Self Directed IRA Cashflow

[Jennifer S.]

I've been reading up on the Self-Directed IRA, and from what I've found is that any cash flow/profit goes back into the SD-IRA. How does one legally obtain funds from a SD-IRA for basic living expenses if the purpose of your rental property is to replace your normal 9-5 income? Is the SD-IRA not the best vehicle for a rental property if you need to have access to the cash flow for your own personal daily expenses?

[Dmitriy Fomichenko]

@Jennifer S.

all retirement accounts are designed for you to build wealth in a tax-deferred to tax-free environment, to be used during the retirement. 

The loan option that Brian mentioned above will probably not work for you either since you just need the income. When taking a loan from your 401k you are depleting the funds in your accounts that otherwise would be available for investment and it might come with the expensive price tag. I agree with Brian that one needs to carefully consider all factors before pulling the loan out.

It might be good for you to know that contributions to a Roth IRA can be withdrawn before retirement without taxes since you already paid taxes upfront. Conversion to a Roth could be one way to avoid paying penalties just the taxes if you need to pull the funds sooner. But be sure to consult with an experienced tax advisor about your particular situation.

The only other option I'm aware of and you might want to explore is the IRS Rule 72(t) which allows you to take a Series of Substantially Equal Periodic Payments before 59 1/2 (again, discuss this with the expert, I'm not a CPA and this is not a tax advise).