Self-Directed IRA (SDIRA) Rules You Need to Know

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A Self-Directed IRA (SDIRA) can provide you with unique benefits to maximize your retirement. At SouthStar Bank, you can utilize your SDIRA to invest in options beyond stocks and bonds, including real estate, private equity, tax liens, and private loans. While there are numerous benefits to using an SDIRA, the IRS enforces strict regulations to protect your retirement savings and maintain your account’s tax advantages.

In this guide, we’ll cover the most important Self-Directed IRA rules you need to know to avoid penalties and maximize your retirement benefits.

What Is a Self-Directed IRA?

A Self-Directed IRA is an individual retirement account that allows investors to diversify their portfolios with alternative assets. Unlike traditional IRAs, which limit investments to stocks, bonds, and mutual funds, SDIRAs offer a broader range of investment options, including real estate, precious metals, private loans, and other alternatives.

Top Self-Directed IRA Rules You Must Follow

1. Account Holders Must use an IRS-approved Custodian or Trustee

Every Self-Directed IRA must be held by a qualified IRA custodian or trustee. SouthStar Bank offers custodial services to customers for their SDIRAs that have Checkbook Control-style accounts¹. This structure allows you to invest in alternative assets beyond conventional options and provides easier access to your funds compared to traditional IRAs.

2. Account Holders Must Avoid Prohibited Transactions and Disqualified Persons

The IRS prohibits certain transactions, known as prohibited transactions, involving disqualified individuals. Disqualified individuals include the IRA owner, spouse, ancestors, descendants, and controlled entities. Examples of prohibited transactions are:

Buying property from yourself or a family member
Using IRA-owned property for personal use
Lending money to yourself or related parties

Violating these rules can trigger taxes and penalties, disqualifying your IRA’s tax benefits.

3. No Self-Dealing

Self-dealing occurs when you personally benefit from your SDIRA investments outside the account. For example, living in or using real estate owned by your IRA is strictly forbidden. All income and expenses must flow through the IRA to preserve its tax-advantaged status.

4. Know What You Can and Cannot Invest In

While SDIRAs allow many alternative investments, certain assets are banned by the IRS, including:

Collectibles like art, antiques, and most coins (except specific precious metals)
Life insurance policies

Always verify investment eligibility with your custodian before proceeding.

5. Required Minimum Distributions (RMDs) Apply

If you have a traditional SDIRA, you must start taking required minimum distributions (RMDs) by age 73 (as of 2023). It’s important to note that Roth SDIRAs do not require RMDs during the owner’s lifetime.

6. Be Aware of UBTI and UDFI Tax Rules

Investments generating Unrelated Business Taxable Income (UBTI) or Unrelated Debt-Financed Income (UDFI) can incur additional taxes. For example, using leverage (non-recourse loans) to buy real estate or investing in an active business may trigger these taxes, which reduce your overall returns.

In Conclusion

Understanding the rules of a Self-Directed IRA is crucial to legally maximizing your retirement account’s growth and avoiding costly penalties. From working with an experienced custodian to steering clear of prohibited transactions, knowledge is your best defense.

Ready to diversify your retirement portfolio with alternative assets? Contact your SouthStar Bank IRA experts at ira@southstarbank.com or 512.384.3948, and they’ll be happy to answer any questions!

¹SouthStar Bank S.S.B. is an independent passive Custodian and is not associated or affiliated with and does not recommend, promote or advise any specific investment, investment opportunity, investment sponsor, investment company or investment promoter or any agents, employees, representatives or other of such firms or entities. Investments are not insured, have no guarantee, and may lose value. SouthStar Bank S.S.B. customers have FDIC bank deposit insurance for non-invested cash deposited into their Custodian Checkbook IRA account up to the standard insurance amount of $250,000 per depositor, per insured bank, for each account ownership category. The Bank follows the FDIC Insurance guidelines for custodians as outlined HERE.

5 Benefits of Saving Early for Your Child’s Future with a Youth Savings Account

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When it comes to securing your child’s financial future, opening a youth savings account early can make a significant difference. Whether you want to help your child build wealth, teach money management, or set them up for long-term financial independence, saving money for your child from an early age offers numerous advantages. Read on to explore the key benefits of contributing early to your child’s savings and why opening a dedicated children’s savings account is a smart financial move for any parent.

1. Harness the Power of Compound Interest in a Savings Account

One of the most significant advantages of starting a child savings account early is the power of compound interest. Compound interest allows your savings to grow significantly over time as you earn interest on both your initial deposit and the accumulated interest. Even small, consistent deposits in a youth savings account can add up significantly by the time your child is headed off to college or heading into adulthood.

2. Set Your Child Up for Long-Term Financial Independence

Opening a youth savings account can help your child build a strong financial foundation. The money saved can serve as a launching pad for important life goals, such as buying a first car, moving out, or starting a business. By establishing a healthy savings balance early, your child gains greater financial freedom and independence in the future.

3. Reduce Financial Stress by Saving Consistently

Saving early through a child savings account helps spread out contributions over time, making it easier to build a substantial nest egg for your child’s future without pressure to make large deposits. Automating deposits into the savings account ensures consistent growth and encourages disciplined saving habits without financial strain.

4. Teach Your Child About Money Management Through a Youth Savings Account

Opening a youth savings account can be an excellent tool to teach your child financial responsibility. Involving your child in monitoring their savings account balance or setting savings goals encourages good money habits from an early age. Kids who learn about saving and budgeting through their own accounts tend to develop lifelong financial skills and respect for money.

5. Encourage a Positive Relationship with Money Early On

Early exposure to managing their own savings account can help your child develop a positive attitude toward money, saving, and investing. This early experience fosters confidence and prepares them for more complex financial decisions later in life. Financial knowledge is crucial for long-term success and viability. Establishing strong principles early can be essential to your child’s development.

How to Get Started with a Youth Savings Account

Get started today at your local SouthStar Bank branch with our Shooting Star Savings account featuring no minimum balance requirement and no monthly service charges! While setting up the account, ask the team about automating monthly contributions to make saving effortless and encourage your child to take part in the process. Even small amounts grow over time, so the key to reaping the full benefits of a youth savings account is consistent saving.

7 Smart Tips for Saving for a Down Payment on Your First Home

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Saving for a down payment is often the biggest hurdle for first-time homebuyers. Whether you’re planning to save the standard 20% down payment or planning to use a first-time homebuyer program, a clear strategy and consistent habits are essential. Below are seven smart, actionable tips to help you save—plus how SouthStar Bank can support you on your journey to homeownership.

1. Set a Realistic Down Payment Goal

Before you begin saving, it is essential to determine how much you’ll need. While a 20% down payment is standard for conventional loans, many first-time homebuyer programs require as little as 3% to 5%. SouthStar Bank’s H.O.P.E Home Loan¹ program goes beyond traditional first-time homebuyer programs to offer even more support to help you get into your first home.

If you are interested in learning what kind of down payment you may need, SouthStar Bank’s local lending experts are available to discuss your options and determine your down payment goal.

2. Open a Separate Down Payment Savings Account

Creating a dedicated savings account to keep your down payment funds separate from everyday spending can be a great help in accomplishing your final goal. Using an account for regular transactions can make saving more challenging to track and control. A dedicated account, on the other hand, allows you to monitor your progress closely and manage your spending more effectively.

3. Automate Your Savings

Setting up automatic transfers into your down payment account ensures consistency and removes the temptation to skip months. Even modest contributions—such as $100 per week—can add up quickly. Some employers also allow you to split direct deposits to multiple accounts. Setting up this feature can be a good tool for accomplishing your down payment savings goals.

4. Cut Back on Expenses

Lowering your daily expenses, whether it be skipping your morning latte or rethinking big trips, can offer a boost to your savings. Work to reduce discretionary spending by limiting takeout, pausing unused subscriptions, or shopping more intentionally. Funnel those extra funds directly into your down payment fund every month.

5. Increase Your Income with a Side Hustle

Consider freelance work, online selling, or part-time gigs. Any extra income can make a big difference when directed straight into your savings account. Currently, there are many credible side-hustles you can do online. Starting an online storefront or pursuing a profitable creative venture can be a great way to make some extra money without interfering with your current work schedule.

6. Use Windfalls to Boost Your Savings

Large windfalls of funds can significantly accelerate your down payment savings. Put tax refunds, work bonuses, or monetary gifts toward your down payment. These unexpected funds can make a significant dent in your savings goal if handled wisely.

7. Take Advantage of First-Time Homebuyer Assistance Programs

Purchasing your first home can feel like a major financial and mental endeavor. Thankfully, many first-time homebuyers qualify for grants, forgivable loans, or down payment assistance programs at the local, state, or federal level.

SouthStar Bank offers several mortgage options to customers looking to purchase their first homes, including the Star Advantage Program and the H.O.P.E. Home Loan Program, which have been designed to meet the unique homebuying needs of a first-time buyer!

Let SouthStar Bank Help You Get Home Faster

Saving for a down payment doesn’t have to feel overwhelming. With clear goals, steady habits, and a knowledgeable partner by your side, your dream of homeownership is within reach.

Ready to take the first step? Connect with your local SouthStar Bank experts to explore your financing options, review savings products, and make your dreams of homeownership a reality!

¹Minimum credit score of 620 required to qualify for H.O.P.E Home Loans. SouthStar Bank NMLS# 410624. All loans are subject to approval. Other fees and restrictions may apply.

Source: Investopedia

Welcome Clint Meyer

Clint Meyer, Senior Vice President of Lending | SouthStar Bank Leander

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Clint Meyer has joined the SouthStar Bank Leander branch as a Senior Vice President of Lending. Clint received his undergraduate degree from Texas Tech University and pursued further education at St. Edward’s University, where he earned his Master of Business Administration degree. A specialist in commercial and CRE lending, Clint spent more than two decades in the Central Texas commercial and industrial construction industry.

In his role with SouthStar Bank, Clint looks forward to building lasting personal and community relationships as well as helping businesses within the local economy. Clint takes great pride in being a part of projects that physically shape communities. He finds it rewarding to analyze complex deals, structure financing based on each client’s unique needs, and serve as a trusted resource and partner for every deal, from concept to completion.

Outside of the office, Clint enjoys spending time with his family, working on his family ranch in South Texas, and fly fishing in the Rocky Mountains. Clint also spends time giving back to his community through Meals on Wheels.

Welcome to the team, Clint! NMLS #2740734

Your Home for Rural Lending

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If you’re looking for a trusted partner for your rural lending needs, choosing the right financial partner matters. National banks may offer convenience, but they often fall short when it comes to understanding the unique financial needs of rural borrowers. At SouthStar Bank, we value the rural communities we work and live in. Our local expertise makes us the smart choice for individuals, families, and businesses in rural areas.

With a strong commitment to local communities and decades of experience in Texas rural lending, SouthStar Bank delivers personalized service and flexible loan solutions that national lenders simply can’t match!

Deep Local Knowledge and Personalized Lending

SouthStar Bank’s lending team lives and works in the same rural communities they serve. This gives them a clear understanding of local land values, agriculture cycles, and the economic challenges rural Texans face. Whether you’re applying for a farm loan, purchasing rural property, or expanding your ranch, SouthStar Bank provides fast, locally made decisions backed by real expertise.

Flexible Financing Options for Rural Texans

No two borrowers are alike—especially in rural areas where traditional loan models often don’t apply. SouthStar Bank specializes in customized rural lending solutions, including:

Farm and Ranch Loans
Rural Living Mortgage Program
Star Advantage Program: Mortgage Solutions for Unique Situations
Lot and Construction Loans
Commercial and SBA Lending

Beyond living and working in our communities, we also make our decisions in house, this allows us to offer flexible terms and creative solutions tailored to your situation.

Investing in Texas Communities

As a true Texas community bank of more than 100 years, SouthStar Bank reinvests in the areas it serves. The money you deposit stays local—supporting other families, farms, and small businesses in your region. That means when you bank with SouthStar, you’re not just getting financing, you’re helping build a stronger local economy!

Trusted Relationships, Not Transactions

SouthStar Bank is relationship-focused, not transaction-driven. Our loan officers take time to get to know you and your goals, providing expertise and support throughout the entire lending process. We have worked hard for over 100 years to earn the trust of our local communities and develop relationships that last generations.

Choose SouthStar Bank for Your Rural Lending Needs

If you’re in need of rural lending solutions in Texas, SouthStar Bank offers the local expertise, flexible financing, and personalized service you deserve. Whether you’re buying land, financing a farm, or building your dream home in the country, SouthStar Bank is your trusted partner for success.

Ready to start your Rural Lending journey? Contact your local experts today!

Transitioning Your IRA

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If you’re planning for retirement and looking for a better way to manage your investments, transitioning your IRA to a trusted local bank can be a wise step. Whether you’re consolidating accounts, seeking better service, or rethinking your strategy, making the move to SouthStar Bank offers personalized support, a broad range of account options, and peace of mind for your retirement future.

In this guide, we’ll walk you through why and how to transition your IRA to SouthStar Bank, and what you need to know to make the process smooth and tax-efficient.

Why Consider an IRA Transfer?

An Individual Retirement Account (IRA) is one of the most powerful tools for long-term saving, but not all IRA providers offer the same value. You might consider transitioning your IRA if:

You’re looking for more personalized, local service.
You want to consolidate multiple IRAs into one, easier-to-manage account.
Your current IRA has high fees or limited investment options.
You’ve changed jobs and need to roll over a 401(k) into an IRA.
You’re interested in a Roth conversion for tax-free retirement income.

At SouthStar Bank, our experienced financial team works with you one-on-one to understand your retirement goals and help you make informed choices about your future.

Benefits of Moving Your IRA to SouthStar Bank

Transitioning your IRA to SouthStar Bank gives you access to:

Local, personalized service from real people who know your name and care about your future
Flexible IRA options including Traditional, Roth, SEP, and SIMPLE IRAs
FDIC-insured IRA savings accounts and Certificates of Deposit (CDs) for low-risk investors
Self-Directed IRA with Checkbook Control offering flexible investment options
Simple rollover and transfer support to make the transition stress-free

Whether you’re nearing retirement or just getting started, our retirement solutions are designed to meet you where you are and grow with you.

How to Transition Your IRA to SouthStar Bank

Review Your Current IRA

Start by looking at your current IRA account. Note the type (Traditional or Roth), the investment performance, fees, and if it aligns with your long-term goals.

Contact a SouthStar Bank Specialist

Our team is here to guide you through every step. We’ll discuss your options, explain the benefits of different IRA types, and help you choose the best solution. Contact our IRA experts at ira@southstarbank.com or 512.384.3948.

Initiate a Direct Transfer

We recommend a direct trustee-to-trustee transfer, which moves your funds from your existing provider straight into your new SouthStar Bank IRA. This avoids taxes and early withdrawal penalties.

Monitor and Confirm

Our team will keep you informed throughout the process, and we’ll ensure your funds are moved safely and securely. IRA transfers typically take 7-14 business days, but in some cases transfers can take longer.

Let SouthStar Bank Help You Plan Your Retirement

When it comes to transitioning your IRA, you deserve more than just a transaction—you deserve a relationship. At SouthStar Bank, we believe retirement planning is personal. That’s why we offer tailored advice, responsive service, and a commitment to helping your savings grow.

Ready to transition your IRA? Contact your local SouthStar Bank IRA experts today!