your previous custodian makes the rollover check payable to your new custodian and sends it either to you or to your custodian for deposit into your new account. With a direct rollover, you can avoid the 20% federal withholding requirement for taxes.

With an indirect rollover, your previous custodian makes the rollover check payable to you for deposit into your personal account. You must then re-deposit the funds into your new account within 60 days. An indirect rollover requires your previous custodian to withhold 20% in federal taxes. Accordingly, when re-depositing the rolled funds into your new account, you will have to make up the 20% difference out of pocket.

If you do not re-deposit the full rollover amount within 60 days, the IRS will consider it a distribution and tax it as income (plus a potential premature penalty tax if you are under the age of 59 ½).

Is the rollover transaction reported to the IRS?

Yes. Rollovers are reported to the IRS as cash or assets leaving one trustee and being received by another. Rollovers must be completed within 60 calendar days. Otherwise, the balance will be taxed as income and early distribution penalties may apply.

Will I have to pay any taxes on my rollover assets?

No. If properly executed within the required time period of 60 days, there is no tax associated with a rollover.

Can I do an in-kind rollover without having to liquidate my assets?

Yes. You can move or consolidate assets in the same manner as cash for transfers and rollovers. For example, if your account owns precious metals, you can roll those assets to another account without having to liquidate them first.

Are there any limitations on IRA-to-IRA rollovers?

The IRS limits you to one 60-day rollover between IRAs during a 12-month period. However, there is no limit to rollover activities between IRAs and non-IRAs (e.g., 401(k) to IRA, 403(b) to IRA, TSP to IRA).

How do I roll an asset out of my account?

To roll cash or assets out of your NDTCO account:

  • Click here to access our Distribution and Notice of Withholding Form via Adobe DocuSign.
  • In Section 2. Distribution Type, choose “Rollover Distribution.” Complete the remainder of the form with any applicable information, provide your electronic signature, and submit the form.
  • NDTCO will require a Letter of Acceptance from your receiving custodian. Contact your custodian to request this letter, and forward it to our office through the client portal.
    • Click “Messages” at the top of the screen, compose a message, attach the Letter to the message, and submit it directly and securely to our office.

CONTRIBUTIONS

A contribution is a deposit of non-tax-advantaged funds into a self-directed IRA, Solo 401(k), or another such account. Think of a contribution as bringing a check to the bank for deposit. Click here to view 2023 contribution limits.

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How do I make a contribution?

To make a contribution, simply log in to the client portal: 

  • Click “Contributions” on the left side of the screen.
  • Indicate the contribution type (a deposit of your personal money would be “Contribution”), the contribution year, and provide your bank information.

NDTCO will execute an ACH transfer into your account, and the funds will be available after five business days.

How much can I contribute to my self-directed account each year?

Annual contribution limits vary by account type, account holder age, and account holder income. These limits may be revised by the IRS each year. 

What is the contribution deadline for a given tax year?

You can make contributions for a given tax year until the tax filing deadline in the following calendar year (usually on or around April 15, plus extensions). For example, you may contribute for the 2022 tax year until April 18, 2023.

How are my contributions reported to the IRS?

All annual contribution activities will be reported and submitted to the IRS via Form 5498, which is issued directly to the IRS after the tax filing deadline. You will also receive an account statement at the beginning of each year with the same information, which you can use for your own tax-filing purposes.

Traditional IRA

If you have earned income for a given year, you can make a Traditional IRA contribution of your personal money for that year. You can contribute up to $7,000 per year in 2024.

SEP IRA

You can contribute the lesser of 25% of compensation or $69,000 in 2024. 

Roth IRA

If you have earned income for a given year, you can make a Roth IRA contribution or deposit of your personal money for said year. You can contribute up to $7,000 per year in 2024.

SIMPLE IRA

Employees can enjoy employer contributions while making contributions of their own. Employees can contribute 100% of their compensation up to $16,000 in 2024.

Health Savings Account

You must have a high-deductible health insurance plan to make HSA contributions, and you can contribute up to $4,150 in 2024 if you have single health insurance coverage.

Solo 401(k)

As an employee, you can contribute 100% of your compensation up to $23,0000 in 2024. As an employer, you can contribute 25% of compensation up to $46,000.

Coverdell ESA

You can contribute up to $2,000 per year in 2024. ESA contributions are not deductible from your income for tax purposes.

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