BiggerPockets

Borrow From Your Retirment Plan Tax Free

Hot foreclosure deal and you need the money now?

Don't look to your IRA as it can't do much to help you out since you cannot borrow from your IRA.

Just so you know, there is an IRA provision that will allow you to "withdraw" any amount you choose for any purpose.

NOTE: This may be done only once every consecutive twelve months and you must replace the monies within 60 days.

There is NO compromising these requirements. Failure to adhere to these two rules will result in those monies being deemed distributed with the resulting taxes and/ or penalties.

Most people find that 60 days is far too short a time frame in which to accomplish their project or goal.

Does this mean that you are out of options when trying to tap into your pile of IRA money?

Not at all, it just means you are trying to use the wrong type of retirement plan. You need a real estate friendly plan!

With the help of an experienced professional you can transfer your IRA into a self administrated Individual 401(k) plan where both 100% checkbook control and personal loans are allowed.

You may borrow from your self directed Individual 401(k) plan:

• For any purpose whatsoever, personal or investment
• Up to 50% of plan assets
• $50,000 is the maximum aggregate amount of the loan(s)
• No more than five (5) loans can be outstanding at any given time


Loan repayment requirements:

• The money must be paid back to the plan within a five (5) year period
• The payments must be with interest (rate set at loan inception)
• The loan payments are calculated using level amortization
• Payments must be made at least once every quarter
• Huge exemption: Should you use the loan to help you purchase your primary residence the repayment period is lengthened to thirty (30) years and the interest you are paying your plan is tax deductible to you!

This liquidity (loan provision) privilege enables you to use tomorrows money TAX FREE to create more cash flow for today!

Comments