Ages to Know for Your Retirement Funds

With all of the different rules and regulations for 401(k)s, IRAs, and Roth IRAs, it can be difficult to remember at what ages you can start using retirement funds from your various accounts. Taking distributions too early or too late can incur stiff penalties you don’t want as burdens against your savings. Whether you retire at 45 or 85, you should keep these three ages in mind when deciding what to do with your retirement funds.

Age 55—This is the earliest you can take distributions from a 401(k) without penalty. However, there are stipulations to this allowance. First, you must retire in the year you turn 55, or after, to access the funds between ages 55 and 59. If you retire before age 55, you won’t be able to access your funds until you are 59 ½. Second, if your 401(k) is through a previous employer that you are no longer working for, you may or may not be able to access funds at age 55. If you left that employer at or after age 55, then you can take penalty free distributions. If you left that employer before age 55, then you will have to wait until 59 ½ to take a distribution from that account. Last, you must keep your funds in the 401(k) account. If you try to roll the funds over into an IRA, the IRA rules will apply and you won’t be able to access the funds early.


Age 59 ½–At this age you can start taking penalty free distributions from an IRA or Roth IRA. Keep in mind that distributions from a traditional IRA will count as taxable income and may bump you to a higher tax bracket depending on the amount you withdraw. Technically you can take a penalty-free distribution on a Roth IRA at any age as long as the account has been open for five years or more. If the account is less than five-years-old, you will have to pay taxes on any distributed earnings from the account. Most financial advisors would recommend still waiting until age 59 ½ to avoid unforeseen penalties and to allow the funds to grow further in the Roth account.

For a 401(k), age 59 ½ is a little tricky. If you are still working at age 59 ½, you may start taking distributions from an old plan, but distributions may be prohibited from a company you are currently working for. Some plans allow in-service distributions, but others do not. If you are retired at 59 ½, you are free and clear to take distributions from a 401(k).

Age 70 ½–Whether or not you have taken distributions in the past, traditional IRA and 401(k) accounts will start required minimum distributions (RMDs) at this age. RMDs are calculated each year by your life expectancy and how much money is in the account. If you are still working at this age, some 401(k) plans make an exception to this RMD regulation. Roth IRAs don’t have RMDs since this rule only applies to tax deferred accounts.

Planning Your Self-Directed IRA Withdrawals as You Get Closer to Retirement

Self-Directed IRA WithdrawalsThe process of saving for retirement, making regular contributions to your self-directed IRA, and choosing the best investments for your account is one that goes on for many years, and requires careful consideration and planning. You also need to put an appropriate amount of effort into planning how you will take distributions from your account as you near your target retirement age.

What Are Your Retirement Expenses? The first question to ask yourself is how much you anticipate needing once you begin retirement. This will depend in no small part on how you define “retirement.” Some individuals still have the traditional notion of retirement as completely stopping work and living a life of leisure. But an increasing number plan to work at least part-time in to their golden years (whether by choice or by financial necessity), and beyond.

Take some time to write out the specifics of your desired retirement lifestyle. If you plan to downsize, move beyond the mere notion of doing so and put numbers down on paper. You can then use this budget to prepare an initial schedule for how you’ll begin to draw down funds from your self-directed IRA.

What Are Your Health Care Needs? One important part of your retirement budget is likely to be health care. In fact, healthcare sometimes represents the single biggest expense for many retirees. If you try to come up with a number for this anticipated expense, be honest with yourself on your current level of health, and your family health history. You may be able to save on future health-care expenses by making lifestyle changes immediately and improving your health outlook.

What Other Savings and Investments Do You Have? Chances are that your self directed IRA won’t be the only asset you have available to fund your retirement. How much do you have in taxable investment accounts, other retirement accounts, savings accounts, and assets such as your home? How much do you anticipate receiving each month in Social Security?

When planning your retirement, you may wish to prioritize withdrawals from certain accounts over others. For example, self-directed IRAs will continue to grow tax-deferred or tax-free basis, so you may wish to fund your retirement primarily or exclusively from taxable investment accounts before you take distributions from your IRA.

The Dangers of Not Having a Plan. Planning withdrawals from your self-directed IRA is important because you want to minimize the chance of outliving your retirement fund. You may wish to start conservatively in taking distributions from your self-directed IRA, but then readjust your plan as necessary, potentially even from year to year.

Required Minimum Distributions. If your self-directed IRA is set up as a traditional account, then you’ll need to take into account the prospect of being subject to required minimum distributions. These rules provide that once you reach age 70 1/2, you must begin taking minimum distributions each year from a traditional IRA. This may not be an issue, but if you would prefer to continue to leave funds in your self-directed IRA later in life, then you may wish to consider converting to a Roth account. Contact Quest Trust Company for more details.

Four Ways Your Self-Directed IRA Can Be The Foundation Of Your Retirement Strategy

Financial planning for retirement generally means accumulating as large of a nest egg as possible, and there are numerous ways to save. But it can be helpful to identify a primary savings vehicle to serve as the foundation of your retirement strategy, and let all of your other retirement decisions flow from there. A self-directed IRA with a custodian such as Quest Trust Company is a great candidate to become just such a foundation.

  1. A Wider Range of Investment Choices. Perhaps the biggest advantage that a self-directed IRA has over other retirement accounts is that you are permitted to take investment positions in the broadest possible range of investment choices. For example, when compared to the typical employer-sponsored 401(k), a self-directed IRA held at a custodian such as Quest Trust Company provides significantly more flexibility.

Having a self-directed IRA allows you to invest your retirement funds directly in real estate, private equity, private mortgages and loans, and even precious metals.This flexibility not only allows you to invest in exactly those assets you wish, having a wider range of choices means that you can tailor your holdings to the risk/reward profile that best suits your needs and investing personality. This makes the self-directed IRA an excellent choice for the foundation of your retirement plan.

  1. Additional Investment Opportunities. Making the maximum contributions to your self-directed IRA each year does not preclude you from using other retirement savings accounts such as an employer-sponsored 401(k). Depending on your tax filing status (single versus married) and your income level, as well as the type of your self-directed IRA (Roth versus traditional), you may even be able to deduct these contributions from your current year tax return.
  2. Portability and Availability.The individual retirement account is something you’ll always have available to make contributions to, every single year, regardless of whatever other options may be provided by your employer. As long as you have earned income, you can make annual contributions to your account. This makes a self-directed IRA a great choice for building your other retirement planning around.

In contrast, in order to have access to a 401(k) plan, your employer must choose to make it available. Employers can also change the investment options or terms of these plans over time, and if you choose to change jobs or careers and work for a company that doesn’t offer such a plan, then you’ll find your self-directed IRA to be particularly desirable.

  1. Estate Planning Advantages. There are also some estate planning advantages if you decide to leave your self-directed IRA to your spouse. In short, under some circumstances your surviving spouse can treat the inherited IRA as if it was their own, thereby extending the period of time for which they can leave the assets in the account to continue to grow on a tax-deferred or tax-free basis.

You can make your retirement planning easier by using a self-directed IRA to serve as the foundation for all of your future investing moves.