Are there any other options for utilizing my 401k besides a SD-IRA?
Here's the situation, I was laid off last week, so I'm jumping into REI full time. I have other capital to use as well, but I also have to consider staying afloat with my own bills (I need liquid reserves). So I understand the SD-IRA can finance deals, but the funds and the returns on those deals have to go back into the IRA. I need income from my deals, so I'm wondering what else is available to use 401k funds besides cashing it in.
@Nicholas Broussard , If you have access to other funds use them. Keep the 401k where it is, you can roll it or cash it out later. You really wont find anything else you can do with those funds. A bank cant use them as additional security, and any profits they generate directly or indirectly must go back into the tax sheltered account.
I say if you need the funds... take the hit and use them. Retirement is no good if you have to live a life of PB&J till you get there.
Cash in your money and rebuild.
you personally can not receive any benefits from your retirement account until you retire. The only option which will allow you to access some of the funds now is 401k loan (if your plan allows for it).
There is a structure known as a "Rollover as Business Startup" you could evaluate. This program allows you to take retirement funds without penalty and use them to fund a new C-Corp that you can be directly involved in. The income of the business is taxed, though dividends issues to the shares owned by the retirement plan would be tax deferred.
You could potentially establish such a corporation for your real estate business, so long as you will be actively engaged in earned income producing activities like wholesaling, flipping or new development. This program would not work for wholly passive enterprises such as rentals and lending.
@Brian Eastman that's what I'm talking about. I have a colleague (ex-colleague) that told me about this. Know any firms that handle these or do I do it on my own?
I can't take a loan from it as I have no job now, I was laid off last week. I don't want to cash in, I understand the hit I'd take.
I resigned from my career and formed a C corp in December to do exactly what you are talking about. It is not something you can do on your own. Fortunately, there is an accountant here in Houston that will put it together and handle all the maintainence for you.
Google "BORSA" and you should get what you are looking for..... I did a lot of research before I pulled the trigger, but ultimately it seemed like a no brainier to me. And my new C-corp just bought it's first property on Tuesday.
I would caution you from cashing in your retirement savings to invest in real estate. The only exception would be if you are an experienced, savvy investor. You'd hate to find yourself in a situation where the subject property is coming a curse more than a blessing.
If you really want to jump into Real Estate, I would encourage you to start by Wholesaling. It's a competitive market, but you would not need much out of pocket.
Best of luck!
@Jeff W. thanks, this is what I had in mind. I'm researching this and solo 401k.
@William Dampier thanks, I don't plan on cashing in, I'm looking at other ways to use the funds and be able to receive the returns (some of them anyway) without having to return everything to the IRA.
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