If you personally wanted to take a property our of your IRA, it would need to be as a distribution. The property would need to be formally appraised to set the value of the distribution. This value would be added to your taxable income for the year and taxed at state and federal levels at your marginal rate - which will typically go up a bracket or two depending on the value of the property. If you are under age 59 1/2, then there is an additional 10% penalty.
A self-directed IRA is not a good tool to purchase property you wish to use personally, and is not a means to improve your personal financial situation today or solve a particular financial difficulty. Rather, such programs are a means to simply diversify your tax-sheltered retirement savings with the aim of producing better results for the IRA than you are achieving in conventional financial investments.
@Steven Hamilton II can you roll money from an employer roth 401k into a SDIRA while still working?
edit: Nevermind continued reading through and saw you can lend to yourself, but cannot roll it into a Self-Directed
@Michael Lauther So will you use the 401k like debt or can you use it like equity and then get a bank loan and essentially be 100% levered?
For example, could I use 50k from employer 401k and then get a loan for 250k from a bank and pay interest on all the $ or would I have to use 50k in cash, and use 250k from my 401k to loan myself?
The 401k participant loan payments would be fixed payments consisting of principal and interest irrespective of the $250K loan from the bank.
To learn more about the 401k participant loan rules, see the following.
I know this is an old post, but...
I am planning to either cash out most of my 403 and swallow the penalties or borrow the money out of my 403b to buy my first investment property.
The way I look at it is this: I want to "retire" by the time I am 45; money sitting in an account that I can't touch doesn't help me much with that goal.
Of course I will continue to contribute to my 403 to get the employer match and also continue to invest into accounts that are not tax deferred, but I want most of the money I have invested to be able to be accessed without penalty.
One more thought is that at my current job my employer will match half of my contribution up to a 3% match, plus after a year of employment they will contribute an additional 3% of my income regardless of my contribution. My math may be way off here, but if I am only contributing 6%, the other 6% will have come from my employer and most of the penalty I receive from an early withdrawal will come from the money my employer contributed.
This got me thinking. Realizing we need to liquidate the wife's former employer 401k and put it to work for us. Good thread, lot of helpful information.
Can the 10% early withdrawal penalty be considered part of the acquisition cost from a tax perspective?
Joshua Briscoe if you are thinking of taking a loan out of your 403b, look into the rules at your employer, they may not let you make contributions if you take a loan....though you will be making loan payments that will be paying back the money into your 403 it may not be matched. Also you may not be able to cash out your 403b unless you are terminated from employment.
this thread is very informative and old however, I wanted to see if I can get feedback. I have a unique situation and I have read all 6 pages of responses. I am leaving my current employer of 10 years, selling my property in the up market here in Tx. I want to gather a few rental properties and not be at the beck/call of a 9-5. So I have anticipated funds from the sale of home and 100k of 401k. What is the best approach with 401k where I can use the rental cash flow for reinvesting as well as living expense? I’m in my 40s , looking forward to your responses to assist. FYI , I have a 10k loan on the 401k that I plan to pay within 60 days ( hopefully) when I sell the home.
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I had some questions about my 401k, im currently 49 years old and I been putting money into my 401k now for 20 years. How big a hit would I take if I decided to cash out and take my money?
If you can't roll over to self directed, then I would consider taking the loan from your 401k up to 50% of the value. No tax hits, and the interest you are paying is just going back into your own 401k anyways.
With new tax laws (2017) and the many deductions (bonus depreciation and doing a Cost Segregation), would passive investors benefit by cashing out their previous employer's 401k or traditional IRA to invest in real estate? I was debating if investing as an LP will have its advantages with the all the current tax changes. I know that Tom Wheelwright is pro liquidating 401ks and IRA accounts.
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