Distributions & Loans
14 articles
General
3 articlesWhat is the penalty for early distribution?
Taking money from a retirement plan before age 59½ triggers a 10% early withdrawal penalty on top of ordinary income taxes. Exceptions exist, and they vary depending on whether you have an IRA or a Solo 401(k). Why the IRS imposes the penalty The IRS ...
What are Required Minimum Distributions (RMDs)?
Required Minimum Distributions are annual withdrawals the IRS requires you to take from certain retirement accounts once you reach a specified age. They exist because most retirement accounts were funded with pre-tax dollars, and the IRS eventually ...
What is the penalty for failure to take RMDs?
If you fail to take a Required Minimum Distribution by the applicable deadline, the IRS imposes a 25% excise tax on the amount you should have withdrawn but did not. That shortfall is also subject to ordinary income tax, since the distribution itself ...
IRA Distributions
5 articlesWhat is a Roth qualified distribution?
A Roth qualified distribution is one that is completely tax-free and penalty-free. To be qualified, a distribution must meet two requirements simultaneously: the five-year rule must be satisfied, and the distribution must occur under one of three ...
How do I take a distribution from an IRA LLC?
Taking a distribution from an IRA LLC is a two-step process. Funds must first move from the LLC back to the IRA custodian, and then a separate distribution request is made to move funds from the IRA to you personally. Step 1: Send funds from the LLC ...
How do I take a distribution from an IRA Trust?
Taking a distribution from an IRA Trust is a two-step process. Funds must first move from the trust back to the IRA custodian, and then a separate distribution request is made to move funds from the IRA to you personally. Step 1: Send funds from the ...
How do I take an In-Kind distribution from an IRA?
An in-kind distribution moves a non-cash asset, such as real estate or a private placement, out of your IRA LLC or IRA Trust and into your own name. The administrative flow matches a cash distribution with two additions: a third-party valuation ...
What are the exceptions to the early withdrawal penalty for an IRA?
The IRS recognizes a specific set of circumstances under which the 10% early withdrawal penalty does not apply to IRA distributions taken before age 59½. Income taxes on pre-tax funds still apply. Only the penalty is waived. The recognized exceptions ...
Solo 401(k) Distributions
6 articlesHow do Solo 401(k) participant loans work?
A Solo 401(k) participant loan lets you borrow from your own retirement plan without triggering a taxable distribution, as long as the loan is properly documented and repaid on schedule. The Self-Directed Plans Solo 401(k) includes the loan feature ...
How do I calculate loan repayments?
Participant loan repayments are calculated using standard straight-line amortization: equal payments of principal and interest made on a fixed schedule over the life of the loan. Any standard loan amortization calculator will produce the correct ...
What happens if I default on a participant loan?
If you miss a required loan payment and do not cure the missed payment within the allowed cure period, the outstanding loan balance is treated as a taxable distribution from the plan. This is called a deemed distribution. The cure period A missed ...
How do I take a distribution from a Solo 401(k)?
As trustee and administrator of your Solo 401(k), you control the distribution process yourself. There is no custodian intermediary. You issue funds from the plan trust account directly to yourself, complete the required documentation, handle ...
How do I report distributions from my Solo 401(k)?
As plan administrator, you handle all distribution reporting yourself, since no third-party custodian files anything on the plan's behalf. Four reporting obligations follow every distribution, plus a fifth if your plan meets the Form 5500-EZ ...
What are the exceptions to the early withdrawal penalty for a Solo 401(k)?
The IRS recognizes a specific set of circumstances under which the 10% early withdrawal penalty does not apply to Solo 401(k) distributions taken before age 59½. Income taxes on pre-tax funds still apply in most cases. Only the penalty is waived. The ...