There are many kinds of IRA accounts, and they have varying policies regarding how much can be invested yearly, under what conditions penalty- free withdrawals may be made, and the amount that must be withdrawn after that. But with these and other retirement funds, the minimum age at which the holder can withdraw without incurring any penalty (but see the exceptions mentioned below) is set at 59½, and the age at which he must periodically withdraw from the account is set at 70½. With a self directed IRA, the account holder must base all his investment decisions on his retirement plan. A common variant is the self directed IRA LLC — here, the investor asks his broker to invest the funds in an LLC. And, of course, the self-directed Roth IRA option exists too.
Withdrawal from IRA accounts should be given very careful consideration; not only does each withdrawal diminish the value of previous investments, but also the missing funds cannot be made up for, as there are limits on how much money can be deposited per year. The withdrawn funds become subject to the income tax, unless they were used to recover an earlier non- deductible contribution. Penalty- free withdrawal is also allowed if the money was used to pay for a medical procedure, an education, or one’s first residence (in the last case, provided less than $10,000 is involved), as an inheritance on the holder’s death, in the event of disability, or if the holder regularly makes withdrawals of close to the same amount. The penalty is also deferred if the withdrawal was made to satisfy a QDRO (qualified domestic relations order), which is an order to give one’s divorced spouse his or her share of the pension plan.
After reaching the age of 70½, the investor must make regular withdrawals from his IRA, and they must be above a minimum amount known as the required minimum distribution (RMD); this amount is determined by dividing one’s income at the beginning of the year by one’s life expectancy (the IRS keeps a table of these figures).
When making an investment in a self- directed LLC IRA, one must make careful note of the company’s operating agreement, copies of which the account custodian and the LLC’s bank will keep. These precautions need to be followed because the account holder needs to know just how much liability he has in the company.