401K transfer to borrow help
Does anyone know what type of account you can transfer your 401k to, and then borrow from it/ pull from it? Without any penalties? I know I heard it’s possible, I just can’t seem to find out the right way to go about it. I tried calling fidelity and it wasn’t any help.
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@Maria Muniz sounds like you are looking for info on a self-directed IRA. The big brokerages (think ones that deal in stocks and mutual funds) rarely have the ability to be self directed. There are other places like Midland Trust, Equity Trust and some others that solely deal in the self-directed space. Are you looking to be a private money lender, lend to investors as a passive investor or use the money yourself?
@Maria Muniz sounds like you are looking for info on a self-directed IRA. The big brokerages (think ones that deal in stocks and mutual funds) rarely have the ability to be self directed. There are other places like Midland Trust, Equity Trust and some others that solely deal in the self-directed space. Are you looking to be a private money lender, lend to investors as a passive investor or use the money yourself?
@Dorothy Butala I was looking to use the money myself. Is that possible?
I have heard rumblings that some people have ways around the rules of not being able to use retirement funds for ones own investing - but I think they are exploiting a razor thin edge. I have also heard of people finding others who also have a retirement account, and each person lending to the other, which is another loophole and not as thin as the trying to finesse the rules to use your own funds for your own projects.
What type of projects/investment strategies are you looking at doing?
A 401K is the account that allows for you to borrow from. So you don't want to roll it into another account type since that would eliminate your ability to take a participant loan.
@Dorothy Butala the money would be used for a down payment for a house or business
@Matt Devincenzo isn’t there penalties for taking out of your 401k early, though?
Will this be the first home you purchase? If so, I you could take a loan out for the purchase of your home - but there are a lot of factors to consider when doing this. While you avoid the 10% early withdraw penalty - you do have to make payments with a small interest rate to be assessed to the loan, and you can't make contributions (neither can your employer) while there is a loan on the account. Another thing to consider is some employers don't allow loans from their 401ks.
Hope this helps.
@Maria Muniz you asked how to borrow the funds, not withdraw them. If you borrow with the 401k participant loan function then there is no penalty, only a loan repayment requirement.
@Matt Devincenzo This is an unnecessary call out based on semantics regarding what the OP wrote - "borrow from it/pull from it" she is asking advice to get educated, where she has yet to learn the terms and subtleties surrounding the topic. We all have to start somewhere.
You can borrow money from a 401k. There is no IRA account you can borrow money from. If you are self-employed and have no full time employees with any business you own, you could open a Solo 401k. Since it is a 401k account, you can take a loan from it.
you need to contact the administrator of your 401k (talk to your HR department)
@Dorothy Butala I apologize if my comment came across as harsh, it certainly was not intended as such it was just direct. My statement stands, you asked how to borrow and here is the answer. If you look at my posts I'm sure you'll find that I do not typically post abrasive or impolite responses. I happened to be busy and posted quickly since the OP asked a pointed question of me, but I defend my post as not being impolite.
@Matt Devincenzo My bad! I thought you were talking about her initial post, and not the follow up question where she implies taking out of her 401k! No harm no foul, thanks for being an awesome resource - I see you aim to help a lot of people based on the volume of your posting :)
Are you still working for the company you had the 401k with? If you still work there you can borrow against the 401k up to certain limits. If you no longer work at the company where you had the 401k and want to access that money to continue investing you can do that. I moved my old 401k to a self directed IRA using this company. https://www.vantageiras.com/ You can then uses this self directed IRA for approved investments (cannot be used for personal use, like buying a house for yourself or family, etc, that company can help with those questions). Good luck.
@Maria Muniz- have you tried talking with the present 401K administrator about this question and about doing a 401K loan directly ?
@Maria Muniz if you want to borrow from your 401k the only way I know is to use as part of the DP for your Primary residence without penalty.
You can borrow up to $50k from your 401k but you will pay yourself back with interest. Also realize you will pay back that loan back with post-tax dollars, not pre-tax.
#2 Market Trends & Data Contributor
if you still work -> take loan , max 50k, interest is 5.5%. It's 100% online, you can even cash it out tomorrow.
if you no longer work there --> self directed IRA.
I do this all the time every 5-6 years or so.
@David Mirza which part isn't true? Article covers everything I stated except the inability for contributions with a loan out - and I can see my comment about that looks like a blanket comment - but it depends on the rules of the individual 401k plan if they implement that provision or not.....
@Dorothy Butala the part about not being able to "make contribution (neither can your employer)...". From the article it states
"
You can keep contributing to your 401(k) while you pay the loan back—an option that may not be available if you take a hardship withdrawal.
"
#2 Market Trends & Data Contributor
taking loan of 401k is very good strategy when market is bearish and you want to build real estate investment.
Real estate is almost always better than stock index in the long run esp. if you still renting, put it that way.
@David Mirza if you only look at a single source for your info you miss out on the full picture. Look at sources other than Forbes about the specifics for loans not hardship withdraws. Some plans don't allow contributions even for loans. It all depends on the stipulations of the employees plans. Anyone looking to do a loan who wants to continue to contribute will have to speak to their HR department to determine if that is an option or not.
@Dorothy Butala hmm thanks for pointing that out to me. I guess each 401k is free to impose additional rules. When I borrowed from my fidelity 401k about 8 years ago, both myself and my employer were allowed to continue to contribute. I guess the lesson here is to call each individual plan and see if they have more strict rules.