Personal ROTH rollover to SD IRA or SOLO IRA?

13 Replies

Can I use my ROTH IRA for REI? I am having trouble finding examples specifically rolling a ROTH to a self directed IRA for REI.

Yes you can, but be careful of UBIT. If you are investing with your self directed IRA it needs to be in a passive investment that you do not influence. If you have any control over the project that the money is invested in, then you are running a business with your SDIRA and are subject to Unrelated Business Income Tax.

I use my SDIRA to invest in Real Estate projects that my fellow investors are doing that I know and trust.

Check with your accountant.

@Joe Mercer

Happy Sunday Joe. All types of IRAs can be self directed. In fact a "self directed Ira" is merely a descriptive phrase for "you control". A Roth IRA will have the se exact rules no matter where you go but the provider is who can choose to allow disallow something. That's why most brokerage companies don't help with alternatives.

In the topic is UBIT, don't be scared. It's actually not a bad thing like people make it out to be. Yes it's a tax but it only arises when you profit off of leveraged funds - something very very few people do with retirement funds.
[Solicitation removed]


I did run into a restriction on moving a Roth IRA into a roth solo 401K. There was no restriction moving a traditional IRA into a regular solo 401K. Not sure about SDIRA's but it is something to get clarified.

Where could we find your blog Loren?

@Joe Mercer  

Roth IRA can be easily converted into self directed Roth IRA, there are no restrictions. However, if you are considering establishing self-directed Solo 401k, IRS does not allow Roth IRA to be rolled over into Solo 401k.

@John Blackman is correct, if you are running a business from your IRA - it will be subject to UBIT tax. Also leveraged real estate is subject to UDFI tax in an IRA, however, Solo 401k is exempt from this rule.

@Loren Whitney , @Dmitriy Fomichenko  ,

Really enjoy your posts and had a another question. What is the end game with ROTH IRA's? I want to have a rental home or two owned by my Roth to have tax free income but then what? Is there requirements to cash out eventually? Does my heirs inherit the IRA? If so, can they use the income or is it their ROTH IRA at that point?

@Joe Mercer  

after you turn 59 1/2 all distributions from Roth IRA are tax free, so if you wish you can distribute the entire property from your account and turn it into your residence. You can also sell the property in your Roth IRA and take out the proceeds tax free. But the best strategy in my opinion is to keep the property (or exchange it into another asset that produces passive income) and distribute income from that asset out of your Roth IRA tax-free for the rest of your life!

@Joe Mercer  

This is actually a complicated question Joe. The Roth IRA is a powerful tax strategy and if the model fits your personal finances well, it can be a colossal win. Note, the Roth IRA doesn't benefit everyone even though the idea of "tax-free distributions" sounds great. You have to look at the big picture and time value of money VS. your long term taxation. I won't go any deeper than that but it's worth putting time into researching the details on that sooner than later.

Once you turn 59.5, you're eligible for tax-free distributions without penalties for early withdrawal (normally 10% if under 59.5 with a few exceptions). If the Roth has been in place for five tax years (5 year rule), then principal + gains can be withdrawn without restriction. There are no RMD restrictions like pre-tax retirement plans and heirs can takeover the assets. It's important to note that Roth tax-status does not transfer to heirs. They would be required to open a beneficiary IRA. That being said, think long and hard about your tax strategy for future heirs as you get older (if you choose to leave assets).

@Dmitriy Fomichenko Are there any restrictions if you have NO earned income and want to rollover a roth and/or a rollover IRA after 59.5?

@Jeff S.  

there would be restrictions on contributions (because contributions are based on your earned income), but you should not have any problems with a rollover.

Thanks @Dmitriy Fomichenko . Found that out when I had to roll back my roth contribution for 2013.

Does anyone know of any good books on SD IRA's?

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here