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As you near Required Minimum Distribution (RMD) age, currently 73 for most retirement savers under SECURE Act 2.0, understanding your distribution strategy becomes increasingly important. This is especially true when your Self-Directed IRA holds illiquid alternative assets like real estate.
Real estate can provide long-term income potential, inflation protection, and portfolio diversification within a Self-Directed IRA. But the IRS requires that distributions must begin at RMD age, regardless of the type of asset in the account. Because property cannot be divided or sold as easily as publicly traded investments, planning ahead is essential.
Below are several options that other investors have considered when managing RMDs involving IRA-owned real estate:
Rental income or cash reserves inside the IRA may be used to satisfy annual RMD obligations.
This may include:
This helps the IRA remain fully invested in real estate while meeting compliance needs.
Some investors choose to liquidate part or all of the investment to create liquidity.
This may allow:
Timing, market conditions, and tax considerations should be evaluated carefully.
Instead of selling the asset, you may transfer fractional ownership of the property from the IRA to yourself personally. The distributed portion counts toward your RMD amount.
Important details:
This option allows you to continue owning the property after distribution.
Some individuals consider converting real estate from a Traditional IRA into a Roth IRA prior to age 73.
Whether this is beneficial depends on tax bracket, retirement timeline, and future distribution goals.
If cash flow is unpredictable or the asset is highly management-intensive, some investors explore restructuring strategies, such as:
Each change must remain fully IRS-compliant.
If you hold multiple Traditional IRAs, the IRS allows you to take the total RMD amount from one or more accounts of your choice.
This flexibility may allow you to:
This strategy applies only to Traditional IRAs (not employer plans).
Managing RMDs with real estate inside your Self-Directed IRA requires strategic foresight, accurate valuations, and compliance with IRS rules. There is no one-size-fits-all approach, each option carries unique tax and financial considerations.
Before moving forward, be sure to:
✔ Review your retirement income needs and timelines
✔ Confirm the property continues to support your goals
✔ Consult with a qualified CPA or financial advisor who understands Self-Directed IRA rules
✔ Work with a knowledgeable Self-Directed IRA administrator for proper recordkeeping and processing
Mountain West IRA can help you understand the administrative requirements for managing real estate in an IRA, including proper titling, valuation, and distribution processing.
📞 Call us at 866-377-3311
This post is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor for personalized advice.
Mountain West IRA, Inc. does not render tax, legal, accounting, investment, or other professional advice. If accounting, tax, legal, investment, or other similar expert assistance is required, the services of a competent professional should be sought.
Meet with our team to explore your personalized journey of building wealth through investing in real estate, promissory notes, precious metals, and other assets using your retirement fund.
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