I have both a Prosper & Lending Club IRA that I’ve been withdrawing from on a monthly basis for several years. The way I figure the amount that I draw are the same for both but how I withdraw is different.
I take my Account Balance (Prosper) or Adjusted Account Value (Lending Club) from the end of the month and subtract the amount from the start of the month and add in any amount I withdrew during that period. This gives me (in a simplistic manner but it works overall) the amount of interest earned that period. Should I withdraw more, then I’ll be pulling from principal, less then the account increases, or maybe just take what it earned and the account remains neutral.
I have both the IRA custodians, Equity Institutional (Prosper) and Self Directed IRA (Lending Club) set up to automatically withdraw whatever cash is in my account (the IRA custodian account mind you) once a month.
My Lending Club is four times the size of the Prosper due to a variety of reasons not part of this topic. Let’s assume Prosper “earns” $500 and Lending Club $2,000 for the month of February. With Self Directed IRA, I have it set up to transfer on the 1st and Equity Institutional on the 15th.
Staring with Lending Club, I’ve decided I’m going to withdraw $2,000 during March and will get that money on 1 April. I am using nsrplatform to invest and could wait until the cash in the Lending Club account reaches $2,000 and do a transfer but that means I’ve missed out on buying loans for that time. Since I’m able to transfer from Lending Club to Self Directed IRA instantaneously on-line, I break that $2,000 into four transfers, transferring $500 each week. This allows my account to continue buying loans with cash not transferred.
Prosper is different in that I cannot do this on-line but rather have to send an e-mail to someone at Prosper to initiate the transfer. I’d say about 3 out of 4 times, that works the first time but it’s not uncommon for have to follow up once or twice to get the transfer started. It then goes to accounting and then the money is transferred to Equity Institutional. It typically takes about a week to see the money transferred. Given the hassle with this, I only withdraw once from Prosper, so in our example, I would e-mail to have $500 withdrawn shortly after the 15th of March (for 15 April into my bank account) to give Prosper plenty of time. For four years I’ve asked the three “account executives” that have been assigned to my account if we could allow on-line transfers with the response, “That would be nice, maybe someday”.
How the IRA custodians treat the transfer differ as well and one needs to be aware of that.
On the first of the month Self Directed IRA looks to see if any cash is in my account and transfers whatever amount is there to my bank account. If there is no cash, no transfer and the request to transfer is closed. Should cash come in on the second of the month or later, it will stay there until the first of the next month.
With Equity Institutional, should there be no cash in the account on the 15th, they hold open the request and if cash comes in later, let’s say the 25th, then they immediately transfer that to your bank account and then the request is considered closed. I completely disagree with that, if I set it up to transfer on the 15th then it should be the 15th, period. This personally impacted me tax wise when they transferred money just a few days short of me turning 59½ and was unaware then how they treated the transfer. I now understand this and account for it.
One last observation, I’ve never had any trouble with Self Directed IRA but it has been nothing but problems from day one with Equity Institutional. I believe Prosper now uses Millennium Trust which I know nothing about.
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