cashing out a SD IRA

[Stephen Sawrie]

so if your LLC, owned by your SD IRA, owns X number of properties by the time you hit 59 1/2, how do you move it out if you wanted to? (hope this question makes sense)

[Brian Eastman]

@Allen Fletcher

Your recommendation #1 is not allowable. Your IRA cannot sell assets to you or lineal family members.

@Stephen Sawrie

Like all IRA plans, there is no reason to liquidate at age 59 1/2. The whole point of an IRA is to build savings to support you in your retirement. You can continue to accumulate tax-deferred savings in an IRA beyond age 59 1/2 and it is generally wise to do so. What reaching age 59 1/2 does is allow you to start drawing income from the IRA if you choose. Any distributions you take from the IRA will be taxable, however, so it is better to withdrawal incrementally so as to be at a lower tax bracket than to pull out a single large amount and pay the maximum tax rate in that year.

As noted, you could choose to start taking distributions of the income produced by your IRA's investment properties. You could also sell one or more properties and now the IRA holds cash, which you could choose to distribute or re-allocate to other types of investments under the umbrella of the IRA.

If you wish to take a property out of the IRA, the property needs to be appraised and it can then be distributed to you in-kind. The value of the property would then be taxable income to you. This generally does not make a lot of sense to do.

Bottom line is that a SDIRA works exactly like any other IRA when it comes to tax treatment, timelines, etc. A SDIRA simply has different choices for investments.