If you’ve had an Individual Retirement Account, or IRA for quite some time or you’ve just opened one with an initial deposit, are you familiar with the basic rules for a traditional IRA? We all know that IRA contributions are tax deductible and any profits from IRA investments accrue tax-free and only Retirement Account Investingtaxed when withdrawn at retirement age. So as an IRA refresher, here are some things to remember.

IRA withdrawals are taxed at your standard rate and penalty free as long as the withdrawal is made when you are at least 59 ½ years old. If you withdraw from your IRA account prior to that age, you’ll be subject to an early distribution penalty. In addition to the income tax you’ll pay another 10 percent penalty will apply as well. There are exemptions to the penalty including payouts to your beneficiary should you die before 59 ½, you become disable, the funds are used for medical purposes, used to pay for higher education and can be withdrawn penalty free when used for a “first home.”

What is not as well-known is funds in a self-directed IRA, one where you control where the funds are invested, can also be withdrawn penalty free if the funds are used to purchase investment real estate. You can use the funds to purchase the property and all proceeds may be returned to the IRA tax-free.

You may begin withdrawing funds from your IRA at the age of 59 ½ but not many investors do, preferring to have the funds continually invested. However, once you reach the age of 70 ½, a minimum required distribution must be taken.

Remember, beyond investing IRA funds in a mutual fund or a collection of bonds, there is another option not often promoted—investment real estate. You can invest these funds to buy a distressed property, rehabilitate it and sell it for a profit.