Withdrawing money out of your IRA?

Question

Does anybody know of a way to withdraw money from your IRA without getting penalized to death? For example, I want to pull money out and invest it into a business. I have been told there are ways like loaning it to someone who is not a relative and you will not get taxed on it. Does anyone have any other ideas of what I could do?

Answer 1

You do not get penalized to death. It is only 10%. I doubt a bank would loan you the money for less than 8-10% annually. The ROI on your busness should be in the neighborhood of 25% after the first 2 years. Of course many are not.

Answer 2

First, whoever told you that loaning your IRA to someone was a viable way to avoid early withdrawal penalties just did not know what they were talking about.

How do you want to invest your IRA in a business? Are you saying that you would use your IRA as seed money? Are you saying that you want to buy stock?

You cannot use your IRA as seed money and avoid early withdrawal penalties.

You can use your IRA to buy stock. To do this, you would first need to establish an IRA account with a broker or with Sharebuilder.com. You would then direct the bank or credit union that presently holds your IRA to do a DIRECT ROLLOVER to the broker IRA. You could then buy stock within the broker IRA.

Answer 3

The only way to avoid penalties is to wait until retirement age, or to withdraw it in "substantially equal" payments. This means dividing it by your life expectancy and withdrawing that amount once each year between now and your anticipated death, paying only the income tax due on it but no penalty each time.

If you have a sound business plan, the bank will lend you the money. If you don't, you certain ly shouldn't be putting your retirement money at risk.

Answer 4

Generally, you'd have to pay a 10% penalty, plus whatever taxes are due on the amount withdrawn. There are a few exceptions for the penalty, but loaning money to a non-relative isn't one of them, nor is starting a business. See http://www.irs.gov/publications/p590/ch01.html#d0e7978 for more information on exceptions. It's the IRS site, and they do explain things reasonably understandably.

Answer 5

If you have a Roth IRA, you can withdraw your contributions with no penalties. Otherwise, check the IRS website for the IRA publication.

Answer 6

If you are self employed you can set up a LLC, establish a pension plan and then roll your IRA over into this account and use it in the establishment of a business. Many Franchisees are doing this. You could contact Polycomp in Roseville, CA. I believe they establish these kind of accounts.

Answer 7

It's never a good idea to pull money from your IRA.

Answer 8

There are options where you can get money out, (i.e 1st time buying house) you should call an accountant and see what may apply before you do!