Has anyone looked at buying RE via a self directed IRA vs cashing out the IRA, paying the penalty and putting funds into a business account and having full control of funds Immediately?
I'm fairly new to this & have been reading and researching this similar option for the last week. Look up "Solo401k" or "Self-Directed" 401k. The Solo option allows you to be tax deferrable and in most instances you can with manage it yourself with checkbook writing or through some companies like Fidelity, they require a TPA/Custodian to help manage the documents for REI & things. There are companies (probably will have some individuals contact you on here) that can point you in the right direction. As I understand it, the self directed IPA is limiting to other assets like traditional investing, but not necessarily for REI. Good luck! Not sure if I helped much, but I think you'll want to read about Solo401k's.
You can establish a self-directed retirement plan capable of investing in real estate in either an IRA or Solo 401(k) format. Which will be best for you will depend on your specific situation and goals.
The advantage of using the retirement plan to invest in real estate is that you will have access to the full amount of your retirement capital and any growth through cash flow and appreciation will be tax deferred. This will allow you to grow your retirement savings - hopefully more consistently than in conventional assets if you know what you are doing with real estate. Of course, within the framework of an IRA or Solo 401(k), it is not you investing in real estate with that tax sheltered money, but rather the retirement plan being invested in real estate. All income accrues to the plan. It is just a different way of building retirement savings.
If you were to cash out the plan, you will do two things that are negative right off the bat; significantly reduce the amount of capital you have to invest with through state and federal taxes as well as a 10% penalty if you are under 59 1/2 years old, and likely significantly increase your marginal tax rate on all of your income in the year in which you distribute a lump sum from your plan to yourself.
Brian I have been headed down the path roll 401k into self directed or solo IRA but keep hearing the noise about withdrawal. Done right with the right investments over the next 10 yrs I can see myself maximizing the new IRA while also building a new 401 or deciding to not contribute and use the funds for out of retirement plan investments. Thks
As has been pointed out, you can have full control of funds without cashing out your retirement account. There are several ways to do so, the two most common approaches are (a) Checkbook Control IRA and (b) Checkbook Control Solo 401k. With either of those you may able to consolidate all retirement cash in one account for maximum investment.
Using a Solo 401k is very often the better option for RE investing, but you must qualify. Another factor to consider is the value of paper losses outside of the retirement account, which depends on your personal tax profile.
I Have a self directed IRA and have purchased 2 rental properties that are held in trust through the IRA all profits made from those rentals return to the IRA therefore building our retirement funds. We will continue to allow it to build then buy more properties. All of this is tax deferred so the income is not counted against us. Using the money in the IRA for any fixing, HOA fees, or maintenance on the properties is really pretty simple. We use a company called Equity Trust and have been very happy with them. Good luck to you.
That sounds good. Congrats on self-directed your retirement funds. As a real estate agent, you may be eligible for a Solo 401k that would offer many benefits and likely save you quite a bit of money over your current structure in the long run.
Great insight much appreciated! Very useful information.