Choosing a self-directed IRA custodian: This step is completely in your hands. Do your research, understand what an IRA custodian can do for you and how they can insure you have a successful outcome. Research what a self-directed IRA custodian does. To put it simply, do your due diligence as you would with any investment and make sure your chosen custodian is regulated and has a process and plan for their investors.
Set up a self-directed IRA account: Like most accounts that deal with money, each company will provide you with paperwork to fill out and sign. If you have any questions before opening the account, make sure to address them with the custodian. Also be aware, it does take time for the account to be set up based on if you are transferring funds.
Fund the self-directed IRA account: You can fund your new self-directed IRA account a few ways. You can fund it with new money, transfer or rollover an existing IRA account you may have, or use a 401k from a current or previous employer. Some options are of course faster than others in terms of waiting time to fund the account. As the investor, you have the choice to transfer any amount you would like into this new account, unless the custodian has a minimum account balance that must be met at all times. Also, you would want to consider how much you will need for your alternative investments, whether it be for precious metals, real estate, LLC, etc. Note that the custodian currently holding your funds can take up to 2 weeks to process the request and send the funds for your self-directed IRA account. For example, at Preferred Trust Company, the average time for an account to be set up is 14 business days.
Processing transactions: Once you have your account set up, the next step is to use those funds to invest. You select your investment and submit appropriate investment direction forms. The custodian will verify that the investment stays compliant with the IRS regulations. Confirm with your custodian that they have the correct documents before signing. When investing in alternative investments with your IRA, remember you can provide yourself with an opportunity to grow your retirement account by having any interest you receive deposited right back in to your IRA account from your investments. It is important to note that you personally should never sign any legal documents pertaining to an investment that will be going into your IRA, your custodian does this on behalf of your IRA. This can cause a transaction to become prohibited and invalidate your IRA, in turn requiring you to pay taxes or even penalties on the investment/gains. If are concerned about what to do, you can work with a licensed professional to help assist you with the process.