What have you done to make the most of your retirement accounts (401k, IRA, 403B, ESA, etc.)? I recently converted an old 401k that wasn’t doing much for me into a self direct individual retirement account (commonly referred to as a SDIRA). I was unhappy with the 401k because I had limited ability to invest in anything other than mutual funds and then the market just goes up and down and sometimes there is nothing to show for it from a return perspective. I liquidated the 401k and transferred the entire balance to a sdira managed by a custodian to ensure I stay compliant with IRS rules. Personally I use equity trust company but there are many companies out there. Using the sdira I’ve been able to passively invest in multi family syndication deals and get the great benefits of real estate like cash flow and value add appreciation. I can’t invest in deals that I’m personally a GP of so it’s a way to diversify. Overall, I’m happy with the setup and performance of my sdira since I have complete control of what to invest in.

@Jamie Burns I'm probably going to get vilified in this thread for this. Why not just stack cash outside of the 401k and use that to invest in real estate? You mentioned that you already reduced your contributions to be exactly the employer match. Therefore, I'm assuming there's a spread between your previous percentage contributed to today's contribution percentage. I think it's a good idea to have both real estate and 401k assets to be diversified. I personally would never self direct to invest in real estate directly. I keep the 401k and real estate separate.

We went to Solo K check book control.. cost a grand or so to set up.. But then you only pay one small fee to the custodian a year.. When I had my entrust sidra and I was an early adopter one of the first 500 of clients of theirs.. but they just fee you to death.. its free to open but then every transaction has a fee.. with the solo K its one time set up and a yearly modest fee to kingdom trust..

@Jamie Burns There is no penalty at all for transferring a 401k to a self-directed IRA. The obstacle you're likely facing is that your employer's plan document may not allow for in-service distributions. If this is the case, you'll need to wait until you leave that job before you have full access to move the funds to a more flexible arrangement such as your self-directed IRA.

@Justin Windham love my solo 401k. Can't say enough good things about them. Way better benefits in a solo than an IRA. More people should learn about and use them. There's a great book I recommend about it. It was written by two extremely savvy investors and one of the top attorneys in the country in this space. I don't get anything for recommending it, but it can be found here... https://assets101.com/shop/solo-401k/ It's $28 and worth ever penny.

Equity Trust is miserable to deal with. Separately, I highly recommend checkbook control...lower cost, more control.

@David Barnett no need to be vilified. We all have our different perspectives and goals. Neither is necessarily right or wrong. It's more about what you need and what makes you the most comfortable. Most people have the majority of their funds in their retirement accounts which is why it's such a big topic.

Who’s Unhappy with Their 401-k?

Lee Johnson

Rental Property Investor · Sterling, VA · Member since 2017 · 13 posts · 15 votes

7y

@Frank Romine - My experience with Madison Trust has been awesome. I created my SD-IRA in 04/2016 via Broad Financial and the transction was low stress and fast; moving the money from Vanguard to the Business Checking account couldn't have been easier.

This is the thing with having Checkbook access. You very rarely have to have interact w/ Madison Trust. Once or twice a year, you will have to report the amount of your account and thats it. Easy!

Good luck w/ your investing!

-Lee

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Danielle Wolter

Rental Property Investor · San Diego, CA · Member since 2019 · 290 posts · 254 votes

7y

I have a solo 401k with checkbook control and I love the options it provides. It also allows for a 401k loan which is a great way to help finance your real estate outside of your retirement account as well.

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Justin WindhamPro Member

Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes

7y

@Danielle Wolter

Congrats on having checkbook control! It really simplifies the transactions and actually cost less than most custodial control models. You're right about the loan feature with the Solo 401k too. IRAs can't offer that. Other benefits include:

-Compared to an IRA, Solo 401k contribution limits are roughly ten times higher.
-There is no custodial requirement for the 401k.
-You don't need the additional expense and administration of an LLC to have checkbook control.
-There is a built in-Roth component whereas IRAs are either traditional or Roth, not both.
-A spouse can also participate in the same Solo 401k plan.
-The Solo 401k has additional tax benefits over an IRA when investing into real estate using leverage.
-The penalties for prohibited transactions are less severe, though it's best not to utilize this benefit :)

4 Reply

Anthony Rosa

Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes

7y

I have done a 401K rollover to IRA and use Vanguard. I have no complaints and there fees are very minimal. Strictly part of my retirement and never to be touched until allowed to.

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Joe Palmer

Rental Property Investor · Delmont, PA · Member since 2018 · 38 posts · 14 votes

7y

@Danny Randazzo

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Joe Palmer

Rental Property Investor · Delmont, PA · Member since 2018 · 38 posts · 14 votes

7y

@Danny Randazzo

I recently set up a SDIRA with Safeguard Advisors. @Brian Eastman is a member of BP and is great to work with. I have check book control which I love.

I recently made an offer on my first property which I wouldn’t have been able to do without the sdira.

1 Reply

Tom Matousek

Rental Property Investor · Western NC · Member since 2019 · 41 posts · 41 votes

7y

@Jamie Burns

I’m in a similar situation. Taking the 401k loan is a pretty simple route. Generally the terms of the loan are fairly flexible and the 6% interest you mentioned goes right back into your account. I would recommend giving them a call. It’s worked out great for me.

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Justin WindhamPro Member

Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes

7y

@Anthony Rosa

A Vanguard IRA will not allow you to invest into real estate, but it can be a good option if you just want traditional assets such as stocks and mutual funds. The fees and capabilities will be quite different with a self-directed IRA or 401k that allows for real estate investment.

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Anthony Rosa

Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes

7y

Originally posted by @Justin Windham:

@Anthony Rosa

A Vanguard IRA will not allow you to invest into real estate, but it can be a good option if you just want traditional assets such as stocks and mutual funds. The fees and capabilities will be quite different with a self-directed IRA or 401k that allows for real estate investment.

True for purchasing your own tangible property but Vanguard REIT is an alternative REI that I have and like.

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Justin WindhamPro Member

Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes

7y

@Anthony Rosa

I'm glad you're happy with it.

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Shannon C.

Rental Property Investor · San Francisco, CA · Member since 2017 · 9 posts · 14 votes

7y

My employer (very large) allows a certain amount from the 401k to be rolled into an IRA. I've done that and then a Roth conversion to build up my SD Roth IRA... As soon as it will allow me to do another in-service rollover I will do it again!

3 Reply

Justin WindhamPro Member

Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes

7y

@Shannon C.

Does your employer's plan allow for a certain amount to be rolled out of the plan or are the in-service distributions limited to certain accounts within the plan? For example, perhaps you cannot access your employee deferrals, but can roll out other accounts while employed?

1 Reply

Ola Dantis

Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes

7y

I too have heard of the Checkbook Control, @Taylor L.

Would definitely check them out...

Thanks for posting this, @Danny Randazzo!

1 Reply

Shannon C.

Rental Property Investor · San Francisco, CA · Member since 2017 · 9 posts · 14 votes

7y

@Justin Windham Good question. You're right, I said "amount", but that was not very precise. Specifically, I can do an in-service rollover of after-tax contributions (I have a small amount of those because of the way the paycheck deduction happens in the month when I meet the 401k contribution limit every year), and "matching employer contributions (plus earnings) that have been in the Plan for at least two full years". Any of my employee pre-tax contributions are not able to be touched until I leave the company.

I have no idea about the history of why it was set up that way, but I'm thrilled that I'm able to access at least a portion of it now!

1 Reply

Daniel DietzPro Member

Rental Property Investor · Reedsburg, WI · Member since 2011 · 1k+ posts · 857 votes

7y

I had a friend that, after seeing what we were doing with our SDIRAs and SOLO401Ks, basically took a 'year sabbatical' from his job just so he could roll his 401K over. He had about 700K in it, so enough to give it a good go. Yes, he did run the risk of 'not having a job to go back to', but he is constantly head hunted in his industry and was not really worried about that. That could obviously be a big deal to others though. Just one way around it.

[email protected]608-524-4899

3 Reply

Justin WindhamPro Member

Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes

7y

@Shannon C.

Yes, anytime you can get earlier access to do more with your funds, it's a good thing.

1 Reply

Mark Welp

Investor/Agent/CPA · Columbus, OH · Member since 2015 · 249 posts · 207 votes

7y

@Danny Randazzo

Just withdraw it, pay the tax and penalty and put the funds to better use where you have control and access to it.

Convert it all at once or over a period of time. Tax rates are low and you have to pay the tax eventually if it is a pre tax account. The 10% penalty is not a big deal.

Thanks!

3 Reply

Nate R.

Real Estate Investor · Austin, TX · Member since 2015 · 219 posts · 234 votes

7y

The SDIRA and QRP are interesting to me, but I don't think my account balances justify the fees associated with those accounts. A few years ago I cashed most of my IRA out early to do syndications. There is a little bit left in IRA's and I contribute some to a 401k, where I invest in individual stocks (REIT's and dividend paying stocks).

I've thought about just completely focusing on funding after-tax accounts and doing syndications, since I don't receive an employer match. However, I do enjoy reading about and investing in solid real estate related companies. There are all kinds of interesting opportunities in the stock market that would be hard to access privately: mortgage REIT's, dividend payers, CEF's, theme park operators -- all kinds of income-producing securities I can buy with the click of a mouse that can return from 8-15%, with complete liquidity, and in some cases these might even be safer than doing a value-add deal late in the RE cycle. So I am leaning more towards diversification and keeping qualified accounts completely separate from my RE activities.

2 Reply

David Ripplinger

Layton, UT · Member since 2019 · 85 posts · 49 votes

7y

If you want to take some money out of your current job's 401k and invest it elsewhere, take out a 401k loan.

0 Reply

Cara Kennedy

Rental Property Investor · Member since 2019 · 189 posts · 62 votes

7y

@Jay Hinrichs - hey Jay, can you share what the annual fee is with Solo401k? I've heard of them recently and I was skeptical when I spoke with an equity trust person who came across very salesperson-y.

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Justin WindhamPro Member

Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes

7y

Originally posted by @Cara Kennedy:

@Jay Hinrichs - hey Jay, can you share what the annual fee is with Solo401k? I've heard of them recently and I was skeptical when I spoke with an equity trust person who came across very salesperson-y.

Most self-directed Solo 401k plan providers charge between $100 and $200 annually as a flat fee. No transaction or asset fees are typically charged.

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Cara Kennedy

Rental Property Investor · Member since 2019 · 189 posts · 62 votes

7y

@Justin Windham thanks, Justin! I appreciate the feedback.

0 Reply

Justin WindhamPro Member

Banker · Nationwide · Member since 2015 · 4k+ posts · 1k+ votes

7y

@Cara Kennedy

No problem at all. I'm happy to help.

0 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

Originally posted by @Cara Kennedy:

@Jay Hinrichs - hey Jay, can you share what the annual fee is with Solo401k? I've heard of them recently and I was skeptical when I spoke with an equity trust person who came across very salesperson-y.

@Brian Eastman Brian did mine I would ping him as well. he is the expert. its so inconsiquental that I really could not tell you how much it is. I just know the Entrust charged me for every little thing so it really added up when you move assets in the retirement account like I do IE notes and note payments.

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Jonathan Paul Shortt

Rental Property Investor · Dallas, TX · Member since 2017 · 64 posts · 73 votes

7y

Thanks for posting guys! Wife has an old 401k I’ve been trying to find the best use for those funds and sounds like SDIRA w/ checkbook control is the way to go. BP for the win again

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