By Julius Choudhury
We all make mistakes, but when opening a self-direct IRA, you want to get it done as seamlessly as possible to avoid delays or consequences. Some people see IRAs as long-term investment vehicles, while others use their IRAs to help fund their retirement—either way, you should pay close attention to your account and its regulations and rules. To help avoid issues down the line, here are four common mistakes people make when setting up an IRA.
Not Filling Out the Application Completely
A common mistake someone makes when setting up an IRA is not filling out the entire application. If you’re experiencing delays, you most likely missed a page or two. Some companies try to keep their forms simple and only require a few pieces of essential information, while others need more information and require you to complete more complex forms.
Regardless of whether the forms are complex or simple, you need to ensure every space has a signature and every page has the correct information.
Not Having the Correct Documents
Another mistake people often make is not having the correct documents. Not having the proper papers or correct contract titling could prevent your progress. For example, if you enter a purchase contract and acquire this property with your IRA, you must list the buyer as your IRA.
Your property title contract should be as follows:
Name of trust company custodian, FBO (for benefit of) [your name] IRA
Not Exploring Other Investment Options
If your IRA rolled over from your workplace’s 401(k), you likely noticed that you have more investment options than the one offered through your 401(k). You should explore your options and see what other investments you have the flexibility to invest in. Take advantage of exploring different options until you find a specific investment strategy you’re comfortable with.
Waiting Too Long to Contribute to Your IRA
When you have an IRA, you also have contribution limits that change yearly. Keeping up with contribution limits is essential to ensure you are not above them. However, when funding your IRA, the trick to building a healthy account is to contribute all at once instead of doing it slowly. If you have the cash to contribute to your limit at one time, you will avoid the pressure and stress of working with the stock market.
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