Self-Directed Real Estate IRA

When Do I Have to Start Taking Distributions from My Self-Directed IRA?

You scrimp and save and put aside as much money for retirement as possible. If you have done it correctly, you should have plenty stowed away in an account like a Self-Directed IRA to help fund your retirement. But you will find that you do not always control every aspect of this retirement, even once you have passed retirement age. You may be required to take distributions—also known as RMD (Required Minimum Distributions)—beginning at a specific age.

When Do You Have to Take Money Out of a Self-Directed IRA?

RMDs typically start at the age of 70 ½–at least that’s the case for a Self-Directed IRA. This account will have the same rules as any IRA, except that you are directing its usage yourself. That means that rules like RMDs are the same, no matter if you self-direct or not.

To begin your RMDs, the IRS will expect that you begin by April 1st of the year following the year in which you turned 70 ½. That means that if you reach retirement age, you’ll be expected to take this money out of the account, pay the appropriate taxes on it, and then do with it what you will.

What if you do not want the RMDs? Well, prepare to face stiff penalties—penalties that make it far too costly to keep the money in the retirement account.

What Kind of Penalties Will You Face if You Don’t Take Distributions?

“If you don’t take your RMDs on time,” says NerdWallet on the rules pertaining to Traditional IRAs, “you’ll pay a stiff penalty of 50% on the amount not withdrawn.”

No problem, you might think. It’s easy to use a Self-Directed Solo 401(k) for retirement. Well, the IRS will still have these expectations. Browse the IRS rules on RMDs and you will find that the same rules go into effect for the Self-Directed Solo 401(k): you will be expected to begin taking RMDs starting April 1 of the calendar year following the year in which you turned 70 ½.

What does this look like in practical terms? The IRS lays it out:

You are retired and your 70th birthday was June 30, 2017. You reached age 70½ on December 30, 2017. You must take your first RMD (for 2017) by April 1, 2018.

Of course, any rules like these are subject to change over time, especially when new tax legislation is passed that may affect the rules of retirement accounts. If you are 40 or younger, you will find it possible that the rules will not be the same when you enter your 70s. That’s why it’s important to keep tabs on RMDs as part of your retirement plan and make your RMD strategy a part of your yearly retirement check-up.

Does Self-Directing Affect When You Take RMDs?

In a word, no. Self-direction still means that the retirement accounts that the IRS makes available will be the same as accounts you are not directing yourself. For example, you can hold within a Traditional IRA when you self-direct…but the Traditional IRA will still have the same basic rules as any other Traditional IRA.

Because of the hefty penalties associated with not taking your RMDs, you will want to be aware of these and incorporate them into your retirement plan. That’s why it’s a good idea to plan for retirement by the age of 70 ½ even if you still plan on working after that age. Knowing rules like these will help you minimize your tax burden by avoiding penalties, giving you more room for the money you’ve saved.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at